Many entrepreneurs decide to incorporate their company when they first open for business to shield their personal assets from liabilities. These business owners are not aware that they can be responsible for the business-related taxes if their ventures fail. According to §§40-29-72 and 40-29-73, Code of Ala. 1975, if a person is in charge of collecting or withholding trust fund taxes and deliberately fails to remit those taxes to ALDOR, they may be personally liable for the business’ tax debt.

Taxes held “in trust” by the company until the tax return and payment are due are referred to as trust fund taxes. State and local sales tax, income withholding tax, lodgings tax, and sellers use tax are among those levied. If the business’ trust fund taxes are not paid, a business owner or official may be held personally accountable.

The Alabama Department of Revenue is authorized by law to impose a direct penalty equal to the unpaid tax to anyone who oversees collecting, accounting for, and/or paying over trust fund taxes to the state but willfully fails to do so. For instance, you can personally be liable for the business’ tax obligation if you have a position inside the company that gives you responsibility and control over the payment of creditors and you decide to pay other creditors while trust fund taxes are still owed. The Internal Revenue Service has been using the process, often known as “Trust Fund Recovery,” since 1954.

View Plain Talk About Your Trust Fund Recovery for more information on Trust Fund Recovery.