Amodio v. Commissioner, T.C. Memo. 2026-96, Docket No. 9959-22L (Sept. 28, 2026)

For tax controversy practitioners, Certified Public Accountants, and Enrolled Agents, navigating the personal liability provisions of Internal Revenue Code (I.R.C.) § 6672 requires a precise understanding of the statutory standards for “willfulness” and the joint-and-several mechanisms governing the Trust Fund Recovery Penalty (TFRP). In Amodio v. Commissioner, T.C. Memo. 2026-96 (Sept. 28, 2026), Special Trial Judge Carluzzo delivered an instructive opinion examining two pivotal tax controversy issues: (1) whether a corporate officer acts “willfully” under I.R.C. § 6672(a) when, upon discovering pre-existing tax delinquencies, he uses unencumbered corporate funds to pay net wages and union benefits to maintain business operations, and (2) whether an Offer-in-Compromise (OIC) accepted by the IRS to compromise the underlying corporate employment tax debt operates to cap the individual officer’s derivative TFRP liability.

This article examines the factual matrix of Amodio, dissects the taxpayer’s statutory arguments, outlines the Tax Court’s legal analysis, and evaluates the judicial synthesis of joint-and-several tax principles against Internal Revenue Manual (IRM) administrative guidelines.

Factual Background and Financial Distress

The petitioner, Thomas Amodio, resided in New York at the time the petition was filed. Before organizing Creative Solutions, Inc. (Creative) in 2002, Amodio worked as a carpenter. Through Creative, he provided specialized construction services focused on retail display cases and millwork installation. Creative operated as a “union shop,” employing unionized trade laborers in the New York and New Jersey metropolitan areas. Consequently, in addition to union-negotiated wage scales, Creative was contractually mandated to pay various employee union fringe benefits.

During 2015 and 2016, Creative encountered severe financial strain stemming from “a slow-paying major client, coupled with union demands.” This cash flow deficit precipitated the nonpayment of federal employment taxes (Form 941 withheld income tax and employee Federal Insurance Contributions Act [FICA] taxes). Significantly, the initial decision to withhold payment of federal employment taxes to alleviate corporate liquidity pressures was made by Creative’s office manager and a third-party payroll processing firm, without Amodio’s knowledge or direct authorization. As noted by the Tax Court, “Petitioner became aware of the failure after the fact.”

Upon discovering the outstanding trust fund delinquencies, Amodio directed available corporate revenues toward paying employee net wages, union benefit contributions, and key suppliers to keep the business operational. Amodio recognized that failing to satisfy employee wage and union benefit obligations would prompt trade unions to immediately pull their workers from active job sites, terminating ongoing projects and destroying Creative’s commercial viability.

On July 28, 2020, Creative successfully entered into an Offer-in-Compromise with the IRS pursuant to I.R.C. § 7122. The corporate OIC resulted in the satisfaction, in whole or in part, of Creative’s employment tax obligations for multiple tax periods, including the calendar quarters ended December 31, 2015, and December 31, 2016.

Procedural History and Taxpayer Request for Relief

Following the corporate tax defaults, the IRS assessed individual TFRPs against Amodio pursuant to I.R.C. § 6672 for the tax quarters ended December 31, 2015, June 30, 2016, September 30, 2016, and December 31, 2016. Amodio subsequently paid off the assessed liabilities for certain intermediate quarters, leaving the periods ended December 31, 2015, and December 31, 2016, in dispute.

On April 4, 2022, the IRS Office of Appeals issued a Notice of Determination Concerning Collection Action(s) Under Section 6320 and/or 6330 (Notice), sustaining a proposed levy action to collect Amodio’s outstanding individual TFRP liabilities for the remaining two quarters. Amodio timely filed a petition with the United States Tax Court under I.R.C. § 6330(d).

In his Tax Court petition and trial presentation, Amodio requested relief from the proposed collection action on two primary legal grounds:

Absence of Willfulness Under I.R.C. § 6672(a): Amodio asserted that he did not “willfully” fail to collect or pay over Creative’s trust fund taxes because he did not participate in the initial decision to withhold payroll tax payments. Furthermore, he argued that his subsequent disbursements were driven by commercial necessity—specifically, satisfying mandatory union obligations to avert immediate operational shut-down.
Adjustment and Capping of Liability via Corporate OIC: Amodio contended that because Creative’s underlying employment tax obligations for the periods in dispute were satisfied or extinguished under the July 28, 2020 corporate Offer-in-Compromise, his derivative, joint-and-several TFRP liabilities must be correspondingly adjusted and capped at the reduced OIC amount.

