941 Tax Preliminary Conference

The following forms apply to 941 tax consulting. Not all forms will apply to all industry types (legal, physician, staff leasing, restaurant, machine shop, etc.). Notes are shown beside each item to assist in the determination of those that should, may have or were actually filed. These are important because they are factual research and will establish not only the fact pattern, but will furnish;

IMPORTANT !

The engagement focus must have the direction needed by the taxpayer.

In most cases, the taxpayer will want relief from the following:

Continued IRS contact and surveillance
Continued written demands from the service
Levies and seizures
Federal Tax Liens - and destruction of credit
Strain on the cash flow; finding the money to pay the assessments and other bills to stay in operation
Interest and penalty assessments

Summary: The taxpayer needs to concentrate on producing income, not be distracted by levies, and pay bills. This can be accomplished by reducing the tax, installment agreements and other strategies the professional can use.

The advocacy procedures therefore must be structured to accomplish the above items by doing the following:

Determine whether the original tax computations were correct
Determine whether the bases used to compute the tax were correct - look for omitted deductions or bases that should not have been taxed (example: if the payroll tax computations including any "Allocated Tips" are more than the employee's pay for that period no taxes need to be computed on the excess. Therefore the "wage" base limits the 941 taxes, even for the allocated tips. (Refer to see also FICA Credit; Lack of withholding)
Look for credits available that were not applied (example: 941 line 6c "Taxable Tips" will usually give the taxpayer credits against the income tax in the same amount of the 941 tax on that line)
Determine the same amounts for wages as bases, and tax computations for liabilities are the same throughout the accounting and tax accounting/preparation system. Determine the 941 returns, the 940, the W2/W3, the tip reporting system/reports, the payroll earnings registers, the federal income tax returns, the IRS records and bills all match - do not miss matching the payroll deposits in the process.
Determine the IRS records are correct
Determine the IRS computations for interest and penalty are correct
Overview other federal taxes as deemed appropriate to discover potential for refunds to help pay any remaining payroll related taxes remaining.
When a business suffers cash flow problems the choice to not pay the payroll taxes may be a symptom of other real or accounting problems. Is there potential for losses caused by diversion of either cash or inventory or other business property? Is there a potential for the income to be over-reported or expenses to be under-reported? Is the product or service priced appropriately? Is the volume required to pay the overhead excessive given the market?
Find sources of cash to pay any remaining assessments, including installment agreements if necessary.

Information and Documents Required

General Questions To Assist in Learning About This Business

Some definitions for important consideration:

Allocated Tips (or deemed tips) ~ (see also FICA Credit; Lack of withholding; ) Large food and beverage establishments (Those with 10 or more workers on a given day) are required to allocate tips among their employees and to report the allocated tips to the IRS. The amount that must be allocated as tips generally is an amount equal to the excess of 8 percent of gross receipts (other than receipts from take out and from services with respect to which a service charge of at least 10 percent is added) over the amount reported by the employees under the reporting rules discussed in Section 93.2(a). However, in response to a request by the employer or a majority of the employees, the IRS can lower this percentage (to an amount not less than 2 percent) if it determines that the amount of tips is less than 8 percent. Code Section 6053(c)(3)(C).

PRACTICE TIP: An employer or employees can make this request by providing information sufficient to demonstrate that the actual rate of tips received is less than 8 percent. For example, this information might include the charged tip rate, the type of establishment, menu prices, the location of the establishment, the amount of "self-service" required, the days and hours open for business, and whether the customer receives the check from or pays the server for the meal. Reg. Section 31.6053-3(h) and Rev. Proc. 86-21, 1986-1 C.B. 560, set out how employers or employees can petition the IRS for a reduction. This allocation is generally done by the payroll period. Code Section 6053(c)(3)(A). However, an employer can allocate either by the calendar year or by reasonable divisions of the calendar year, as long as it follows the same rule for the entire year. Reg. Section 31.6053-3(g). The allocation among employees may be done under a good-faith agreement between the employer and the employees. Alternatively, it may be done using a formula prescribed by the IRS in Reg. Section 31.6053-3(f). If the IRS's method is used, tips are allocated only to directly tipped employees, who are employees who receives tips directly from customers (including employees who after receiving tips directly from customers turn all the tips over to a tip pool), such as waiters, waitresses, and bartenders. Reg. Section 31.6053-3(j)(12).

