§3403 — Liability for tax

Petitioner further argues that section 31.3102-1(d), Employment Tax Regs., makes the employee liable for the employer's obligations, which conflicts with and is therefore superseded by section 3403.

Those regulations were superseded by regulations finalized on July 2, 2008, T.D.

We hold that he bears the burden ofproof.

In its entirety, section 3403 provides: "The employer shall be liable for the payment ofthe tax required to be deducted and withheld under this chapter [chapter 24, sections 3401-3406], and shall not be liable to any person for the amount ofany such payment." Section 31.3403-1, Employment Tax Regs., which implements section 3403, emphas

More fundamentally, regardless of petitioner's classification as a partnership for Federal tax purposes, petitioner is the "employer" within the meaning of section 3403; accordingly, the liability for the employment taxes is petitioner's and not the Conways' . See United States v . Galletti, 541 U .S . 114, 121 (2004) . Because petitioner is a separate entity from the Conways, the imposition of employment tax on petitioner cannot be viewed as equivalent to the imposition of employment tax on its

More fundamentally, regardless of petitioner’s classification as a partnership for Federal tax purposes, petitioner is the “employer” within the meaning of section 3403; accordingly, the liability for the employment taxes is petitioner’s and not the Conways’.

fund Social Security and Medicare. Sec. 3111(a) and (b). Employers report wages paid and employment taxes withheld and owed on those wages on Forms 941. An employer is liable for both its own portion and the employee’s portion of employment taxes.7 Sec. 3403; sec. 31.3403-1, Employment Tax Regs. For all years at issue in these cases, the Commissioner argues that the firm did not pay employment taxes on all the wages that Ward received. The disagreement is largely about what the firm calls the “

fund Social Security and Medicare. Sec. 3111(a) and (b). Employers report wages paid and employment taxes withheld and owed on those wages on Forms 941. An employer is liable for both its own portion and the employee’s portion of employment taxes.7 Sec. 3403; sec. 31.3403-1, Employment Tax Regs. For all years at issue in these cases, the Commissioner argues that the firm did not pay employment taxes on all the wages that Ward received. The disagreement is largely about what the firm calls the “

oner, 144 T.C. at 46. Thus, the withheld taxes are referred to as "trust fund taxes". Pollock v. Commissioner, 132 T.C. at 25 n.10. The employer is liable to the government for the payment ofamounts required to be withheld. Sec. 3102(b) (FICA tax); sec. 3403 (income tax). Ifan employer fails to withhold the amounts required to be withheld or withholds the amounts but fails to pay them to the IRS, a person responsible for the failure (such as a corporate officer ofthe employer) may be personally

In this setting, "the employer bears principal liability under -11- [*11] section 3403 for the trust fund taxes that should have been withheld, and the 'responsible persons' bear derivative liability for those same taxes under section 6672." Dixon v.

But the tax is really in aid ofthe tax owed by the employee on the income he earns. The employee gets a credit on his income-tax bill for the money withheld by his employer from his paycheck. M g, Slodov v. United States, 436 U.S. 238, 243 (1978). An employer can get hit with a big tax bill ifit misclassifies its employees as independent

Section 3403 imposes liability on employers who fail to withhold required amounts oftax owed by employees. - 10 - [*10] D. Application and Analysis The employment tax liability at issue in the case at docket No. 4177-13L arises from a $2,000 discrepancy between amounts reported on petitioner's Forms 941 for tax year 2006 and Mr. Baldauf's Form 104

y penalties or additions to tax otherwise applicable in respect of (continued...) - 10 - [*10] Virginia and Federal statutes, withholding agents are liable for the tax required to be deducted and withheld. Compare Va. Code Ann. sec. 58.1-390.2 with sec. 3403. Under both the Virginia and Federal statutes, the withheld tax is allowed as a credit against the tax imposed. Compare Va. Code Ann. sec. 58.1- 486.2(E) with sec. 31. We have often observed that there is only one Federal income tax but ther

Contributions Act ("FICA") tax and income tax from its employees' wages, hold them in a so-called "trust fund" for the United States, and pay them over to the United States. See sec. 3402(a)(1) (requiring employerto withhold income tax from wages); sec. 3403 (employer is liable for paying income tax it is required to withhold); sec. 3101 (imposing FICA tax on wage earners); sec. 3102(a) (requiring employer to withhold from wages the amount ofthe tax imposed by sec. 3101); sec. 3102(b) (employer

Section 3403 imposes liability on employers who fail to withhold required amounts oftax owed by employees. - 10 - [*10] D. Application and Analysis The employment tax liability at issue in the case at docket No. 4177-13L arises from a $2,000 discrepancy between amounts reported on petitioner's Forms 941 for tax year 2006 and Mr. Baldauf's Form 104

Outreach Center was required to withhold Federal Insurance-Contributions Act (TFICA) tax and' income taxes from its employees' wages and pay them over to the United States. See sec. 3402(a).(1) (requiring employer to withhold income tax from wages); sec. 3403 (employer is liable for paying income tax it is required to withhold); sec. 3101 (imposing FICA4tax on wage earners); sec. 3102(a) (requiring employer to withhold from wages the amount of the tax imposed by section 3101); sec. 3102(b) ;(emp

In furtherance of these purposes, regulations specify that thE IRS may find that a withholding exemption certificate is defective and may instruct the employer to withhold taxes from the-employee on the basis of instructions from the IRS rather than in accordance with the W-4 furnished by the employee . 26 C.F.R. § 31 .3402(f)(2)-.1(g)(5)

Liability for tax The employer shall be liable for the payment of the tax required to be deducted and withheld under this chapter, and shall not be liable to any per- son for the amount of any such payment Treasury Regulation § 31.3403-1 Liability for tax Every employer required to deduct and withhold the tax under section 3402 from the

For employment tax purposes, the term “employee” includes “any individual who, under the usual common law rules applicable in determining the employer-employee relationship,[13] has the status of an employee”. Sec. 3121(d)(2); accord sec. 3306(i). In applying the common law rules, uncertainty should be resolved in favor of employment. Br

The employer will not be relieved of his liability for payment of the tax required to be withheld unless he can show that the tax against which the tax under section 3403 may be credited has been paid.

loyee's obligation to pay the tax. Church v. Commissioner, 810 F.2d 19, 20 (2d Cir. 1987). - 6 - Even if it were assumed that Carolina Acoustical was petitioner's employer and as such is liable for taxes it failed to withhold from his paycheck, see sec. 3403, petitioner is also liable for the taxes, sec. 61(a). Respondent may collect payment from either the employee or the employer, but the employee remains ultimately liable for his own taxes even though his employer was obligated to withhold. I