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who had authority to sign checks on the payroll and escrow
accounts at Brooks Field National Bank and Trinity National Bank.
Although there was usually enough money in the SWAS accounts
to make payroll payments, petitioners’ corporations did not
regularly transfer enough money to SWAS to cover the corporate
employment tax deposits. For this reason, neither petitioners
nor Mr. Kanz always immediately signed the corporate employment
tax deposit checks. Mrs. Grothues stacked the unsigned corporate
employment tax deposit vouchers on her desk.
On each of the Federal income tax returns filed by
petitioners’ corporations for the 1984-88 tax years, deductions
were claimed for each corporation’s employment tax liabilities
that were reported on the SWAS EIN account.
Ernest Hooks (Mr. Hooks) was employed by petitioners’
corporations from 1983 through January 5, 1990. He was
responsible for reconciling the corporations’ and SWAS’s bank
statements, and he assumed additional duties associated with
SWAS’s centralized payroll processing. Mrs. Grothues also
participated in the reconciliation of the corporations’ and
SWAS’s bank statements. Both Mrs. Grothues and Mr. Hooks knew
that many of the checks written to pay the corporate employment
taxes did not clear the bank. Mr. Hooks became uncomfortable
with the practices he observed at petitioners’ offices, including
the delays in signing the corporate employment tax deposit checks
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Last modified: May 25, 2011