In contrast, indirectly tipped employees are employees who do not normally receive tips directly from customers, such as busboys, service bartenders, and cooks. An employee, such as a maitre d', who receives tips both directly from customers and indirectly through tip splitting or tip pooling is treated as a directly tipped employee. Reg. Section 31.6053-3(j)(13). Establishments subject to these requirements are required to report to the IRS each year:

(1) their gross receipts from the sale of food and beverages (other than receipts from take out and from services with respect to which a service charge of at least 10 percent is added);

(4) the sum of the tips reported by the employees as discussed in Section 93.2(a) and the amount the employer is required to report as wages paid to employees with respect to service charges of less than 10 percent; and

This report is made on Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, and must be furnished on or before the last day of February following the year for which the report is made. An employee that fails to file this report in a timely fashion, or does not file it correctly, is subject to the failure-to-file-information- statements penalty under Section 6721, which is discussed in Section 607.4

COMPLIANCE TIP: Form 8027 may be filed magnetically or electronically. Rev. Proc. 99-46, 1999-49 I.R.B. 605.

The employer also must report the amount of tips allocated by him to each employee. Code Section 6053(c)(2). This report is made on Form W-2. Reg. Section 31.6053-3(b). An employer who fails to provide the employee with this report or who does not provide correct reports, is subject to the failure-to-provide payee statements penalty of $50 for each missing or incorrect statement, up to a maximum of $100,000. This penalty is increased to the greater of $100 or 10 percent of the amount required to be reported, with no maximum, if the failure is due to intentional disregard. Code Section 6722. See Section 607.4 for discussion of this penalty.

Allocated tips have no effect on income tax or FICA withholding and are not included in reporting the amount of the employee's wages. Instructions for Form 8027. However, they are subject to tax, unless the employee's records, discussed in Section 93.6(b), show that he received more or less.

CAUTION: The IRS may determine that a tipped employee received a larger amount of tip income than is reflected by the employee's allocation. Reg. Section 31.6053-3(b)(5). In addition, the employer must keep records sufficient to substantiate the allocations and the information returns and reports to employees for three years. Reg. Section 31.6053-3(l).

A large food or beverage establishment is a trade or business or part of a trade or business that provides food or beverages to customers, with respect to which the tipping of employees who serve the food or beverages is customary, and that normally employed more than ten employees (based on total employees, not those receiving tips directly) on a typical business day in the previous year, not counting any individuals that own more than 50 percent of the business. <12> Generally, tipping is not considered customary for a cafeteria-style operation or for a food or beverage operation where at least 95 percent of the total sales are subject to the addition of a service charge of 10 percent or more. Reg. Section 31.6053-3(j)(7). However, the IRS has ruled that a cafeteria- style operation in which tipping is customary is a large food and beverage establishment subject to the reporting rules. TAM 9834001.

