Phoenix, AZ asked in Collections for Indiana

Q: Are withholding taxes owed by a defunct C-corp that did business soley in Indiana owed by the officers of that corp?

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1 Lawyer Answer
Michael R. Smith
Michael R. Smith
  • Indianapolis, IN
  • Licensed in Indiana

A: Possibly. The Internal Revenue Code imposes liability for the failure to collect and pay withholding on "responsible persons." Responsible persons can include officers, directors, shareholders, and others. The test is not really the person's title but whether the he or she had a duty to account for, collect, and pay the taxes (and whether the person willfully failed to do so). So a person who was an officer in name only, with no real responsibilities, should not be held liable. But a person who was responsible for payroll would likely be held liable, regardless of the person's title.

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