A “responsible person” who willfully fails to pay “trust fund taxes” (withholding for income tax and FICA from employees’ wage) can be 100% personally liable for the unpaid tax. In one case, the CPA of a management consulting company embezzled between one and two million dollars, which was discovered when he had a heart attack. The CEO of the company sued to recover the funds, some of which should have been used to pay employment taxes. Following a settlement, the CEO used funds to pay personal expenses rather than any of the trust fund taxes. The CEO claimed he was not a responsible person because of a limited ability to comprehend mathematical concepts, but the court said he was such a person because of his position, authority, and control over the company’s affairs. He also claimed he didn’t act willfully, but willfulness for this purpose means using funds for anything other than for trust fund taxes. #IdeaoftheDay
Barbara Weltman
Big Ideas for Small Business, Inc.
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