Responsible Party ~ The IRS can and does assess against everyone it can find who is potentially a "responsible officer" until the amount due has been paid, but the IRS may collect the tax due only once. Payment made by a responsible person pursuant to Code Section 6671 is not deductible under for federal income tax purposes. Although an exception for reasonable cause is not provided by Code Section 6672, the Fifth Circuit has indicated that the question of reasonable cause is to be considered in determining whether or not the failure was willful. Howard v. United States, 711 F.2d 729, 733 (5th Cir. 1983) Responsibility is a matter of status, duty, and authority. Those performing ministerial acts without exercising independent judgment will not be deemed responsible. In general, non-owner employees of the business entity, who act solely under the dominion and control of others, and who are not in a position to make independent decisions on behalf of the business entity, will not be asserted the trust fund recovery penalty. The penalty shall not be imposed on unpaid, volunteer members of any board of trustees or directors of an organization referred to in Section 501 of the Internal Revenue Code to the extent such members are solely serving in an honorary capacity, do not participate in the day-to-day or financial operations of the organization, and/or do not have knowledge of the failure on which such penalty is imposed. In order to make accurate determinations all relevant issues should be thoroughly investigated. An individual will not be recommended for assertion if sufficient information is not available to demonstrate he or she was actively involved in the corporation at the time the liability was not being paid. However, this shall not apply if the potentially responsible individual intentionally makes information unavailable to impede the investigation.

Trust Fund Tax ~ Amounts withheld from workers' payroll checks "shall be held to be a special fund in trust for the United States." Code Section 7501(a). See also §301.7512-1 Taxes collected under this provision are to be held in a special fund in trust for the United States. Reg. Section 301.7512-1. Although the statute requires the withheld amounts to be held in a special trust, there is no requirement that the withheld sums actually be segregated from the employer's general funds or that they be deposited in a separate bank account until required to be paid to the government.

COMPLIANCE CAUTION !

The employer is liable for the tax imposed with respect to unreported tips only as of the date on which notice and demand for the tax is made to the employer. Code Section 3121(q). However, in computing the tax, the employer uses the tax rates and maximum contribution bases in effect in the year in which the tips were actually received. Rev. Rul. 95-7, 1995-1 C.B. 185.

COMPLIANCE TIP: An employer that receives a notice and demand from the IRS reports its liability by making an adjustment for FICA taxes on its Form 941, Employer's Quarterly Federal Tax Return, for the calendar quarter in which notice and demand is made. To explain the adjustment, the employer attaches a copy of the notice and demand and a Form 941c, Supporting Statement to Correct Information, which the employer identifies in the top margin with "3121(q)." The employer must file a separate Form 941c for adjustments pertaining to a Code Section 3121(q) notice and demand; any other adjustments for the period must be made on a different Form 941c. Rev. Rul. 95-7, 1995-1 C.B. 185.

CAUTION: Although employers not receiving employee statements are not treated as having paid the tips until notice and demand, they nonetheless remain liable for the employee's FICA tax on these tips.

Since IRS's notice and demand may encompass all open years for all of the employers' employees, an employer may be faced with a sizable FICA tax liability upon receiving the IRS notice.

In assessing a large food and beverage employer for the FICA tax attributable to the unreported tips, the IRS uses the information reported by the employer on Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips, as discussed in Section 93.2(c). However, if it determines that the employer has not reported sufficient tips, the IRS may reconstruct the amount of tips.

PRACTICE TIP !

PRACTICE TIP: It may be advisable for large food and beverage establishments to calculate their exposure to FICA tax assessments on aggregate unreported tip income by following the same procedures the IRS uses in making its assessments. In addition, food service establishments can increase their odds of avoiding any potential negligence penalties on future FICA assessments by increasing their efforts to get employees to report tip income.

FICA Credit

Employers in the food and beverage industry can claim a credit against their income tax liability for part of the FICA tax they pay in connection with their employees' cash tips. Code Section 45B.

If, by the 10th of the month after the month you received an employee's report on tips, you do not have enough employee funds available to deduct the employee tax, you no longer have to collect it. If there are not enough funds available, withhold taxes in the following order:

Employers in the food and beverage industry can claim a credit against their income tax liability for part of the FICA tax they pay in connection with their employees' cash tips. Code Section 45B.

However, you cannot get credit for your part of social security and Medicare taxes on those tips that are used to meet the federal minimum wage rate that applies to the employee under the Fair Labor Standards Act.

