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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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Federal taxes owed on a closed out of business corp.

Resolved Question:

Federal taxes owed on a closed out of business corp. who would be held liable to pay these? President and owner?
Submitted: 8 years ago.
Category: Tax
Expert:  Ed Johnson replied 8 years ago.

DearCustomer

This depends on what kind of corporation.

The federal government is very good at respecting the corporate veil and not touching individual income for taxes, especailly if the corporation is operating legitimately as a corporation, and not as an alter ego of the owners and officers. For example is it a C corp, S, corp, or LLC,etc.

The exceptions are:

1. Public trust taxes. These are the taxes that are held in temporary trust and paid quarterly from employee pay and include SS, MC and income tax. For these, the IRS can and does go to the corporate officers who have control over these activities which could be the owners, president, etc. (ERISA is also covered here).

2. For the state, the state does the same thing with regard for sales tax.

Customer: replied 8 years ago.
This is a regular corp with only one stockholder. Two other non compensated directors.
Business closed in October with unpaid withholding taxes with penalty and interest.
From what I have been told (I'm an unpaid director with no stock interests,) I would have no personal liability. Just trying to confirm that
Expert:  Ed Johnson replied 8 years ago.

Dear XXXXXm,

AS a regular corporation, you are correct, you have no personal liability. EXCEPT. If for some reason the state and fed want to go after the money, they can under the following conditions:

1. If they determine your C corp operated as an alter ego of the owners and officers.

2. If they were to determine the owner or officer gave thier personal gaurantee

3. If because of misshandling of the public trust funds which I previously mentioned, they determine that the officers and owners had controll of it. Then they could come after you for it., and

4. In the matter of property and sales tax, the state can detemrine under the aforementioned conditions to come after it from you personally.

Many people are surprised to find out, that personal liabilty is not as limited as they thougth when they formed a corporation. If the government, state or federal, can pierced the corporate veil, then you can still be touched.

Generally, you are correct, but circumstances may work to make you liable.

being paid or having no stock will not make a difference, if they are able to peirce the corporate veil, and find that you are repsonsible or had control over a function invovilng the issue they are trying to recover.

Especially the withholdling taxes, because these are public trust money's, and the fed will be agressive.

If you did not have control over the payments, then you have nothing to worry about. So what is control:The CEO, perhaps a board member who was supervising the Controller, the controller, the COO, financial officer, etc.

It will not matter if you are paid or not, if you are a director having responsbility over the area of concern, the veil can be pierced, and you can be personally held libel for these funds.

Whether you will or not is a different matter.

Here are a couple of aritcles on similar issues

http://www.aar.com.au/pubs/insol/insolaug00.htm

 

 

Customer: replied 8 years ago.
I did not mention earlier that this was a non profit corp and the only employee that collected funds and made all payments was the owner.
Myself and one other person, were listed as Directors, but neither were on the payroll as employees
Expert:  Ed Johnson replied 8 years ago.

DearCustomer

Being a non-profit does not exclude you from potential liability.

However, if you had no responsibility over the financial dealings, then I would say you are fairly distanced from any actual liability. Just know that there is always the potential that the IRS or state could name you in a suit along with the owner, and you may have to deal with the court fixing responsibility.

I can not predict how this will turn out for you. NO one else can either, who is reputable.

The best I can say is that you have some distance and most likley you would not be held liable, but there is still a potential. Your exposure may be slight, but exposed none-the-less.

Ed Johnson and other Tax Specialists are ready to help you