23. As Findings 15 and 16 reflect, Robert became aware of G & F's withholding tax liability not later than the second quarter of 1984, when Oliver told him of his potential personal liability, and again in late 1984 or January 1985 when he found several unfiled federal withholding tax forms in the corporate file cabinet and discussed them with Oliver as described in Finding 16.
Conclusions of Law
1. This Court has jurisdiction under 28 U.S.C. § 1346(a)(1).
2. Taxes withheld from an employee's wages are to be held by the employer in trust for the United States. Sections 3402, 3102 and 7501; Monday v. United States, 421 F.2d 1210, 1214 (7th Cir. 1970).
3. Any person required to collect, truthfully account for or pay over taxes withheld from employee's wages who willfully fails to collect such tax or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or its payment thereof, is liable to a penalty equal to the total amount of the tax evaded or not collected or not accounted for or paid over. Section 6672; Slodov v. United States, 436 U.S. 238, 250, 56 L. Ed. 2d 251, 98 S. Ct. 1778 (1978); United States v. Schroeder, 900 F.2d 1144, 1146 (7th Cir. 1990).
4. In any litigation involving an assessment under Section 6672 the taxpayer must prove by a fair preponderance of the credible evidence that the assessment was erroneous; that is, that he or she does not owe the tax claimed by the government. Schroeder, id. at 1148. As part of that burden of both production and persuasion, he or she must demonstrate that the IRS' determination as to his or her responsibility or willfulness is wrong. Ruth v. United States, 823 F.2d 1091, 1093 (7th Cir. 1987).
5. Although the assessment under Section 6672 is spoken of as a penalty, it is civil in nature: "It provides a remedy to prevent the unnecessary loss of tax funds by permitting the 'taxing authority to reach those responsible for the corporation's failure to pay the taxes which are owing.'" Monday, 421 F.2d at 1216.
6. Liability under Section 6672 attaches to those with the power and responsibility within the corporate structure for seeing that the taxes withheld from various sources are remitted to the Government. Monday, id. at 1214. Such liability is not limited to those employees performing merely mechanical functions of collection and payment, but extends to all with responsibility and authority to avoid the default that constitutes a violation of the statute. Accordingly more than one person may be liable. Id.; Harrington v. United States, 504 F.2d 1306, 1312 (1st Cir. 1974).
7. Responsibility cannot be avoided by showing that someone else performed the function of actually disbursing the corporation's funds. Any corporate official is still considered to be responsible so long as he or she could have seen to it that the taxes were paid. Monday, 421 F.2d at 1214.
8. It is not necessary that a person have "exclusive" control over the corporation's financial affairs to be responsible under Section 6672. Adams v. United States, 504 F.2d 73, 75 (7th Cir. 1974). Merely the existence of the same duty and concomitant liability in another individual has no effect on the taxpayer's responsibility. Monday, 421 F.2d at 1214.
9. Under Section 6672 the key to liability is significant control or authority over an enterprise's finances or over the decisionmaking process in that area of activity. Purdy Co. of Illinois v. United States, 814 F.2d 1183, 1188 (7th Cir. 1987). "Authority" in that context means effective power to pay. Howard v. United States, 711 F.2d 729, 734 (5th Cir. 1983). Such authority is demonstrated by the issuance of even small checks without the approval of others in the corporation. Id.
10. Factors that indicate such control over the financial affairs of a corporation are ownership, holding an office in the corporation, being an officer or a director, having power under the corporation's by-laws, having the power to sign checks and having the authority to borrow money on behalf of the corporation. See, e.g., Monday, 421 F.2d at 1215.
11. Both in those legal terms and in actual reality, Robert had the requisite authority within the corporation to be considered responsible under the statute. All the factors referred to in Conclusion 10 were present in his case, and he in fact did exercise such powers (though the principal activity in those areas was conducted by John). Robert clearly had the power to pay Corporations' withholding taxes and was therefore a responsible person under Section 6672. Landau v. United States, 702 F. Supp. 199, 202 (N.D. Ill. 1988); and see, e.g., Latimer v. United States, 593 F. Supp. 881, 884 (N.D. Ill. 1984), aff'd by unpublished order, 774 F.2d 1167 (7th Cir. 1985).
12. To the extent that Robert did not exercise the authority he had within Corporations and delegated it to his brother John, no such delegation would relieve Robert of liability under the statute. Harrington, 504 F.2d at 1312; Brown v. United States, 552 F. Supp. 662, 665 n. 6 (N.D. Ill. 1982). On that basis as well, Robert was a responsible person within the meaning of Section 6672 throughout 1983 and 1984.
13. Because Robert continued to take dividends from Corporations after February 1985 and wrote at least one corporate check to a creditor other than the United States (even apart from the dividend checks he wrote to himself) after that date, and continued to participate (though to a lesser extent) in the corporate business, Robert was also a "responsible person" for the third quarter of 1985.