Standard of Review and Burden of Proof

In a Collection Due Process (CDP) proceeding governed by I.R.C. § 6330(d), where the validity or amount of the underlying tax liability is properly at issue, the Tax Court reviews the Commissioner’s determination under a de novo standard (Sego v. Commissioner, 114 T.C. 604, 610 (2000); Goza v. Commissioner, 114 T.C. 176, 181–82 (2000)). The Court confirmed that the IRS complied with procedural statutory mandates, including obtaining timely managerial supervisory approval for penalty assessment pursuant to I.R.C. § 6751(b).

In challenging the existence or amount of an underlying TFRP liability, the taxpayer bears the legal burden of proof under Tax Court Rule 142(a) (Thompson v. Commissioner, 140 T.C. 173, 178 (2013); Malloy v. United States, 17 F.3d 329, 331 (11th Cir. 1994); Hochstein v. United States, 900 F.2d 543, 548 (2d Cir. 1990)).

Judicial Analysis of Willfulness Under Section 6672

Under I.R.C. § 6672(a), “[a]ny person required to collect, truthfully account for, and pay over” any federal tax who “willfully fails” to do so is liable for a penalty equal to the total amount of the tax evaded, not collected, or not accounted for and paid over (Kalb v. United States, 505 F.2d 506, 510–11 (2d Cir. 1974); Mason v. Commissioner, 132 T.C. 301, 321 (2009)). Amodio conceded that he was a “person” within the statutory definition of I.R.C. § 6671(b).

Addressing the statutory requirement of “willfulness,” the Tax Court reaffirmed established jurisprudence holding that a willful failure constitutes “a voluntary, conscious and intentional failure to collect, truthfully account for, and pay” employment taxes (Newsome v. United States, 431 F.2d 742, 745 (5th Cir. 1970); Mason, 132 T.C. at 324–25; Winter v. United States, 196 F.3d 339, 345 (2d Cir. 1999)). Bad motive, evil intent, or intent to defraud the government is not required.

Special Trial Judge Carluzzo articulated the established rule governing post-discovery conduct:

“Quite simply for purposes of section 6672, willfulness is demonstrated if a ‘person,’ after becoming aware of a corporation’s outstanding employment taxes, uses unencumbered corporate funds for purposes other than paying the corporation’s outstanding employment taxes.” (United States v. Rem, 38 F.3d 634, 643 (2d Cir. 1994); Mason, 132 T.C. at 325; Gustin v. United States, 876 F.2d 485, 492 (5th Cir. 1989)).

Applying this standard, the Court acknowledged the real-world economic pressures faced by business owners attempting to satisfy employee wages and union mandates during cash flow bottlenecks. However, the Court rejected Amodio’s defense that commercial necessity or union pressure negates willfulness under tax law:

“Using withheld employment taxes to ease cashflow problems has consequences, which is one reason this Opinion is being written.”

The Court relied directly on Second Circuit precedent establishing that employees and trade unions holding wage claims enjoy no statutory priority over federal trust fund obligations:

“While working around cashflow disruptions to ensure timely payment to employees is understandable, for purposes of determining willfulness, ‘an employee to whom the corporate employer owes wages is simply another creditor.’” (Hochstein v. United States, 900 F.2d 543, 548 (2d Cir. 1990)).

Because Amodio learned of the trust fund deficiencies shortly after assessment and subsequently chose to disburse corporate funds to pay net wages, union benefits, and operational expenses rather than satisfying the delinquent employment taxes, the Tax Court concluded that his failure to pay was willful under I.R.C. § 6672(a).

The Interplay Between Corporate Offers-in-Compromise and Individual Penalty Caps

Having established Amodio’s liability under I.R.C. § 6672(a), the Court turned to the central legal controversy: whether Creative’s corporate Offer-in-Compromise restricts the amount the IRS can collect from Amodio individually.

