Romano-Murphy v. Comm'r
| Decision Date | 29 November 2012 |
| Docket Number | T.C. Memo. 2012-330,Docket No. 27236-09L. |
| Parties | LINDA J. ROMANO-MURPHY, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent |
| Court | United States Tax Court |
Linda J. Romano-Murphy, pro se.
Kimberly A. Daigle, for respondent.
CONTENTS
FINDINGS OF FACT..............................................5
1. Formation and Operation of Nurses PRN, LLC (i.e. NPRN) ............6
2. The Timing of NPRN's Deposits of Its Employment Taxes............10
3. NPRN's Payments of Employment Taxes Before First Quarter 2005 (Including Alleged Overpayments for Fourth Quarter 2003 and Fourth Quarter 2004) .............................................. 12
4. NPRN's Temporary Merger With Nurses Staffing, LLC, in June 2004 .......................................... 15
5. NPRN's August 2004 Negotiations With PRN Health Services, Inc......16
6. December 2004 Letter of Intent From Medical Staffing Solutions, Inc. (i.e. MSSI) ................................................ 17
7. NPRN's January 2005 Securities Exchange Agreement With MSSI .....20
8. Alleged Overpayment of NPRN's Taxes for First Quarter 2005 ........ 20
10. NPRN's Semiweekly Deposits for Second Quarter 2005 .............. 24
11. NPRN's June 16, 2005 Asset-Purchase Agreement With MSSI and Nurses PRN Acquisition Corp. (i.e., NAC)........................25
12. Completion of the Sale of Assets to MSSI.........................36
13. The Agreement Between NPRN and the IRS Regarding the Application of the $1.6 Million Payment..........................36
14. The Alleged Letter to Gary Greene Regarding the Application of the $1.6 Million Payment ........................................37
15. The Application of the $1.6 Million Payment by the IRS..............38
16. Whether the IRS's Application of $740,712.89 of the $1.6 Million Payment Caused a Tax Overpayment for First Quarter 2004 ........... 42
17. The Form 941 for Second Quarter 2005 .......................... 43
18. Romano-Murphy's Awareness of NPRN's Employment-Tax Liability for Second Quarter 2005 ...................................... 44
19. NAC Begins Operations; Renamed NOC ....................44
20. The $70,000 of Payments by NOC of NPRN's Taxes That Were Applied by the IRS Against Fourth Quarter 2003, First Quarter 2004, and Second Quarter 2004 ..................................... 45
21. After 2005 ................................................. 46
OPINION ...................................................... 53A. Collection-Review Hearing ............................... 53
B. An Employer's Liability for Employment Taxes and FUTA Taxes ............................................... 55
A. Application of the $189,316.63 in Semiweekly Deposits ......... 71
B. Application of the $73,783.00 Payment......................81
C. Application of the Supposed $17,866.99 Overpayment From First Quarter 2004 ...................................... 85
D. The $70,000 in Payments by NOC That Were Applied by the IRS Against Tax Liabilities for Fourth Quarter 2003, First Quarter 2004, and Second Quarter 2004 ..................... 86
E. Alleged Overpayments of $12,009.07 From Fourth Quarter 2003, Fourth Quarter 2004, and First Quarter 2005 ............. 86
A. Romano-Murphy Acted Willfully in Refusing To Pay Trust-Fund Taxes to the Federal Government ..........................91
B. Romano-Murphy Did Not Make Reasonable Efforts To Pay NPRN's Unpaid Trust-Fund Taxes .........................98
C. Alleged Errors Made by the Appeals Office Regarding Willfulness .......................................... 106
MEMORANDUM FINDINGS OF FACT AND OPINION
MORRISON, Judge: Linda J. Romano-Murphy petitioned the Court under section 6330(d)(1) to review the determination of the IRS Appeals Officesustaining a proposed levy and filing of notice of federal tax lien to collect a section 6672 penalty assessed against her. Unless otherwise indicated, all references to sections are to the Internal Revenue Code of 1986, as amended. The issue for decision is whether Ms. Romano-Murphy is liable for penalties assessed against her for failing to pay over the income taxes and Federal Insurance Contribution Act (FICA) taxes that were withheld from the wages of employees of Nurses PRN, LLC, for the second quarter of 2005.
The parties entered into a stipulation of facts, which was supplemented twice. We adopt the stipulation of facts, as supplemented, as our findings of fact unless otherwise noted.
For the convenience of the reader, we note below abbreviations that are used for some of the entities relevant to this dispute:
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¦ ¦Table of abbreviations ¦
+--------------+------------------------------------¦
¦Abbreviation ¦Entity ¦
+--------------+------------------------------------¦
¦NPRN ¦Nurses PRN, LLC ¦
+--------------+------------------------------------¦
¦Webbank ¦Webbank/Rockland Credit Finance, LLC¦
+--------------+------------------------------------¦
¦MSSI ¦Medical Staffing Solutions, Inc. ¦
+--------------+------------------------------------¦
¦NAC ¦Nurses PRN Acquisition Corp. ¦
+--------------+------------------------------------¦
¦NOC ¦Nurses Onsite Corp. ¦
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1. Formation and Operation of Nurses PRN, LLC (i.e. NPRN)
Nurses PRN, LLC, was formed in July 2002 by three persons: Aftab Adamjee, Robert Murphy, and Linda J. Romano-Murphy. Linda J. Romano-Murphy was known as Linda J. Romano until June 2005, when she married Robert Murphy. We refer to her as Romano-Murphy. We refer to Nurses PRN, LLC, as NPRN.
NPRN was in the business of health-care staffing. It employed nurses and arranged for them to work at hospitals that wished to hire nurses as needed rather than permanently. The hospitals would remit payment (to NPRN's factor, as discussed below) for the nurses' services. NPRN paid wages to the nurses.
NPRN offered the nurses the option of receiving their wages immediately after the end of each work shift. Without a factoring arrangement, this method of payment would have posed a potential timing problem for NPRN because it wouldhave had to make its wage payments to the nurses before it received its own fees from the client hospitals. To match the timing of its cashflows to the timing of its wage payments, NPRN had a factoring arrangement with its factor, Webbank/ Rockland Credit Finance, LLC ("Webbank"). The arrangement worked as follows: Whenever NPRN billed a hospital for services, Webbank would advance to NPRN 90% of the amount billed. Webbank deposited the advances into NPRN's bank account at Suntrust Bank. The parties stipulated that this was the only bank account used by NPRN. With the money in the bank account, NPRN would make wage payments to the nurses. The wage payments took into account the requisite federal trust-fund taxes, meaning that the wage payments were reduced by NPRN to reflect that it was withholding (1) employees' income taxes and (2) the employees' share of FICA taxes. Later, when a hospital paid its bill, it would make its payment to Webbank rather than NPRN. When Webbank received the payment from the hospital, it would deposit in NPRN's bank account an amount equal to (a) 10% of the payment it received from the hospital, minus (b) Webbank's fee.
In 2005 NPRN had 10 staffing locations in 6 states and provided medical staffing services to over 250 clients. It employed over 1,000 nurses and 25administrative and management staff. The company was based in West Palm Beach, Florida.
From the time it was formed in July 2002 until its corporate assets were sold on July 1, 2005, NPRN's stock ownership was as follows:
Aftab Adamjee had provided $1 million in funding to the company.
Robert Murphy was the chief executive officer and president of NPRN from July 2002 through June 30, 2005.
Romano-Murphy was the chief operating officer and secretary of NPRN from July 2002 through June 30, 2005. As the parties have stipulated, Romano-Murphy's job was to manage "all the branches" of NPRN and to manage "the Payroll, Accounting, and Accounts Receivable Departments" of NPRN. She "controlled NPRN's finances, wrote and signed checks to creditors, and signed all federal income and employment tax returns for NPRN." The record contains copies of 164 checks that the parties stipulated are "checks issued on NPRN's bank account at Suntrust Bank * * * during the period from April 1, 2005 through June 16, 2005." All 164 checks bear Romano-Murphy's signature (either an original or a stamp). The record also contains copies of 68 checks that the partiesstipulated are "checks issued on NPRN's bank account at Suntrust Bank * * * during the period from ...
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