PRIA, Government Policy, Made Personal

Summary

If someone who is not the employer — for example a lender or surety — pays wages directly to an employee or to an agent for the employee, that person is personally responsible to the United States for the payroll taxes that should have been withheld from those wages, plus any interest. If someone gives money to an employer to pay wages and knows the employer will not or cannot turn over the withheld taxes, that person is personally responsible for the unpaid taxes and interest, but only up to 25 percent of the amount they supplied. Any payments made under these rules reduce what the employer owes.

Title 26, §3505

Internal Revenue Code, Source: USLM XML via OLRC

(a)Direct payment by third parties

For purposes of section 3102, 3202, 3402, and 3403, if a lender, surety, or other person, who is not an employer under such sections with respect to an employee or group of employees, pays wages directly to such an employee or group of employees, employed by one or more employers, or to an agent on behalf of such employee or employees, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) required to be deducted and withheld from such wages by such employer.

(b)Personal liability where funds are supplied

If a lender, surety, or other person supplies funds to or for the account of an employer for the specific purpose of paying wages of the employees of such employer, with actual notice or knowledge (within the meaning of section 6323(i)(1)) that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required by this subtitle to be deducted and withheld by such employer from such wages, such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) which are not paid over to the United States by such employer with respect to such wages. However, the liability of such lender, surety, or other person shall be limited to an amount equal to 25 percent of the amount so supplied to or for the account of such employer for such purpose.

(c)Effect of payment

Any amounts paid to the United States pursuant to this section shall be credited against the liability of the employer.

Statutory Notes and Related Subsidiaries

Effective Date

Section applicable only with respect to wages paid on or after Jan. 1, 1967, see section 114(c)(1) of Pub. L. 89–719, set out as an

Effective Date

of 1966 Amendment note under section 6323 of this title.

§3505 Liability of Third Parties Paying or Providing for Wages

Summary

Title 26, §3505

Notes & Related Subsidiaries

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata