Are all payroll and withholding taxes paid and all payroll tax returns filed?
Many people do not realize that if an organization does not pay all of its payroll taxes, the IRS can assert a 100% “trust-fund penalty” against the board members who are found to be “responsible parties.” The penalty amount is equal to the unpaid taxes and can be collected “jointly or severally,” meaning the IRS can pursue collection of the entire amount of the tax from any one of the persons it deems responsible, leaving that person to attempt to recover from the organization and/or the other members. Board members should ensure that all payroll trust fund taxes are paid timely. How is the compensation determined for the top management officials? Nonprofit organizations have a fiduciary obligation to the public and/or their members to spend their money wisely and in accordance with the organization’s exempt purpose. To motivate board members and management to provide proper oversight, Congress decided to make the decision makers of §501(c)(3) organizations (charities) and §501(c)(4)
