Georgia Responsible Officer Trust Fund Tax Liability
Representation of Corporate Officers and Employees Held Personally Liable for Trust Taxes
Trust taxes are taxes withheld from employees (withholding taxes) or collected from purchasers (sales taxes). When a company withholds or collects the taxes but does not remit the taxes to the Georgia Department of Revenue, officers or employees within the business can be held personally liable. Personal liability also arises where the business should withhold or collect but fails to do so. Officers and employees must examine and evaluate their possible personal civil liability for the business' failure to pay these trust taxes. They must also consider the criminal liability also, including liability under O.C.G.A. § 48-1-5 (unlawful conversion of funds collected for the benefit of the state).
The Department of Revenue looks at corporate records, documents filed with the Department of Revenue and at Secretary of State filings to determine who to assess personally. The Department is not limited to assessing only one person. Every officer or employee in the business who is "responsible" and who acts "willfully" can be held personally liable for 100% of the unpaid trust taxes.
Even if you are a silent investor or an officer in name only, the Department of Revenue could assert personal liability against you. You must come forward with proof that you are not personally liable. Thus, regardless of your level of involvement in the business, if you are an officer or an employee in a business, you may be contacted by the Department of Revenue and held personally liable for payment of sales and use taxes and employer withholding taxes.
At The Litwin Law Firm, P.C., located in Atlanta, we advise corporate officers nationwide about non-payment of trust fund taxes and responsible officer/employee civil and criminal liability for trust fund taxes. Attorney Richard Litwin is an AV-rated* lawyer with expertise in all matters related to state and local taxation in Georgia.
Tax Liability Determinations
Two key factors are generally used to determine whether you are personally liable for trust fund taxes:
- Are you a "responsible" person in the business? The analysis turns on your status in the business and requires more than simply holding a title or being an investor. Did or do you have hiring and firing responsibility? Do you have check-signing authority? Did you actually sign checks? Our law firm can help prove or disprove your level of responsibility.
- Have you acted "willfully"? Did you know that the taxes were supposed to be paid? Do you know whether the taxes were actually paid? What did you know and when did you know it? Did you choose to pay other creditors over the Department of Revenue? Did you show “reckless disregard” of an obvious risk that the taxes may not be paid to the Department of Revenue? Did you discovery nonpayment of the taxes but fail to further investigate or correct the mismanagement that resulted in the nonpayment of the taxes?
Typically, after completing its investigation, the Department of Revenue issues a Notice of Proposed Assessment against the individuals deemed to be liable as responsible officers or employees. The Department of Revenue then issues an Official Assessment and Demand for Payment against the individual officers or employees. The offical assessment is prima facie correct. It is deemed correct, and the assessed officer or employee faces the burden to prove otherwise. Officer tax liability representation includes negotiation with the Department of Revenue, case investigation and litigation in court and before the Georgia Tax Tribunal (which begins accepting cases on January 1, 2013).
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