• Liability for Unpaid Employee Withholdings - Even with Lender Lock-Box Arrangement
  • January 11, 2018 | Author: Andrew D. Bulgin
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • Earlier this year, the United States Court of Appeals for the Sixth Circuit issued an opinion in which it affirmed a lower court’s determination that a business owner was liable for failing to remit trust-fund taxes that were to have been withheld from employee wages notwithstanding the fact that the business was operating under a lock-box arrangement with its lender. Pursuant to the terms of the loan agreement, the lender exercised its right to control the business’s financial activities. The owner asked the court to hold that the lock-box arrangement and the lender’s resulting control over payments to third parties absolved him of any responsibility for remitting the taxes to the IRS. The court rejected that argument because, among other things, the business had voluntarily entered into the loan agreement and, thus, the lock-box arrangement, the owner continued to exercise significant control over the payment of the business’s creditors after the lock-box arrangement went into effect and the owner knew that the taxes were due and could not show that the lender rejected a request to pay those taxes. Please contact Andrew Bulgin with questions about this topic.