United States v. Tax and Bankruptcy Attorney, PLC

Background

The United States sued Tax and Bankruptcy Attorney, PLC (TAB) and Kenneth Keate to reduce federal tax and civil-penalty assessments to judgment. TAB is a limited liability company established in Minnesota, and Keate is its sole owner and president.

The government alleged that TAB failed to pay employment taxes for 16 quarters ending between December 31, 2014, and December 31, 2020, and failed to pay unemployment taxes for the period ending December 31, 2018. As of May 20, 2024, the outstanding balances were $73,456.06 in employment taxes and $178.40 in unemployment taxes, plus statutory interest and additions. TAB also faced a $3,509.47 civil penalty under 26 U.S.C. § 6721 for failing to timely file W-2 statements for the period ending December 31, 2015.

The government also alleged that Keate failed to pay income taxes reported on his returns for tax years 2010, 2011, 2013, 2016, 2017, and 2018, and that the Internal Revenue Service determined he had failed to report certain income in 2010 and 2011. His unpaid federal income-tax balance was $51,354.32 as of May 20, 2024, plus statutory interest and additions.

The government sought trust-fund recovery penalties against Keate for TAB’s failure to pay employee income-tax and Federal Insurance Contributions Act withholdings for 11 quarters between 2010 and 2017. Keate admitted that he was responsible for collecting, accounting for, or paying those taxes and that he directed, authorized, or otherwise caused TAB to pay other creditors ahead of the United States. The trust-fund recovery penalty balance was $34,577.27 as of May 20, 2024, plus statutory interest and additions.

Procedural History

The United States moved for summary judgment on all counts. The court granted the defendants additional time to respond until July 24, 2024, but they did not respond, request another continuance, or otherwise participate. The court therefore decided the motion without oral argument.

Legal Standard and Analysis

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. Federal tax assessments receive a presumption of correctness. The government may establish that presumption through certificates of assessments, payments, and other specified matters; Internal Revenue Service account transcripts; and employee declarations. Once the presumption applies, the taxpayer must present evidence showing that the assessments are incorrect.

The court held that the government’s evidence established the presumption of correctness for TAB’s employment-tax, unemployment-tax, and civil-penalty assessments and for Keate’s income-tax assessments. The defendants presented no evidence creating a genuine dispute about those assessments. The court therefore granted summary judgment on Counts 1 through 4 in the respective amounts of $73,456.06, $178.40, $3,509.47, and $51,354.32, plus statutory interest and additions accruing after May 20, 2024.

For Count 5, the court concluded that Keate’s admissions supported a finding that his failure to pay TAB’s trust-fund taxes was willful. The court also applied the usual presumption that trust-fund recovery penalty assessments are correct. Because Keate offered no evidence rebutting that presumption or creating a genuine issue of fact, the court granted summary judgment on Count 5 for $34,577.27, plus statutory interest and additions accruing after May 20, 2024.

Disposition

The court granted the United States’ motion for summary judgment. It ordered TAB to pay the United States $77,143.93, plus statutory interest and additions accruing after May 20, 2024. It ordered Keate to pay the United States $85,931.59, plus statutory interest and additions accruing after that date. The United States was directed to submit a proposed judgment with updated calculations within 28 days after entry of the order.