The Court began its analysis by reiterating the foundational nature of Section 6672 penalties as derivative and joint-and-several obligations:

“Penalties contemplated by section 6672(a) are, by nature, derivative of a different taxpayer’s failure to satisfy its employment tax obligations. The employment tax liability of the other taxpayer and the person described in section 6671 is joint and several, like the income tax liability that results from the election to file a joint federal income tax return by married individuals.”

From this premise, Special Trial Judge Carluzzo underscored the bedrock doctrine prohibiting double tax collection:

“It almost goes without saying that the Commissioner can collect a joint and several tax liability only once, a point so fundamental it is not even discussed in the brief of either party.” (Brown v. United States, 591 F.2d 1136, 1142 (5th Cir. 1979)).

The Commissioner argued that under Internal Revenue Manual (IRM) provisions—specifically IRM 5.8.4.22.1(2) (May 10, 2013) (currently IRM 5.8.4.21.1(2) [Apr. 25, 2025])—the settlement of a corporate tax liability through an OIC does not extinguish the individual responsible person’s TFRP, enabling the IRS to levy against the responsible officer for the full uncompromised balance. Respondent further asserted that the Tax Court had “favorably” commented on this IRM provision in Mason v. Commissioner.

Special Trial Judge Carluzzo firmly rejected the Commissioner’s position and clarified the misinterpretation of Mason:

“Not so fast, according to respondent. As respondent views the matter, the excess of petitioner’s TFRP for each of those periods over Creative’s offer-in-compromise-reduced employment tax liability remains due and collectable by levy. Yet another reason this Opinion is being written.”

The Court highlighted that footnote 19 in Mason referenced the IRM merely as an expression of internal administrative policy, explicitly noting that the handling of the corporate OIC had “no direct bearing” on that taxpayer’s case (Mason, 132 T.C. at 329 & n.19). The IRM does not carry the force of law and cannot override general legal principles governing joint-and-several debt satisfaction.

Rejecting respondent’s administrative argument, Special Trial Judge Carluzzo held:

“There might be circumstances that ‘may’ support respondent’s decision to collect from a responsible person a TFRP liability that exceeds a corporation’s related employment tax liability that has been adjusted by an offer-in-compromise, but in the absence of a specific reason for doing so in this case we are more persuaded to proceed by applying common sense and the general principles that govern joint and several federal tax liabilities.”

Application of Law to Facts and Judicial Disposition

Synthesizing the statutory framework and common-law principles of joint-and-several liability, the Tax Court arrived at two core findings:

Willfulness Established: Amodio’s deliberate choice to pay employee wages and union benefits after gaining knowledge of Creative’s trust fund tax defaults met the statutory standard for willfulness under I.R.C. § 6672(a).
Collection Amount Capped by Corporate OIC: Respondent’s collection authority under the Notice of Determination must be legally capped at the compromised corporate balance:

“In so doing, it follows and we hold that respondent may proceed with collection as determined in the Notice but only in amounts that do not exceed the amount of Creative’s employment tax liability for each period in dispute, as adjusted by the offer-in-compromise.”

Because the precise remaining balance of Creative’s compromised tax liability could not be fully established from the trial record, the Tax Court ordered that decision be entered under Tax Court Rule 155 to allow the parties to compute the exact capped collection amounts.

Core Takeaways for Tax Practitioners

Delegation Does Not Shield Responsible Persons Upon Knowledge: Taxpayers cannot escape I.R.C. § 6672 liability by delegating payroll functions to office managers or third-party payroll providers. Once a responsible officer becomes aware of unpaid trust fund taxes, any subsequent disbursement of unencumbered corporate funds to other creditors—including employee net wages—satisfies the legal test for willfulness.
Payroll and Union Obligations Are Not Priority Creditors Under Tax Law: Practitioners representing businesses in distress must advise clients that paying union dues or net employee wages to prevent business closure constitutes voluntary preference of general creditors over the United States under Hochstein.
Corporate OICs Cap Individual TFRP Collection Limits: Amodio v. Commissioner provides vital precedent for tax professionals negotiating resolution options. While a corporate OIC does not automatically discharge an officer’s Section 6672 liability per se, basic principles of joint-and-several liability mandate that the IRS cannot collect more from the individual than the compromised corporate balance.

Prepared with assistance from Gemini Notebook.