The CDTFA and Personal Responsibility for Business Tax Debt

Many business owners choose to operate as an LLC or corporation because they believe their personal assets are protected from business debts. While that is often true, there is one important exception that surprises many California business owners:

In certain circumstances, the California Department of Tax and Fee Administration (CDTFA) can hold individuals personally liable for a business's unpaid sales and use taxes.

If your business has fallen behind on its sales tax obligations, it's important to understand when personal liability may become a possibility.

What Is Responsible Person Liability?

Under California law, the CDTFA may assess a business's unpaid sales and use taxes against certain individuals who were responsible for collecting, accounting for, or paying those taxes but willfully failed to do so.

In other words, even if your business is organized as a corporation or LLC, the CDTFA may pursue you personally under certain circumstances.

Don't Assume Your LLC or Corporation Guarantees Protection

Forming an LLC or corporation remains an important way to limit personal liability for many business obligations. However, unpaid California sales and use taxes are one area where those protections may not apply.

Understanding your responsibilities before collection actions begin can help protect both your business and your personal finances.

Wilson Tax Law Group Can Help

Wilson Tax Law Group represents business owners throughout California in CDTFA audits, Responsible Person Liability matters, sales and use tax disputes, , and collection proceedings.

If you or your business has received a notice from the CDTFA, obtaining experienced legal guidance early can make a meaningful difference in protecting your rights and evaluating your available options.

 

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense. Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board. Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC Tel: (949) 397-2292 (Newport Beach Office) Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.