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Personal liability for overdue corporate taxes

On Behalf of | Dec 10, 2021 | Tax Mistakes |

Corporations pay various taxes, including income taxes, sales and use taxes and payroll taxes. Failure to pay or delayed payment will have the IRS knocking on their doors. Therefore, it could lead to hefty penalties and fines.

First, the IRS will design a suitable payment plan to help collect what is owed. However, garnishing profits and putting liens on the business property is the next step. The problem is that most corporations will close up shop if it reaches this stage. They let operations dissolve naturally or declare bankruptcy while creditors fight for scraps.

However, the IRS doesn’t roll over and play dead when a corporation decides to go out of business to avoid taxes and penalties. Instead, they go after responsible parties within the corporation to help collect unpaid taxes. Today, we take a comprehensive look at personal liability for corporate taxes. Read on to find out more if your corporation owes more than $200,000 to the IRS.

Who is deemed responsible for unpaid corporate taxes?

Federal and state laws will determine the parties responsible for paying taxes within the corporations. These individuals will then be held liable when those taxes go unpaid. Typically, it comes down to any person required to collect and account for taxes owed to the IRS. It could, therefore, include the payroll supervisor, chief financial officer, bookkeeper or workers in the accounting department.

In most cases, an individual’s title alone could dictate if they are liable for overdue corporation taxes. For instance, the head of accounting would automatically be liable for any unpaid taxes within the organization. The court will help determine who is responsible for unpaid taxes by accessing job responsibilities. The IRS will levy fines or seize personal assets for every person found liable by the court.

Which corporate taxes attract personal liability?

Individuals could be found liable for various corporate taxes when they are not paid. These taxes include the following:

  • Withholding taxes
  • Sales and use taxes
  • Associated penalties and fines

Individuals could either carry sole responsibility or joint liability, depending on the corporate structure. Note that these individuals will be charged with interest and penalties that have accrued over time as well. The age and size of the debt will determine the total amount that the charged individual(s) will have to pay the IRS. An experienced corporate lawyer can help you fight these charges to avoid losing everything you have.