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Lawdoctor
Lawdoctor, Attorney
Category: Business Law
Satisfied Customers: 1400
Experience:  I have handled numerous business law cases during my career
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I dissolved my C Corp in late Feb 08 primarily due to a large

Customer Question

I dissolved my C Corp in late Feb '08 primarily due to a large embezzlement scheme which was discovered to be caused by my Office Mgr. who was subsequently found guilty, serve incarceration and pay restitution over a long period of time for a small part of what she actually stole...as sole owner am I personally responsible to the Va. Employment Commission for back unemployment taxes incurred by the Co.?...if I am; what is the proceedure(s) the state must act upon before they can file liens, etc. and actually get paid
.....Va. Code Section 60.2-521 which they directed me to is, to me, quite unclear as to getting my questions answered....Thanking you in advance for your time....Richie Dellastatious
Submitted: 4 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 4 years ago.
When a company goes out of business, the owner can be held personally liable for any back taxes, unemployment or payroll or sales taxes, that are owed by the company. Realize that the government always gets the money it is owed. The owners of a business are liable for taxes even after a business has been closed up and taxes cannot be extinguished through even bankruptcy. You are going to need to get a business attorney involved to negotiate this debt with the commonwealth.


I hope you found my answer helpful, please click on the GREEN ACCEPT button above for my answer. This is necessary for me to be paid for my work and so that I can get credit for assisting you. Your question will not close, and you will still have the opportunity to follow-up if needed. Leaving a bonus and positive feedback is not required, but doing so is certainly appreciated!

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Customer: replied 4 years ago.








my question was a 2 part question....you only answered the first part and your answer to the 1st was wrong....for example, the officers of a C Corp. are only responsible for the trust portion of payroll taxes and some taxes are dischargable in bankruptcy...you didn't even attempt to answer what the state's procedure must be in collecting the debt if I am responsible....and lastly, I don't need a business attorney....I would need a tax attorney which I would have checked had your organization given me that choice....I don't mind paying fairly for obtaining equal service in kind, but your answer hardly qualifies...thanks for trying, but I'm not paying for an answer I would get from most any 1st year law student and an incomplete one at that...you couldn't have even read the code section I gave you....please make sure my credit card is not charged any amount....









Expert:  Law Educator, Esq. replied 4 years ago.
I will opt out and you can have someone else assist you, since you already know the answers to the questions you are asking.
Expert:  Lawdoctor replied 4 years ago.
Dear Mr.Dellastatious:

PaulMJD referred your question to me so that I may assist you.

You actually are in a good position regarding the taxes if the officer manager's conviction addressed the theft of employment and trust fund taxes.

Let's look at the VA statute you referred to:

§ 60.2-521. Collection by civil action; persons subject to civil actions; other remedies; compromise and adjustment.

If, after notice, any employer defaults in any payment of taxes or payment in lieu of taxes or interest or any penalty assessed pursuant to subsection C of § 60.2-501 and § 60.2-513, the amount due shall be collected by civil action in the name of the Commission. The employer adjudged in default shall pay the fees and costs of such action. Civil actions brought under this article to collect taxes or interest or any penalty from an employer shall be heard by the court at the earliest possible date. Such civil actions may be brought against any officer, employee, or agent of a corporation or partnership in his individual, personal capacity when that person willfully fails to cause the employer to pay the appropriate taxes and he had the authority to do so. No person shall be subject to this section unless it is proved (i) that such person had knowledge of the failure or attempt to make such payment and (ii) that such person had authority to prevent such failure or attempt. In addition to the foregoing remedies the Commission shall have such other remedies as are available to the State Tax Commissioner and county and city treasurers for the collection of taxes generally. The Commission is authorized to compromise, settle and adjust any tax or taxes, including interest, or any penalty assessed against any employer where in the judgment of the Commission the best interests of the Commonwealth will be promoted or served. The Commission may in such cases accept in full settlement of the tax assessed an amount less than that assessed.

(Code 1950, § 60-78; 1968, c. 738, § 60.1-94; 1974, c. 466; 1977, c. 445; 1979, c. 634; 1986, c. 480; 1990, c. 687.)

 

 

The portion of the statute that applies to your situation is:

 

No person shall be subject to this section unless it is proved (i) that such person had knowledge of the failure or attempt to make such payment and (ii) that such person had authority to prevent such failure or attempt.


