QUESTION
Could a 7.5 percent partner with no management be liable for back taxes of the company?
Asked on Jun 22nd, 2015 on Taxation - Michigan
More details to this question:
My son was listed on my now defunct company's 2012 & 2013 tax returns as a 7.5% partner. He had no management say whatsoever and no corporate title. Can the IRS hold him liable for unpaid payroll taxes and penalties?
4 ANSWERS
Chapter 7 Bankruptcy Attorney serving Lisle, IL
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Mankus & Marchan, Ltd.
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Not from how you describe his involvement with the company. The big test is whether he had check signing authority. If he signed checks for the company, he could be held liable.
Answered on Jun 23rd, 2015 at 8:43 AM
Taxation Law Attorney serving Glendale, CA
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Irsfeld, Irsfeld & Younger LLP
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That would is probably.
Answered on Jun 22nd, 2015 at 3:37 PM
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Your referred to your son as a "partner", partners are responsible for all debts of the partnership, even a partner with a tiny percentage of the ownership. If your son was not actually a partner but a member of a limited liability company or a shareholder of a corporation, he would only be liable for taxes if was responsible for collecting, accounting for and/or paying the withholding taxes. The IRS views these activities broadly. For example, if your son either had the responsibility to decide which bills to pay or actually signed the checks/authorized the transfers, he's liable if he paid any other bills when the taxes where due.
Answered on Jun 22nd, 2015 at 3:30 PM
The IRS could assert a 100% responsible officer penalty against him. Based upon your description, he should contest that assessment. If he ignores the assessment, he could find himself on the hook for these taxes.
Answered on Jun 22nd, 2015 at 2:17 PM