This article analyzes the standards and application of 26 U.S.C. § 6672 concerning the Trust Fund Recovery Penalty (TFRP) as determined by the United States District Court for the Eastern District of Pennsylvania in United States of America v. Kathryn S. Flaim. The court granted the Government’s Motion for Summary Judgment, finding the defendant liable for unpaid federal employment taxes totaling $204,466.54 (as of September 29, 2025). This analysis focuses on the court’s determination that the taxpayer qualified both as a "responsible person" and acted "willfully" in failing to remit trust fund taxes.

Factual Background of Tax Delinquency

The defendant, Kathryn S. Flaim, was assessed with TFRPs for employment taxes outstanding from two related entities: Slate Belt Visiting Nurses, LLC ("Visiting Nurses") and Slate Belt Home Care, LLC ("Home Care").

For Visiting Nurses, Flaim served in managerial roles, described variously as "assistant administrator" and "business manager". Her responsibilities included determining financial policy, authorizing payroll, authorizing and directing bill payments, and making federal tax deposits. She was one of only two people authorized to approve payroll and was the individual assigned the PIN numbers and passwords required to access the electronic payment system for federal taxes and the business’s bank account. Visiting Nurses fell behind on employment taxes in 2014 (quarters one through three). Flaim became aware of the liability in the spring or summer of 2014, engaging in multiple contacts with IRS personnel. Despite this knowledge, Flaim authorized the payment of other creditors, including bills for supplies, utilities, maintenance, insurance, rent, and payroll, while the delinquent taxes increased.

For Home Care, Flaim established the entity in 1997 and is its sole member in the member-managed LLC structure. Flaim had final authority over all managerial decisions, including financial affairs, setting employee salaries, and making IRS payments. She was the only person with signature authority over the business’s bank accounts and the only person who could authorize or make payments for bills, payroll, and federal tax deposits. Home Care co-mingled withheld employment taxes with other funds. Flaim was informed of Home Care’s outstanding tax liabilities in 2018 and again in May 2023. Subsequent to the 2023 notice, Flaim continued to authorize payments to non-IRS creditors, covering utilities, rent, payroll, and her personal compensation. Allegedly, her compensation included charging personal expenses—such as payments to her credit card company, Netflix, her husband’s mortgage, and ATM cash withdrawals—to Home Care’s business accounts.

Taxpayer’s Response and Procedural Posture

The United States initiated the action on March 20, 2025, seeking a money judgment for the unpaid TFRP assessments, along with statutory interest, pursuant to 26 U.S.C. § 6672.

Flaim filed an Answer broadly denying the factual allegations and asserting several affirmative defenses, including a claim that the Government had not correctly stated the amount owed. Crucially, when the Government filed its Motion for Summary Judgment, Flaim failed to file a timely response, despite a court reminder. After the deadline passed, Flaim filed an "Objection," asserting new affirmative defenses and claiming the Motion was not unopposed, yet she failed to articulate any arguments in legal opposition to the Government’s motion or point to any error in the underlying tax calculation.

The court noted that where a party fails to oppose summary judgment, the facts may be deemed undisputed (Fed. R. Civ. P. 56(e)(3); Anchorage Assocs. v. V.I. Bd. of Tax Review, 922 F.2d 168, 175 (3d Cir. 1990)). Nonetheless, the court was required to analyze whether the moving party was entitled to judgment as a matter of law.

Court’s Analysis of Statutory Requirements

The court analyzed liability under 26 U.S.C. § 6672, which imposes a penalty for failure to remit withholding ("trust fund") taxes. To establish liability, the Government must prove two conditions: (1) the individual must be a “responsible person,” and (2) the failure to pay the tax must be “willful” (Samango v. United States, 833 F. App’x 941, 945 (3d Cir. 2020), citing Greenberg v. United States, 46 F.3d 239, 242 (3d Cir. 1994)).

The Standard for "Responsible Person"

A "responsible person" is defined as an individual “required to collect, truthfully account for or pay over any tax due to the United States” (Samango, 833 F. App’x at 945, citing Greenberg, 46 F.3d at 242-43). Responsibility is determined by status, duty, or authority, rather than knowledge (Samango, 833 F. App’x at 945, citing Quattrone Accountants, Inc. v. Internal Revenue Service, 895 F.2d 921, 927 (3d Cir. 1990)). The individual must have “significant control” over corporate finances, possessing either "the final or significant word over which bills or creditors get paid" (Samango, 833 F. App’x at 945, citing Brounstein v. United States, 979 F.2d 952, 954 (3d Cir. 1992)). Importantly, there can be more than one responsible person for § 6672 purposes (Reddington v. United States, 2021 WL 5085305, at *3 (E.D. Pa. Nov. 2, 2021)).