Let's break down the paragraph above. Unless you were involved with the theft by your business manager, your knowledge was that the taxes were being collected and then deposited as required. Is that correct? If so, then the State should fail in meeting the first requirement that you had 'knowledge'. The second prong of the equation is that you had the authority to prevent such failure or attempt. The second prong fails as well because your authority was usurped without your knowledge or consent. If she hid her embezzlement, then she falsified documentation that you would have reasonably relied on to conduct your business and if she provided these doctored books to your accountant who relied on them as well, then you have evidence of a professional who relied on the falsified documents and you, as a lay person should not be held responsible if a professional could not detect her deception.

One aspect you have not mention is the IRS. If you are contacted regarding the Trust Fund monies, it is very important that you obtain representation by a knowledgeable Tax attorney who specializes in Trust Fund matters. I always tell business owners -- you can get away with playing with your income taxes, but if you touch Trust Fund monies, the IRS will hunt you down!!! It is very important any communication between the IRS and you be through an attorney as the agency has been rather aggressive on similar cases in the past few years.

I may not have addressed everything, but if you feel like I made any headway into the information you need, please, respond with a list of the items I may not have covered to your satisfaction. We at JA want to answer your questions !

Let me know what I may have missed! I will be going off line in a little while, but if you wish to continue to work with me, then send a list and I will research them and have an answer tomorrow. If you wish to have another expert assist you or go back to Paul (he is one of the best, XXXXX XXXXX way!), that is fine as well. We are here to get you the best answer possible and to make sure you are a satisfied customer!

I wish you the best and just let me know what direction you want to go from here.
Customerbr />

Thank you again for trusting us with your problem. Good luck and Godspeed.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
If I don’t’ answer immediately, I may be offline. If so, I will answer as soon as I come back. If I am online, I may be assisting someone else and will respond as soon as I can. Thank you for your understanding and patience.

Please remember that we have not created an attorney-client relationship, and that my post is not intended to be specific legal advice. The answers given are limited to the information you have provided in your post. For specific legal advice, please consult with an attorney licensed in your state.

DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the states of Florida and Mississippi. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.



Paul is right when he says that the government can come after you if they chose to. You will win, but that does not some bureaucrat from making life miserable for you for as long as they like! You and I both know that is true.


Customer: replied 4 years ago.
DearCustomer....Thank you for your input as it was very helpful...I do however have a few more questions.....

Actually I did mention the trust portion of the Co's payroll taxes and I do know and am in the process of paying the IRS the delta of that trust portion......I did in fact think my Office Manager had been paying the unemployment taxes at least most of them...I could never get a straight answer from her as to what and for what period 'we' owed any taxes...She would manipulate the books and the spread sheets revealing different answers every time ....She was in fact not paying what she told me she had because of course she was stealing most of the money which could have paid the taxes...

The Code Section is confusing to me because it seems they must first take me to court and if the State prevails they must then obtain a judgement to use as an instrument to then lien my personal assets if I don't pay the judgement....The State, however is 'making noises' that if I don't come to an agreement; they will start looking for my assets to lien...The other 'gray' area is where it states 'other remedies the commission' may employ....can that be interpruted as lien filing without a trial?...

My main problem with this whole matter is that these taxes was not money held in trust and then not paid the State...to me and obviously the IRS there is a great deal of difference...and of course I am greatly concerned because I do have assets....

Thank you... and yes I would prefer to continue to have you personally address my questions......

Richie Dellastaatious
Expert:  Lawdoctor replied 4 years ago.
Dear Mr. Dellastaatious:

I am glad that you have the Trust Fund issues under control with the IRS. That was my most pressing concern for you in this situation.

The state's cause of action is just as you presumed. They would have to go through the administrative process and if they find you are liable it goes up the administrative appeals chain and eventually to a court of law, where the appeals process would start in that arena.

The lien they are probably threatening you with now is technically called a 'lis pendens', but in the administrative area what they are doing is akin to what the IRS does and that is to 'seize' your assets. I will research the issue on the asset seizure to direct you to the appropriate statutes and Administrative Rules, but it may take a few hours as the Administrative Rules are more difficult to find and access.

They want to maneuver you into negotiating a settlement with them. Hearings and trials are time consuming and expensive and thus they expect you to weigh the cost and risks of fighting them to a quick settlement.

You are an experienced businessman obviously and thus you will need to sit down and weigh the probable cost of litigation against what you could negotiate in a settlement and have the issue over and done with. I would imagine that most firms that handle the type of case you have would required at least a 10,000.00 retainer and your entire legal bill could escalate rapidly if there are numerous hearings, discovery with depositions, and a trial, then you get to appeal, oh, joy.

One other thought. Did you have a business insurance policy in place at the time of her thefts? If you did have a policy did you ever check to see if you had coverage? If not, it may be too late under the policy to make a claim for what she stole, but you policy may give you coverage on this issue. Call you agent and ask or get a copy of your policy and review it with an attorney who is knowledgeable in insurance coverage for businesses, as it is a specializes area of law.

