Tax debt is often a driving force behind the filing of a bankruptcy, either for individuals, or a business. If it is income tax for individuals, it can be discharged in bankruptcy if it is more than three years old and meets certain requirements under the bankruptcy code. However, one kind of tax debt that will never go away, like alimony and child support, is something called trust fund tax debt.
This is not so much a tax on individuals as a penalty levied upon them that is equal to the funds withheld from employee wages by a business that it should have turned over to the appropriate taxing authority, but did not. This raises a couple points.
If your business is going through a rough patch, do not use the trust fund money to pay operating expenses. That money is not yours, it is payment on the tax debt of your employees, and must be preserved. It must also be turned over to the taxing authorities within a particular period of time, so don't even be late!
If your business goes under, and it is a corporation or LLC, you can let regular unsecured creditors go wanting. If you do that to the IRS or the New Jersey State Department of Revenue, however, they will hold you personally responsible, and it will never go away.
So What Do I Do?
The bottom line here is that if you live in southern New Jersey, are contemplating filing bankruptcy, and think that you may have a trust fund tax problem, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey!