Employer Headed for Bankruptcy and I'm Worried About Creditors Coming After Me

[frannyz]

What is the name of your state (only U.S. law)?

 

[latigo]

What is the name of your state (only U.S. law)?

Yours or your employer's?

If you’re short, I have some to spare.

 

[frannyz]

Ugh I wrote a whole post and it somehow disappeared. Sorry. I will reply later with details again. I don't know why my original post is edited down to that question?

 

[despritfreya]

Ugh I wrote a whole post and it somehow disappeared. Sorry. I will reply later with details again. I don't know why my original post is edited down to that question?

Doubt it was done deliberately. Just the flaws of cyberspace.

Des.

 

[LdiJ]

Ugh I wrote a whole post and it somehow disappeared. Sorry. I will reply later with details again. I don't know why my original post is edited down to that question?

Because you previewed your post and the preview function does not work properly here. Just do not preview your post the next time.

 

[frannyz]

Yes. I previewed my post. Didn't know that would erase it!

Ok so here is my question: I live and work in California. I work for a small retail business (about 10 employees). It looks like the company is headed for bankruptcy but my boss is trying to hang on with every thread she can. To me it seems inevitable. I am her office manager and I'm an hourly employee. I pay the bills, report the employee payroll to our payroll company etc. However I don't have the authorization to pay anything with out her approval (and I can't sign the checks). When I get a bill, I tell her about it and she tells me if I can pay it - right now everything is past due so she is hardly paying anything (but so far she is still paying the employees as she is still trying to make sales).

One of the other things I've done for her is file her BOE sales tax returns online using her account. I compile the sales data, enter it online and tell her how much she needs to pay the BOE. She hasn't paid her sales tax since April and she is now getting collection notices and had the company bank account levied once already. I'm concerned (not only because I'm likely out of a job soon) but because I check the mail and I read the collection notice from the BOE. It states:

"Upon termination of a business, corporate officers or other person responsible for the filing of the returns or the payment of tax who willfully fail to pay the taxes collected or use tax due, will be held personally liable for any TAXES as well as interest and penalties on the taxes, originally owed by COMPANY NAME under the provisions specified in section 6829 of the Revenue and Taxation Code."

This freaked me out because I have been filing the returns online for her, and when I did so I put my name as the person who filed the return. Also, she signed a form so that the BOE can talk to me, give me confidential information and review the account with me so that I could amend some returns that were done incorrectly (that have been corrected since). Can they come after me for her unpaid sales tax? Rationally, I think they can not because it is not my company, I have no control over the money or what the company does but the wording scares me (I did file the returns and my name was on the return as the person who filed it) and I just want to be sure. Do I need to protect myself from her bankruptcy? Some of her other debtors have my name as well because I was the one who usually had to deal with them and that freaks me out a bit too.

I'm hoping for some reassurance, or if I am vulnerable, how can I protect myself against her bankruptcy?

 

[latigo]

Yes. I previewed my post. Didn't know that would erase it!

Ok so here is my question: I live and work in California. I work for a small retail business (about 10 employees). It looks like the company is headed for bankruptcy but my boss is trying to hang on with every thread she can. To me it seems inevitable. I am her office manager and I'm an hourly employee. I pay the bills, report the employee payroll to our payroll company etc. However I don't have the authorization to pay anything with out her approval (and I can't sign the checks). When I get a bill, I tell her about it and she tells me if I can pay it - right now everything is past due so she is hardly paying anything (but so far she is still paying the employees as she is still trying to make sales).

One of the other things I've done for her is file her BOE sales tax returns online using her account. I compile the sales data, enter it online and tell her how much she needs to pay the BOE. She hasn't paid her sales tax since April and she is now getting collection notices and had the company bank account levied once already. I'm concerned (not only because I'm likely out of a job soon) but because I check the mail and I read the collection notice from the BOE. It states:

"Upon termination of a business, corporate officers or other person responsible for the filing of the returns or the payment of tax who willfully fail to pay the taxes collected or use tax due, will be held personally liable for any TAXES as well as interest and penalties on the taxes, originally owed by COMPANY NAME under the provisions specified in section 6829 of the Revenue and Taxation Code."

This freaked me out because I have been filing the returns online for her, and when I did so I put my name as the person who filed the return. Also, she signed a form so that the BOE can talk to me, give me confidential information and review the account with me so that I could amend some returns that were done incorrectly (that have been corrected since). Can they come after me for her unpaid sales tax? Rationally, I think they can not because it is not my company, I have no control over the money or what the company does but the wording scares me (I did file the returns and my name was on the return as the person who filed it) and I just want to be sure. Do I need to protect myself from her bankruptcy? Some of her other debtors have my name as well because I was the one who usually had to deal with them and that freaks me out a bit too.

I'm hoping for some reassurance, or if I am vulnerable, how can I protect myself against her bankruptcy?

Don’t sweat it! You are misinterpreting the language, “or other person responsible” as applying to your functionary duties as the owner’s employee, and it does not apply to you.

Nor are you responsible to her business creditors. As long as the creditors with whom you may have dealt were aware or could have easily become aware that you were acting in the capacity as an employee and not incurring the obligation in your own stead, they have no legal recourse against you.

And if the owner declares bankruptcy, the Trustee (who assumes the position of the creditors) would have not greater rights than the creditors themselves.

 

[frannyz]

Okay good. I feel a little better. Thanks for the response.

 

[tranquility]

Don’t sweat it! You are misinterpreting the language, “or other person responsible” as applying to your functionary duties as the owner’s employee, and it does not apply to you.