How the Credit Is Figured

Generally, the credit equals the amount of employer social security and Medicare taxes paid or incurred by the employer on tips received by the employee. However, the employer social security and Medicare taxes on tips that are used to meet the Federal minimum wage rate applicable to the employee under the Fair Labor Standards Act are not used in the computation. The Federal minimum wage rate is $5.15 per hour as of September 1, 1997.

For example, an employee worked 100 hours and received $350 in tips for October 1999. The worker received $375 in wages (excluding tips) at the rate of $3.75 an hour.

Because the Federal minimum wage rate was $5.15 an hour, the employee would have received wages, excluding tips, of $515 had the employee been paid at the Federal minimum wage rate. Thus, only $210 of the employee’s tips for October 1999 is taken into account for credit purposes.

Background Information

Employment Tax Controversy Heats up in Food Service Arena In response to the mass underreporting of tip income and the related underreporting of Federal Insurance Contribution Act (FICA) taxes, the IRS is focusing on the employers of the underreporters -- operators of food and beverage establishments who normally have more than ten employees on a typical day. As a result, the dispute over the interpretation of Code Section 3121(q), which governs FICA tax payments on tips, has erupted again. In Fior D'Italia Inc. v. United States, <<ENDNOTE 1>> a district court rejected the IRS' use of the "aggregate" method to determine, assess, and collect an employer's share of FICA taxes on the tips received by its restaurant employees. The Court of Federal Claims had come to a similar conclusion in 1996 in the Bubble Room v. United States, but the Federal Circuit Appeals Court reversed that holding just weeks after the Fior D'Italia (Fior) decision. <<ENDNOTE 2>>

These cases have lessons to offer both practitioners with food service clients and corporate tax personnel employed by larger restaurants. First, where an establishment's employees' reported cash tip rate is significantly lower than that of the tips on charge cards, the food service establishment's exposure to FICA tax assessments on aggregate unreported tip income should be quantified using the IRS methodology discussed below. Second, it may be prudent to recommend to food service clients or employers ways that they can increase their efforts to get employees to report tip income in an effort to avoid any potential negligence penalties on future FICA assessments.

(1) the employee's share, which is usually paid by deductions from an employee's wages, and

(2) the employer's contribution, usually equal to the employee's share. Normally, this does not present a problem. The employee's share of FICA is withheld from his paycheck and the employer is easily able to calculate his share of FICA for a particular employee. Special rules apply, however, for collecting and calculating FICA taxes payable by employees with respect to tip income.

With some exceptions, tips received by employees are treated as wages for both the employee and employer's share of FICA taxes. <<ENDNOTE 3>> Tipped employees must report their tips in written statements to their employer on or before the tenth day of the month following the month in which the tips are received. <<ENDNOTE 4>> Appropriate reporting and payment of the employee's share means that the employee's wage history account is properly credited, which is important for future Social Security distributions.

In previous years, the IRS had used indirect methods to compute individual tip income. <<ENDNOTE 5>> One indirect method is the McQuatters formula, <<ENDNOTE 6>> which works as follows:

Recently, however, the IRS changed tactics and began assessing employers for FICA taxes due on the aggregate unreported tips of all employees.

Under the aggregate method, it computes the alleged amount of the employer's share by using the information on the employer's Form 8027, an annual information return that shows tips reported by employees and tips allocated to employees.<<ENDNOTE 7>> Specifically, the IRS determines the percentage of tips on the food and services that were charged on credit cards, by dividing the total amount of tips charged by the total charges. It estimates the total tips received by all employees by multiplying that percentage by employer's total receipts. The tips actually reported to the IRS are subtracted from that amount to determine the estimate of unreported tips. That figure is then multiplied by the employers' FICA tax rate to determine the employer's FICA tax liability. Thus, there is no assessment on the individual employees and the FICA taxes paid by the employers are not credited to any particular employee's wage history account.

The employer-taxpayers have challenged the use of this method arguing that the statutes governing FICA taxes require the IRS to determine FICA taxes for each employee individually in order to assess the employer's share.

The IRS, however, argues that nothing in the statute prohibits the use of an aggregate method and that the aggregate method of assessing FICA tax on employers is a reasonable interpretation of Code Section 3121(q), the provision that treats tip income as being subject to FICA. Fior is the third case to address whether Code Section 3121(q), when read in conjunction with the rest of the Code dealing with FICA taxes, permits an aggregate assessment of unreported employee tips to determine the employer's share of FICA taxes.

MORRISON RESTAURANTS, INC. v. UNITED STATES: In Morrison Restaurants, Inc. v. United States, <<ENDNOTE 8>> a district court held that the IRS lacked the authority to assess employer FICA taxes on unreported tips in the aggregate without determining the individual employees' underreporting and without crediting the employees for the employer's share of the assessed FICA taxes. However, the Eleventh Circuit reversed that decision, noting that Code Section 3121(q) provides that tips are "deemed to have been paid by the employer" and that the IRS can assess a deficiency for the employer's share of FICA taxes when an employee fails to accurately and completely report all tips. This provision, the court observed, clearly provides that an employer can be assessed for its share of FICA taxes on employee tips even if the employee fails to report all tips. According to the court, this provision also suggests that the employer can be assessed its share of FICA taxes even when the individual employee's share is not determined. The Eleventh Circuit also noted that in the Code, Congress imposed the employee's share of FICA taxes in a provision separate from the provision imposing the employer's share. Specifically, Code Section 3101 imposes the employee's share and Code Section 3111 imposes the employer's share. These provisions are located, respectively, in Subchapter A, Tax on Employees, and Subchapter B, Tax on Employers. The court observed that the separation of the provisions into different, parallel subchapters suggests that Congress contemplated that employees' and employers' shares could be imposed separately. Given the structure of the Internal Revenue Code, the court was unconvinced that Congress's silence on the issue could be construed to mean that an employer cannot be assessed its share of FICA taxes based on employees' unreported tips in the aggregate without determining the underreporting by the individual employees and crediting the individual employees' wage history accounts.

The court also expressed concern that basing the employer's share of FICA taxes exclusively on employees' reported tips would provide an incentive to employers to discourage accurate reporting or ignore blatantly inaccurate reporting by the employees so that the employer could pay less FICA tax.

BUBBLE ROOM v. UNITED STATES: In Bubble Room, Inc. v. United States, <<ENDNOTE 9>> the Court of Federal Claims held as the district court in Morrison had -- that the IRS may not assess an employer's share of FICA tax by using the aggregate method. However, on October 16, 1998, subsequent to the decision in Fior, a divided Federal Circuit vacated the Court of Claims decision and held that the lower court erred in holding that the IRS is prevented from assessing FICA tax against an employer based on an aggregate estimate of unreported tip income without determining the individual employees' tip income.

The Federal Circuit looked to the second sentence of Code Section 3121(q), which addresses the date on which tips are deemed to have been paid by the employer. That provision refers to "determining the employer's liability in connection with taxes imposed by section 3111 with respect to tips in any case where no statement including such tips was so furnished (or to the extent that the statement so furnished was inaccurate or incomplete)." As such, the court stated, Code Section 3121(q) expressly contemplates that the employer may be liable for its share of FICA taxes even if the records supplied by the employee are missing, inaccurate, or incomplete. The court observed that, although not conclusive, this provision seems to imply that an indirect method may be used to calculate the amount of employer FICA tax in the absence of any better evidence.

