Withheld taxes are held in trust for the government. When employers fail to remit these trust fund taxes, responsible individuals may face personal liability. Understanding trust fund recovery helps you protect yourself and navigate these serious situations.
Trust fund taxes include income tax withheld from employee wages. These amounts belong to the employees and the government, not to the employer. The employer merely collects and holds these funds temporarily before remitting them.
Personal liability can be imposed on responsible persons who willfully fail to remit trust fund taxes. This means the OTC can pursue individuals personally, not just the business entity, for unpaid withholding.
Responsible person status depends on having authority over the business’s financial affairs. Officers, owners, managers, and others who can direct which bills get paid may qualify as responsible persons. Multiple individuals can be responsible for the same taxes.
Willfulness requires knowledge that trust fund taxes were due and a decision to use those funds for other purposes instead. Using withheld taxes to pay rent, vendors, or other expenses when you knew they were owed to the government demonstrates willfulness.
Assessment against individuals follows specific procedures. The OTC must determine that you’re a responsible person who willfully failed to remit trust funds. You have the right to dispute this determination through administrative processes.
Defense strategies depend on the facts. You might dispute that you were a responsible person, argue that your actions weren’t willful, or challenge the amount of trust fund taxes at issue. The appropriate defense depends on your specific circumstances.
Personal liability survives bankruptcy in many cases. Unlike some debts that can be discharged, trust fund recovery liability often remains after bankruptcy. This makes addressing these issues particularly important.
If you’re facing trust fund recovery liability in Oklahoma, schedule a consultation immediately to discuss your options.
