Employment Withholding Tax Penalty Contribution

If you has been found to be the responsible person for the “Withholding Tax Penalty”, you have a right to contribution from others in the company that may also be responsible persons. For convenience sake on the part of the IRS, it is not unusual for individuals to be singled out for this liability even though others are liable. The IRS can identify those other persons that are responsible by disclosing in writing not only the names of any other persons whom they believe are liable, but also whether the IRS has attempted to collect this penalty from those persons, the general nature of those collection activities, and the amount collected. Keep in mind that the IRS’s determination will not be conclusive a contribution action, but the determination will be important nonetheless as leverage in pre-litigation negotiations.

The extent of your right of contribution is determined by the number of responsible persons (by Code definition), not by the percentage of negligence. So, if you have paid the full amount and there are four other responsible persons, you have a right to 80% of the amount paid as contribution.

An action enforcing a right to contribution can take place in federal court as a federal cause of action, or in state court if that state permits such claims. The choice of forums can depend on variations in state law that sometimes make it difficult or impossible to press successful suits in state courts to force a contribution from other responsible persons, and the time it takes to get to trial.