It is common for the IRS to make various demands on businesses that are undergoing employment tax audits or businesess that are trying to deal with employment tax collection issues. One common demand is that the taxpayer immediately start complying with the employment tax laws. But what if the taxpayer cannot comply, perhaps due to cash-flow problems, or chooses not to do so? The court addressed this in United States v. Askins & Miller Orthopedics, P.A., et al., No. 8:17-cv-92-T-27MAP (M.D. Fla. 2017).
The Facts & Procedural History
The court case involved employment taxes. A revenue officer was involved, so it was likey a collection matter.
The government brought suit to asked the court to order the taxpayer to comply with its employment tax obligations. The specific order the government was seeking included the following language:
- Defendants shall pay over to the Internal Revenue Service all income and Federal Insurance Contributions Act (FICA) taxes withheld from employees and Askins & Miller’s own share of FICA taxes (collectively, employment taxes);
- Defendants shall segregate (i.e., hold separate and apart from all other funds) all employment taxes of employees of Askins & Miller in an appropriate federal depository bank in accordance with the federal deposit regulations;
- Defendants shall not transfer any money or property to any other entity to have that entity pay the salaries or wages of Askins & Miller’s employees;
- Defendants shall not assign any of Askins & Miller’s property or rights to Askins & Miller’s property or make any disbursements from Askins & Miller’s accounts before paying all required outstanding liabilities due on each employment tax return required to be filed going forward from the date of the preliminary injunction;
- Defendants shall sign and deliver affidavits to the IRS at 5971 Cattleridge Boulevard, Suite 102-Mail Stop 5410, Sarasota, FL 34232, or to such other specific location as directed by the IRS, within two banking days after each employment tax deposit is due, stating that the requisite deposit was timely made;
- Defendant Roland V. Askins III shall notify the IRS of any new company or business he may come to own or manage; and
- Defendant Philip H. Askins shall notify the IRS of any new company or business he may come to own or manage.
The taxpayer objected to the motion.
The Court Denied the Government’s Request for an Injunction
The court denied the government’s request for an injunction. Why? The government’s request was nothing more than a ruling that the taxpayer had to comply with existing law. This is not what injunctions are generally intended to be used for.
Injunctions are to be used when there is some irreparable injury that the requesting party would suffer if the injunction was not issued. This would include evidence that the taxpayer was hiding money or taking steps to put it beyond the government’s reach.
The facts in this case apparently did not show any such injury the government would suffer. In fact, apparently the government’s evidence only consisted of statements made by the IRS’s Revenue Officer. The court even noted that it wasn’t clear that the government was even correct in its underlying determination.
This case serves as a reminder that businesses that are dealing with employment tax disputes, particularly those involving on-going businesses, do not have to go along with every demand made by the government. These businesses just need to take care so that there is no basis for the government to argue that it will suffer harm absent an injunction.
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