Dissenting from the majority, Judge Plager noted that wages subject to FICA do not include cash tips received by an employee in any calendar month unless they exceed $20 or more nor do wages include tips that exceed the annual contribution and benefit base. <<ENDNOTE 10>> Any assessment of FICA taxes against an employee, and derivatively against the employer, that is outside this "wages band" would be unlawful. Therefore, in the absence of information about the tip income of individual employees, the judge concluded, the IRS cannot know whether the income on which tax is being assessed is within the wages band. Judge Plager also stated that the Social Security system is not intended to generate tax income to the Treasury unrelated to the actual (or properly estimated) tip income of an employee, and for which no employee receives wage credits. And he found the concern that basing the employer's share of FICA taxes exclusively on employees' reported tips will lead to fraudulent employer behavior to be unsupported, if not misplaced. As he pointed out, the Bubble Room exerted substantial efforts to comply with the letter and spirit of the Code and did everything but individually police its employees' handling of tips received.

FIOR v. UNITED STATES: In Fior, the taxpayer operates a restaurant in which its employees receive tips. It computes and pays its share of FICA taxes for each employee based on each employee's salary and tip reports. In 1994, the IRS sent Fior a Notice and Demand to pay its share of FICA taxes allegedly due on tips not reported by its employees for the years 1991 and 1992. The IRS computed the amount from the information on Fior's Forms 8027, using the aggregate method described above. As a result, the IRS calculated that Fior owed additional FICA taxes on the aggregate unreported tips of all employees.

Fior paid a small portion of those taxes under protest and then brought a refund suit challenging the use of the aggregate method. In reaching its decision for Fior, the district court looked to the legislative history of FICA taxes, the purposes of FICA taxes, and the interaction of Code Section 3121(q) with other sections involving FICA taxes. The court concluded that nothing in the legislative history indicates a congressional intention to make employers more responsible than the employees for FICA taxes on tips or an intention to place a tax on employers that is not credited to the employees' Social Security accounts. According to the court, a tax on employers, based on aggregate assessment without individual employee credit, operates as a general revenue tax for the government beyond the purpose of the FICA taxes.

The court also found some evidence of congressional intent regarding Code Section 3121(q) in Code Sections 3121(a) and 45B. Like Judge Plager's dissent in the Bubble Room, the Fior district court found that the exception to the term "wages" prevents the IRS from determining whether that exception applies unless it determines each employee's tip amounts. Additionally, under Code Section 45B, employers may take a tax credit for FICA taxes paid on tips in excess of the tax due on federal minimum wage. An employer cannot take advantage of this tax credit, the court observed, if the IRS assesses his FICA taxes on unreported employee tips in the aggregate. The unreported tips for each employee must be determined in order to ascertain whether the employer has paid FICA taxes on that employee's wages in excess of the minimum wage. According to the court, that provision expressly applies to situations in which the employee has failed to report or has underreported tips ("without regard to whether such tips are reported under section 6053"), and therefore anticipates that each employee's taxable wages will have been determined before the employer is required to pay FICA taxes as to that employee. As a result, the court concluded, Code Sections 3121(a) and 45B indicate that Congress intended that individual wage assessments should be made before the employer's share of FICA taxes can be assessed since those provisions could not be applied otherwise. If the IRS were permitted to make assessments of taxes due on an aggregation of unreported tips, those credits and exemptions would become a nullity for many employers. And, the court noted, it is a basic rule of statutory construction "that one provision should not be interpreted in a way ... that renders other provisions of the same statute inconsistent or meaningless." <<ENDNOTE 11>>

CONCLUSION: As noted at the beginning of this article, practitioners with food service clients and corporate tax personnel employed by large restaurant chains may want to calculate their client's or employer's exposure to FICA tax assessments on aggregate unreported tip income by following the same procedures the IRS uses in making its assessments. Where, like in the Bubble Room, reported charge tips are ten times higher than the tip rate on cash receipts, the food service operator may be a prime candidate for IRS audit and a subsequent aggregate FICA assessment. In the meantime, food service establishments can increase their odds of avoiding any potential negligence penalties on future FICA assessments by increasing their efforts to get employees to report tip income. Although the IRS did not assess negligence penalties in the above cases, the possibility may exist for employers that the IRS deems have not done enough to ensure compliance with the FICA tax reporting rules. For example, the Bubble Room Employee Policy Manual informed employees that tips were taxable wages and that it was the employer's policy to require both its directly and indirectly tipped employees to comply with Code Section 6053(a) by reporting 100 percent of their tip income to the employer. Management also sent correspondence to its employees requesting that they acknowledge in writing their obligation to report all of their tip income to management and to the IRS. In addition, the Bubble Room implemented a procedure requiring tipped employees to report their tip income on a daily basis, and this information was reviewed weekly by Bubble Room managers to ensure compliance.

