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Weder v. United States ex rel. Internal Revenue Service

United States District Court, W.D. Oklahoma

October 16, 2017

TOMMY W. WEDER, Plaintiff,
v.
UNITED STATES OF AMERICA, ex rel. INTERNAL REVENUE SERVICE, Defendant.

          ORDER

          VICKI MLLES-LAGRANGE UNITED STATES DISTRICT JUDGE

         Before the Court is defendant's Motion for Summary Judgment, filed March 28, 2017. On May 5, 2017, plaintiff filed his response, and on May 26, 2017, defendant filed its reply. Based upon the parties' submissions, the Court makes its determination.

         I. Introduction

         Plaintiff is the former president and owner of Boom Drilling, LLC (“Boom”). Boom incurred $1, 183, 644.91 of employment tax liability for the first quarter of 2008 but failed to timely pay its employment taxes. In or about April 2008, Internal Revenue Service (“IRS”) Officer John Spangler (“Spangler”) met with plaintiff, Jerry Frech, a CPA for plaintiff and Boom; Don Lyles, counsel for Boom; and Pam Weder, a CPA employed by Boom, to discuss Boom's unpaid employment taxes.

         On April 25, 2008, after the above meeting, Boom transferred $300, 000 to the IRS to be applied to Boom's employment taxes. Boom did not make the April 2008 transfer by check or other written financial instrument but made it by wire transfer through the IRS's electronic funds transfer payment system (“EFTPS”). Boom did not provide written instructions to the IRS on how to allocate any portion of the April 2008 transfer between the trust fund and non-trust fund portions of Boom's employment taxes. Plaintiff alleges that at the April meeting, Spangler told representatives at Boom that they had to transfer the $300, 000 via wire using the EFTPS system and that the funds would all be applied to Boom's trust fund tax liabilities. Instead, the IRS applied a portion of the April 2008 transfer to Boom's non-trust fund employment tax liability. On November 9, 2009, the IRS assessed plaintiff penalties under 26 U.S.C. (“I.R.C.”) § 6672 for Boom's unpaid trust fund taxes for the first quarter of 2008, which plaintiff paid in full.

         On September 8, 2008, Boom filed a petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Western District of Oklahoma. By orders issued on September 11, 2008, September 16, 2008, and September 24, 2008, the bankruptcy court authorized Boom to pay pre-petition and post-petition wages of Boom's employees for the period beginning on August 27, 2008 up to Boom's pay week ending September 26, 2008, including all resulting employment taxes Boom owed to the United States. Boom paid wages and made required EFTPS deposits of employment taxes for four of its pay weeks ending September 26, 2008, a period during which Boom incurred $269, 058.08 of employment tax liability. Defendant alleges that the IRS did not receive timely employment tax deposits for wages Boom paid from August 27, 2008 to September 3, 2008, which totals $42, 727.34. On November 9, 2009, the IRS assessed plaintiff penalties under § 6672 for Boom's unpaid trust fund taxes for the third quarter of 2008, which plaintiff paid in full.

         On March 25, 2015, plaintiff filed the instant action seeking a refund of penalties that the IRS assessed against him under § 6672. Plaintiff alleges that the IRS misapplied several of Boom's employment tax payments to non-trust fund tax liabilities, which, if allocated to the trust fund tax liabilities, would reduce plaintiff's § 6672 penalties. The disputed amounts include: (1) portions of the $300, 000 transfer on April 25, 2008, and (2) $42, 727.34 of the $269, 058.08 of bankruptcy payments. Defendant now moves for summary judgment as to plaintiff's refund claims regarding the above disputed amounts.

         II. Summary Judgment Standard

         “Summary judgment is appropriate if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The moving party is entitled to summary judgment where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party. When applying this standard, [the Court] examines the record and reasonable inferences drawn therefrom in the light most favorable to the non-moving party.” 19 Solid Waste Dep't Mechs. v. City of Albuquerque, 156 F.3d 1068, 1071-72 (10th Cir. 1998) (internal citations and quotations omitted).

         “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Furthermore, the non-movant has a burden of doing more than simply showing there is some metaphysical doubt as to the material facts. Rather, the relevant inquiry is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Neustrom v. Union Pac. R.R. Co., 156 F.3d 1057, 1066 (10th Cir. 1998) (internal citations and quotations omitted).

         III. Discussion

         A. Employment taxes

Under 26 U.S.C. §§ 3102(a) and 3402(a), employers are required to withhold federal social security and income taxes from wages paid to employees, and to remit those withheld amounts to the IRS on a regular basis. If an employer withholds these payroll taxes (also known as “trust-fund taxes”), but fails to pay them over to the government, the employee is nevertheless credited with having paid the taxes, and the government may not require any ...

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