Business on the Ropes: Who to Pay?

A financially-struggling business must decide which bills to pay with limited funds available. In one case, the owner of a medical practice chose to pay his employees rather than trust fund taxes (income tax withholding and the employees’ share of FICA). The result: a district court said he was liable for the trust fund penalty (100% of what’s owed) because paying employees shows he (a “responsible person”) willfully failed to pay the tax by directing the payment of unencumbered funds to creditors (the employees) before the government.

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