The IRS will surely appeal its loss in Fior to the Ninth Circuit. Although two appellate courts have now sided with the IRS, the Ninth Circuit has a reputation for going its own way and may yet deliver a taxpayer victory.

Copy obtained for file?	Time Period or Date Covered	Form Number	Title of Form	About this form
		4070-A	Employee's Daily Record of Tips	Used by employee for record keeping
		4070	Employee's Report of Tips to Employer	Used by employee to inform employer
		W2 & W3	Wages & Tips Income	Used by employer for annual reporting
		State Unemp Tax
		940		Used by employer for annual reporting
		941		Used by employer for quarterly reporting of wages & tips
		8027	Employer's Annual Information Return for Tip Income & Allocated Tips (see also: see also FICA Credit; Lack of withholding)	Used by employers with 10 or more workers per day
			Earnings Records - include quarterly and annual totals, each payroll check and computations of limits for allocated tips.	Employers records of amounts paid to workers
			Worker Comp Reports	Reports from an independent third party to affirm other records
			Financial Statements	Employer's financial records showing amounts paid to workers
		Business Income Tax Returns (1040; 1120; etc)		Complimentary records to affirm and/or crosscheck the 941 and related payroll taxes, bases and computations.
			Corporate Minute book
		8846	Credit for Social Security and Medicare Taxes Paid on Certain Employee Tips	This form is used to compute the reduction of the federal income.
			List of those signing any checks
			List of officers
			List of staff or third parties preparing any payroll related items	Examples would be payroll clerks, CPA or outside payroll service, preparer's of forms submitted to taxing authorities
			Other information relating to allocated tips, computations, worksheets, etc.
				The following are the records the IRS will ask for when considering assessment of the 100% Trust Fund Penalty: (a) Articles of incorporation and bylaws showing duties of officers, directors, etc. (b) Changes of officers, directors, etc., and their duties as recorded in minutes. (c) Appointment of officers, directors, etc. (d) Resignations of officers, directors, etc. (e) Minute book as regards (1) Diversion of funds to uses other than payment of taxes, when taxes already had accrued. (2) Borrowing of monies when taxes had already accrued with the proceeds of the borrowing not used to pay taxes. (3) Authority of persons to sign checks, deposit monies, obligate the corporation by borrowing, etc. (4) Responsibility of persons to file tax returns and pay tax. (5) Issuance of stock to officers, assets transferred to officers, etc. (6) Any evidence of transfer of assets that appears questionable. (f) Canceled checks and bank statements as regards (1) Diversion of funds to officers, members, etc. (2) Deposits and withdrawals of alleged loans to corporation by officers, directors, members, etc. (3) Excessive salaries, expenses, etc. (4) Payment of other obligations when tax liability already had accrued. (5) Deposit record of monies received for sale of assets for less than full value. (6) Deposit record of payments for stock in corporation where it is believed less than full value was paid for stock. (g) Payroll records and other records as regards (1) Unreported payroll and other taxes. (2) Other evidence of any kind relevant to the Code Section 6672 penalty. (2) BANK RECORDS <169> (a) Signature cards, supporting corporate resolutions, and correspondence to the bank relative to changes effecting signature card, etc. (b) Bank statements, if not available from the employer. (c) Financial statements submitted to bank. (d) Records of loans by bank to the employer, especially if made since accrual of tax liability.