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JKCPA
JKCPA, CPA
Category: Tax
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Experience:  CPA with tax experience.
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I paid $ 80,000 in back taxes for my company (incorporated)

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I paid $ 80,000 in back taxes for my company (incorporated) from my personal account. Can I deduct this from my personal income tax as a business expense ?
Submitted: 4 years ago.
Category: Tax
Expert:  JKCPA replied 4 years ago.

Hello,

 

Thanks for your question.

 

Was this back tax for income taxes or payroll taxes? Are you an officer of the corp? Is this an S-corp or C-corp?

 

Customer: replied 4 years ago.
It was a C corp. The taxes were sales tax (+ interest and penalty). I first was going to consider it a loan, but I closed the business before I was repaid.
Customer: replied 4 years ago.
I was an officer in the company. MA law has the principle/owner pay any sales tax the company does not pay.
Expert:  JKCPA replied 4 years ago.

 

Sorry but I do not have good news. Unfortunately, you may not deduct the sales taxes paid on behalf of another entity per page A-2 of the Schedule A instructions. http://www.irs.gov/pub/irs-pdf/i1040sca.pdf This is also not a valid business expense since it not an ordinary expense that would be paid by a principle.

 

States will hold officers of corporations responsible for unpaid sales and employee withholding taxes because these are considered trust fund taxes. The tax when assessed to a principle is generally called a "Trust Fund Recovery Penalty". So since it is actually a penalty, penalties are never deductible for taxes.

 

If your corp was still in existence, you could have written up a formal loan document to fund the company for the taxes. Then you could have later wrote it off as a bad debt if the company became insolvent. However, it is too late at this point to do that.

 

Hope this helps,

Best regards,

 

 

 



Edited by JK_CPA on 1/2/2010 at 10:30 PM EST
JKCPA, CPA
Category: Tax
Satisfied Customers: 5761
Experience: CPA with tax experience.
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