I will research the seizure of assets issues and get back with you in a few hours.

Regards,
Customerbr />

Thank you again for trusting us with your problem. Good luck and Godspeed.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
If I don’t’ answer immediately, I may be offline. If so, I will answer as soon as I come back. If I am online, I may be assisting someone else and will respond as soon as I can. Thank you for your understanding and patience.

Please remember that we have not created an attorney-client relationship, and that my post is not intended to be specific legal advice. The answers given are limited to the information you have provided in your post. For specific legal advice, please consult with an attorney licensed in your state.

DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the states of Florida and Mississippi. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.

Expert:  Lawdoctor replied 4 years ago.
Dear Mr.Dellastatious:

I spent a bit of time looking for the procedures used by the State of Virginia. This was very difficult information to come by, but I was able to locate some interesting documents for you.

Here is a break down of the Penalty and Interest

Employers who fail to withhold, file withholding returns, or make withholding payments as required are subject to a penalty of 6% of the tax due for every month or part of a month that the return or payment is late. The maximum penalty is 30% of the tax due.

We impose a minimum penalty of $10.00 for either filing a return late or making a withholding payment late, and we apply the minimum penalty to the employer's account even when there is no tax due.

Note: Semiweekly filers are also subject to a penalty if 90% of the total liability has not been paid in timely installments, generally, within three banking days of each federal cut off date.

They charge interest on any unpaid withholding tax due from the payment due date until we receive the tax payment. We compute interest at the rate established by the current Internal Revenue Service underpayment rate plus 2%.

 

 

Here are some web links that give you a little bit more information (the best site is the last one!)

 

http://www.tax.Virginia.gov/site.cfm?alias=DelinquentDebtors

http://www.arlingtonva.us/Departments/ManagementAndFinance/budget/fy09proposed/D_TRO%20Compliance.pdf

this is from 2004, but is great in how it covers the information you are looking for:

http://www.wvyounglawyers.com/handbook/chapter34.pdf


see page 16 ..

The site above is a PDF document written for young lawyers to train them on handling delinquency cases.

Please pay particular attention to page 16,

Let me know if this gives you the information you need.

I wish you the best!!

Thank you again for trusting us with your problem. Good luck and Godspeed.

Have I satisfactorily addressed your concerns? If not, then please feel free to ask for clarification.
If I don’t’ answer immediately, I may be offline. If so, I will answer as soon as I come back. If I am online, I may be assisting someone else and will respond as soon as I can. Thank you for your understanding and patience.

Please remember that we have not created an attorney-client relationship, and that my post is not intended to be specific legal advice. The answers given are limited to the information you have provided in your post. For specific legal advice, please consult with an attorney licensed in your state.

DISCLAIMER: Please understand that the complexities of most legal problems cannot be adequately addressed in this setting, and that I am only licensed to practice law in the states of Florida and Mississippi. Accordingly, you acknowledge (1) that we have not formed an attorney-client relationship, and (2) that my post is general information only and not specific legal advice.

 

Customer: replied 4 years ago.

DearCustomer

Sorry to be so long in getting back....You did give me some very good information and I was going to pay you the $60 but then I noticed that your Company had actually already charged my bank card that amount on 1/11/10....I never pressed any accept button and you yourself have subsequently wondered why I hadn't approved the charge and paid the $60.....I have never believed in getting something for nothing but what your Company has apparently done is not right....

 

Please advise.

 

Richie Dellastatious

Expert:  Lawdoctor replied 4 years ago.
Dear Mr.. Dellastatious:

Thanks for getting back to me. The way the site works (as I understand it) you make a deposit and ask a question and when an expert answers to your satisfaction, you hit 'accept' and the expert's portion of the deposit is paid into their account and the site keeps its portion. In order for me, the expert, to get compensated from the deposit you made, you have to 'accept' with the green button beside one of my answers.

Now, be careful because the site has a question for you if you want to make another deposit at the time you hit the accept key and get a discount on your next question. Make sure you press no for the future deposit. However, do not worry if you hit it accidentally because they are very good about refunding and making sure you are happy with the service. Just contact customer service or you can let me know and I will route it to customer service for you.

So, if you are happy with the answer I gave you, then hit the green accept button and it will compensate me.

I enjoyed assisting you and if you ever need my help again, please make sure to ask forCustomerand your question will be routed to me. I wish you the best with your situation and I hope for a favorable resolution of the issue!!!

Have a great day!
Customer

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