In Erwin v. United States, the Fourth Circuit Court of Appeals (covering Maryland, Virginia, North and South Carolina, and West Virginia) held Charles Erwin, founder, director, secretary, treasurer, vicepresident and partial owner of GC Affordable Dining, Inc. (“GCAD”), personally liable for GCAD’s unpaid payroll taxes. Applying a multi-prong test, the court determined Erwin was “responsible” for the collection and payment of GCAD’s taxes because he had substantial and active involvement in GCAD, exercised supervisory control over the management team, determined which creditors to pay when GCAD resources were limited and decided to keep GCAD afloat by paying other expenses even after he learned about the unpaid payroll taxes. The court further found that the failure to collect and pay the taxes was willful because, at a minimum, Erwin knowingly used GCAD’s resources to keep the business open rather than pay the back taxes. The court rejected Erwin’s attempt to share or shift blame to others within GCAD, noting liability rests with “all” responsible persons, not the “most” responsible person.
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Corporate owner personally liable for unpaid payroll taxes
- Fenwick & West LLP
- Michael A. Sands, Saundra L. M. Riley and Mona Clee
- USA
- February 10 2010
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David Parker
Group Manager, Legal and Business Services
Australian Grand Prix Corporation
