Indiana Bankruptcy Blog: Is it possible to be "too broke" for Bankruptcy?
Yes
Saturday, March 26, 2011
Thursday, March 17, 2011
Debt collectors and payment allocation
17 March 2011
If you are a debtor with multiple debts, chances are you may have one debt collector collecting on a number of them simultaneously. If this is the case, there are some additional considerations that you should bear in mind. There are numerous stories out there where a debtor has negotiated a payment arrangement with respect to debt. The debtor thought (or assumed) that the payments were being applied in a manner that favored them, like paying one debt, maybe with the highest interest rate, first. They later learn the payments are being applied in a manner that is not in their favor.
As the debt collector is collecting on other debts of the debtor as well, the collector will most likely apply an equal portion of the payments received across the board. However, you can avoid this scenario. If you would prefer that one specific debt is paid first, indicate so on your payments. If the debtor designates that the payment is intended for a particular debt, the debt collector must pay that debt with the funds received. See 15 U.S.C 1692h. Keep in mind, getting the agreement in writing is best to avoid any future disagreement.
But, this is only one problem that can arise in this context—there could be more. If you are facing this issue, you should probably seek legal counsel to help guide you through the process. Feel free to give this office a call.
If you are a debtor with multiple debts, chances are you may have one debt collector collecting on a number of them simultaneously. If this is the case, there are some additional considerations that you should bear in mind. There are numerous stories out there where a debtor has negotiated a payment arrangement with respect to debt. The debtor thought (or assumed) that the payments were being applied in a manner that favored them, like paying one debt, maybe with the highest interest rate, first. They later learn the payments are being applied in a manner that is not in their favor.
As the debt collector is collecting on other debts of the debtor as well, the collector will most likely apply an equal portion of the payments received across the board. However, you can avoid this scenario. If you would prefer that one specific debt is paid first, indicate so on your payments. If the debtor designates that the payment is intended for a particular debt, the debt collector must pay that debt with the funds received. See 15 U.S.C 1692h. Keep in mind, getting the agreement in writing is best to avoid any future disagreement.
But, this is only one problem that can arise in this context—there could be more. If you are facing this issue, you should probably seek legal counsel to help guide you through the process. Feel free to give this office a call.
Wednesday, March 2, 2011
Payroll Taxes and the Internal Revenue Service (IRS)
2 March 2010
Business owners who are behind on paying their payroll taxes may find themselves in a big mess. The IRS requires employers to withhold money from their employees’ paychecks that those employees owe or will owe the government in the future. Federal law requires employers to hold these funds in “trust for the United States.” 26 U.S.C. § 7501(a) (West 2011). Should employers fail to pay these trust fund taxes, the government is able to collect the amount due from the officers of the company who are responsible for their collection and payment. In other words, these officers may become personally liable for the unpaid trust fund taxes of the corporation.
An employer may also fall behind on its ordinary corporate income tax or other “non-trust fund” taxes. These taxes are not collectable from individuals, but only from the corporation.
Often when a business owner owes trust fund taxes, their business likely owes ordinary corporate taxes as well. In this case, there may be something the business owner can do to limit his personal liability. IRS policy has long permitted a taxpayer that “voluntarily” submits payment to the IRS to allocate where they would like the payment to go—i.e. to the ordinary corporate income tax debts or to the “trust fund” debt. In re Energy Resources Co., Inc., 871 F.2d 223 (1st Cir. 1989). So an easy way to limit personal liability is to designate any future payment to the IRS specifically for the trust fund taxes. If you don’t, the IRS will choose how it wants to apply the payment.
In closing, it is always best to make your tax payments on time, however, if you do get behind, consider writing directions on your checks to allocate payment to the trust fund portion of your tax debt. However, if a company is facing this issue, it probably needs legal counsel. Feel free to give this office a call.
Business owners who are behind on paying their payroll taxes may find themselves in a big mess. The IRS requires employers to withhold money from their employees’ paychecks that those employees owe or will owe the government in the future. Federal law requires employers to hold these funds in “trust for the United States.” 26 U.S.C. § 7501(a) (West 2011). Should employers fail to pay these trust fund taxes, the government is able to collect the amount due from the officers of the company who are responsible for their collection and payment. In other words, these officers may become personally liable for the unpaid trust fund taxes of the corporation.
An employer may also fall behind on its ordinary corporate income tax or other “non-trust fund” taxes. These taxes are not collectable from individuals, but only from the corporation.
Often when a business owner owes trust fund taxes, their business likely owes ordinary corporate taxes as well. In this case, there may be something the business owner can do to limit his personal liability. IRS policy has long permitted a taxpayer that “voluntarily” submits payment to the IRS to allocate where they would like the payment to go—i.e. to the ordinary corporate income tax debts or to the “trust fund” debt. In re Energy Resources Co., Inc., 871 F.2d 223 (1st Cir. 1989). So an easy way to limit personal liability is to designate any future payment to the IRS specifically for the trust fund taxes. If you don’t, the IRS will choose how it wants to apply the payment.
In closing, it is always best to make your tax payments on time, however, if you do get behind, consider writing directions on your checks to allocate payment to the trust fund portion of your tax debt. However, if a company is facing this issue, it probably needs legal counsel. Feel free to give this office a call.
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