The court cited the seven non-exclusive factors used by the Third Circuit to determine responsibility (Samango, 833 F. App’x at 945-46, citing Greenberg, 46 F.3d at 243, and Brounstein, 979 F.2d at 954–55).

The Standard for "Willfulness"

"Willfulness" is established by either a “voluntary, conscious and intentional decision” to pay other creditors instead of taxes, or a “reckless disregard” that taxes will go unpaid (Samango, 833 F. App’x at 947, quoting Quattrone, 895 F.2d at 928 and Brounstein, 979 F.2d at 956).

A responsible person acts willfully when paying other creditors in preference to the IRS, knowing that taxes are due, or acting with reckless disregard for whether taxes have been paid (Greenberg, 46 F.3d at 244). Reckless disregard includes the “failure to investigate or correct mismanagement after being notified that withholding taxes have not been paid” (Samango, 833 F. App’x at 947, citing Greenberg, 46 F.3d at 244). Furthermore, any payments to other creditors or bills, including wages, made with knowledge that federal taxes are due establishes willfulness (Samango, 833 F. App’x at 947). Financial distress or spending funds to keep the corporation running in expectation of later revenue to pay the IRS is no defense (Greenberg, 46 F.3d at 244).

Application of Law to the Facts

Finding of "Responsible Person"

The court found Flaim was a "responsible person" for both entities due to her self-admitted duties and authority. Flaim had significant control over Visiting Nurses and the final word over Home Care’s payments.

Applying the seven factors, the court found substantial support for responsibility:

Bylaws: Home Care bylaws listed Flaim as the sole member.
Check Signing/Account Access: Flaim was the only person with PINs/passwords for Visiting Nurses’ bank account access and the only person with signature authority over Home Care’s bank account.
Tax Returns: Flaim had authority to sign returns for Visiting Nurses and was responsible for signing returns for Home Care, personally signing or authorizing the use of a rubber stamp of her signature for all but two returns.
Payment of Other Creditors: Flaim admitted to making payments to creditors—including utilities, rent, and payroll—in lieu of tax obligations for both businesses after becoming aware of the delinquencies.
Identity of Officers/Stockholders: Flaim was the sole member/officer of Home Care.
Hiring/Firing: Flaim had the authority to hire and fire employees at both businesses.
Financial Affairs: Flaim determined financial policy and oversaw financial affairs for both businesses.

The court concluded that the abundance of factual support, coupled with Flaim’s admissions in her depositions and Forms 4180 (Reports of Interview with IRS personnel), demonstrated that no genuine dispute of material fact existed on the issue of “responsible person”.

Finding of "Willfulness"

The court determined that Flaim’s failure to pay was "willful". She indisputably made payments to other creditors, including wages, with knowledge that federal taxes were due (Samango, 833 F. App’x at 947).

For Visiting Nurses, Flaim knew of the delinquency in 2014 yet authorized payments for operating expenses.
For Home Care, Flaim was notified of tax liability in 2018 and 2023, yet continued to pay operational expenses, payroll, and personal compensation. The co-mingling of trust funds and subsequent use of business funds for personal items further supported the finding of willful conduct.

Flaim’s argument that she attempted to cut expenses and payroll at Visiting Nurses to restore the business to "profitability" before paying the IRS was rejected. Attempting to keep a distressed corporation in business with the expectation that taxes will later be paid is specifically not a defense to willfulness (Greenberg, 46 F.3d at 244). This conduct constituted at least "reckless disregard" (Samango, 833 F. App’x at 947). The court found no genuine dispute of material fact regarding "willfulness".

Conclusion on Liability and Assessment

The Government presented evidence of the federal tax assessment totaling $204,466.54, which is entitled to a “legal presumption of correctness” (United States v. Fior D’Italia, Inc., 536 U.S. 238, 243 (2002); Samango, 833 F. App’x at 945). The burden then shifted to Flaim to rebut this presumption by a preponderance of the evidence (Samango, 833 F. App’x at 945).

Flaim failed to meet this burden, only broadly denying the amount owed without explaining why the calculation was incorrect. Since Flaim failed to show a genuine dispute of material fact on the issues of responsibility or willfulness, and failed to rebut the presumption of correctness of the assessment, the court concluded that the Government was entitled to judgment as a matter of law (Anchorage Assocs., 922 F.2d at 175).

The court granted summary judgment for the United States on all counts, entering a money judgment for the amount of the tax penalty plus statutory interest.

Prepared with assistance from NotebookLM.