Nor are you responsible to her business creditors. As long as the creditors with whom you may have dealt were aware or could have easily become aware that you were acting in the capacity as an employee and not incurring the obligation in your own stead, they have no legal recourse against you.

And if the owner declares bankruptcy, the Trustee (who assumes the position of the creditors) would have not greater rights than the creditors themselves.

While latigo is clearly correct as to normal creditors, the sales tax issue is more problematic. California has a very broad meaning here (http://www.boe.ca.gov/lawguides/business/current/btlg/vol1/sutr/1702-5.html):

(1) RESPONSIBLE PERSON. As used herein, the term "responsible person" means any officer, member, manager, employee, director, shareholder, partner, or other person having control or supervision of, or who is charged with the responsibility for, the filing of returns or the payment of tax or who has a duty to act for the corporation, partnership, limited partnership, limited liability partnership, or limited liability company in complying with any provision of the Sales and Use Tax Law. The term "responsible person" does not include any person who would otherwise qualify but is serving in that capacity as an unpaid volunteer for a non-profit organization.

Now, that does not make the OP liable, but it is problematical.

 

[LdiJ]

Don’t sweat it! You are misinterpreting the language, “or other person responsible” as applying to your functionary duties as the owner’s employee, and it does not apply to you.

Nor are you responsible to her business creditors. As long as the creditors with whom you may have dealt were aware or could have easily become aware that you were acting in the capacity as an employee and not incurring the obligation in your own stead, they have no legal recourse against you.

And if the owner declares bankruptcy, the Trustee (who assumes the position of the creditors) would have not greater rights than the creditors themselves.

Unfortunately the bolded may not be correct, or may only end up being correct after a long fight with the taxing authorities in CA. I have yet to see a state that will not go after the signer of the tax return, as well as the owners of the business. Since it appears that you have been digitally signing her sales tax returns, this does potentially pose a problem for you. However, the sales tax is the only thing that you might have to worry about.

If she does file bankruptcy rather than just walking away however, that should solve the problem for you because taxes have high priority. I would recommend however that you stop using your name completely on the sales tax returns.

 

[tranquility]

Unfortunately the bolded may not be correct, or may only end up being correct after a long fight with the taxing authorities in CA. I have yet to see a state that will not go after the signer of the tax return, as well as the owners of the business. Since it appears that you have been digitally signing her sales tax returns, this does potentially pose a problem for you. However, the sales tax is the only thing that you might have to worry about.

If she does file bankruptcy rather than just walking away however, that should solve the problem for you because taxes have high priority. I would recommend however that you stop using your name completely on the sales tax returns.

While I agree with the rest, the bolded portion is not correct as responsible person taxes are different. For a convoluted legal strategy to resolve those (Although it focuses on the "owner" it is relevant here too.), see http://www.jdsupra.com/legalnews/discharging-responsible-person-liabili-30155/.

 

[frannyz]

I definitely won't put my name on anything further and am contemplating quitting before I stop being paid.

I just found this link:
http://www.avvo.com/legal-guides/ugc/shorten-your-statute-for-responsible-person-liability-on-ca-sales-tax

It says:

"In California under Revenue and Taxation Section 6829 a responsible person can be held liable for the non-payment of sales taxes by a company if they willfully failed to pay the taxes. A responsible person is an officer of the company, a check signer, or a return signer (someone that has the ability to direct the funds of the entity). A willful non-payment occurs when the reposnsible party has knowledge that the tax is due, but fails to pay it. Failure to pay is usually shown by indicating that something else, like payroll was paid instead of sales tax."

I did sign the return but I don't have the ability to direct the funds of the entity. If I did, I would have paid this before paying some of the other things she has paid. Honestly I have not agreed with my employers priorities in paying things off but it's not my company so I don't really have a say - I can give her my advise but thats it.

I just really hope this doesn't become an issue because she almost owes as much as my yearly before tax earnings.

 

[tranquility]

I definitely won't put my name on anything further and am contemplating quitting before I stop being paid.

I just found this link:
http://www.avvo.com/legal-guides/ugc/shorten-your-statute-for-responsible-person-liability-on-ca-sales-tax

It says:

"In California under Revenue and Taxation Section 6829 a responsible person can be held liable for the non-payment of sales taxes by a company if they willfully failed to pay the taxes. A responsible person is an officer of the company, a check signer, or a return signer (someone that has the ability to direct the funds of the entity). A willful non-payment occurs when the reposnsible party has knowledge that the tax is due, but fails to pay it. Failure to pay is usually shown by indicating that something else, like payroll was paid instead of sales tax."

I did sign the return but I don't have the ability to direct the funds of the entity. If I did, I would have paid this before paying some of the other things she has paid. Honestly I have not agreed with my employers priorities in paying things off but it's not my company so I don't really have a say - I can give her my advise but thats it.

I just really hope this doesn't become an issue because she almost owes as much as my yearly before tax earnings.

That link is a very rough summary and not to be read with precision.

You certainly have some arguments, but, as LdiJ said, arguments can be expensive.

 

[frannyz]

I just checked the form I filed out. It says "Preparer Name" for which I put my name then it says "Preparer Position" for which I wrote "Office Manager" and then for phone number I gave the company phone number.

 

[frannyz]

Update: I just spoke to someone at the BOE. They said since her name (my boss) is on the permit, she is the responsible party. That I'm just doing the paperwork for her so I'm fine.