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.
Barbara Weltman
Big Ideas for Small Business, Inc.
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