14. Willful conduct denotes intentional, knowing and voluntary acts. It may also indicate a reckless disregard for obvious or known risks. Willful action within the meaning of Section 6672 refers to voluntary, conscious and intentional (as opposed to accidental) decisions not to remit funds properly withheld to the Government. Monday, 421 F.2d at 1216. That meaning must be distinguished from the definition of "willful" in the criminal context. Liability under Section 6672 does not depend upon the presence of evil motive or specific intent to defraud the Government or deprive it of revenue. Id.
15. "Reasonable cause" or "justifiable excuse" are also not defenses to liability under Section 6672. Those inapplicable concepts would invite consideration of such misleading and improper factors as the financial condition of the business or the demands of creditors. Id.
16. Any person who is "responsible" within the meaning of Section 6672 throughout the period in which withheld taxes are not remitted to the Government acts willfully if, when or after he or she gains actual knowledge that the taxes are delinquent, liquid funds are available from which the taxes can be paid and he or she, having the ability to pay the taxes, fails to do so. Garsky v. United States, 600 F.2d 86, 91 (7th Cir. 1979); Mazo v. United States, 591 F.2d 1151, 1154 (5th Cir. 1979); Latimer, 593 F. Supp. at 885.
17. Even if a responsible person had never gained actual knowledge of delinquent withholding taxes, he is still "liable if he (1) clearly ought to have known that (2) there was a grave risk that withholding taxes were not being paid and if (3) he was in a position to find out for certain very easily." Wright v. United States, 809 F.2d 425, 427 (7th Cir. 1987). Thus a responsible person is liable if he or she should have known that the corporation was delinquent in paying its withholding taxes over to the Government.
18. Whether Robert may or may not have known the extent or seriousness of G & F's withholding tax deficiency is "entirely irrelevant" to the issue of willfulness and will not serve to relieve him of liability under the statute. Brown, 552 F. Supp. at 665. Thus it cannot be that "a responsible officer may immunize himself from the consequences of his actions by wearing blinders which will shut out all knowledge of the liability for and the nonpayment of [the corporation's] withholding taxes." Calderone v. United States, 799 F.2d 254, 260 (6th Cir. 1986), quoting Bolding v. United States, 215 Ct. Cl. 148, 565 F.2d 663, 674, 40 A.F.T.R.2d (P-H) 6057 (1977). Willful conduct also includes failure to investigate or to correct mismanagement after having notice that withholding taxes have not been remitted to the Government. Garsky, 600 F.2d at 91; Brown, 552 F. Supp. at 665.
19. This is not a Slodov-type case, where an individual has become responsible for a tax liability incurred prior to that individual's assumption of responsibility. Robert was responsible during all the quarters at issue here. If this were a case in which Robert had become a "responsible person" at some point after the tax liability had accrued, he would still be responsible in the amount of Corporation's funds and liquid assets at the time he assumed responsibility. Slodov, 436 U.S. at 259-60; Purdy Co., 814 F.2d at 1191. Moreover, even if a Purdy responsibility analysis of funds and liquid assets were to be employed in examining the willfulness aspect of this case, Robert would nonetheless be liable for the entire assessment. Even as of July 31, 1985 (the date on which Robert himself admits he became aware of the tax liability), Corporations had liquid assets in the form of $ 49,800 in inventory, $ 81,666.96 in accounts receivable and $ 1,711.78 in petty cash and in bank accounts. Robert has presented no evidence disputing the correctness of those figures. See Sinder v. United States, 655 F.2d 729, 732 (6th Cir. 1981) (per curiam) (taxpayer has burden of establishing lack of available funds and liquid assets). Thus even if Robert's liability were limited to the value of Corporations' liquid assets at the time he admits he became aware of the unpaid tax liability, he would nonetheless be liable for the entire amount of the assessment against him. Landau, 702 F. Supp. at 203.
20. Whenever a "responsible person" becomes aware that trust-fund taxes are not being paid over to the Government or recklessly disregards facts that should put him or her on notice that they are not being paid over, his or her use of funds, or his or her knowledge of the use of funds for payments to other creditors, is willful conduct within the scope of Section 6672. Garsky, 600 F.2d at 91. Any such responsible person has the burden of showing that there were no funds available to pay the IRS when the individual became aware of the withholding tax liability. Brown v. United States, 591 F.2d 1136, 1141 (5th Cir. 1979).
21. Robert acted willfully by failing to direct payment to IRS, and by disbursing at least 12 checks to creditors other than the United States after June 30, 1984 (in fact after February 1, 1985), including 11 checks to himself totalling $ 7,800. Garsky, 600 F.2d at 91; Latimer, 593 F. Supp. at 885. Indeed, Robert received dividends totalling $ 15,600 during 1985. Robert has presented no evidence of insufficient funds to pay the withholding tax liability after any of the relevant dates. Therefore Robert acted willfully within the meaning of the statute.
* * *
Robert Peterson's claim against the United States is without merit and is dismissed with prejudice. Judgment is ordered to be entered in favor of the United States and against Robert Peterson in the sum of $ 41,336.40 plus statutory interest from and after November 24, 1986 to today's date.