Dear Valued Clients and Visitors: As our nation responds to COVID-19, our firm is taking precautionary measures by closely following and reinforcing the guidelines from the CDC and local health authorities. Our physical office is open on a intermittent basis. However, please be assured that we are open for business and ready to serve your needs.

If you have a tax problem or inquiry please call and if we are not in leave a message. A return phone call will be made within a short period of time. Now is the time to address your tax matter. We remain committed to our clients and colleagues through these unusual times. Please stay safe and healthy.

Law Offices of Robert T. Leonard, APC
Free Consultations Available
Toll Free 888-408-9486

How you can be held liable for someone else tax bill

In a number of our posts, we have highlighted how people lament the power of the IRS to collect taxes from them. This power is rooted in federal law, and can lead to taxpayers having their wages garnished and property being taken in extreme circumstances. If that is not bad enough, the IRS may have the power to collect taxes from you even though they were originally meant for someone else.

How is this possible?  This post will briefly explain. 

Essentially, the IRS can make life miserable for unwitting taxpayers because of the doctrine of transferee liability. This occurs when a person who owes taxes on an item (or income) attempts to avoid such taxes by transferring the item (or income) to another person. The person owing taxes is considered the "transferor" and the person eventually pursued for the debt is the "transferee."

To pursue a transferee, the IRS must prove that the person fits the definition of Section 6901(h), and that the transferee is substantively liable for the transfer. The second prong is basically the trigger for tax liability since a person may be considered substantively liable if he or she did not receive reasonably equivalent value for the transfer, and the person or entity making the transfer was made insolvent or was left in a precarious financial condition.

So while a taxpayer may feel like they are getting a gift from someone who has their best interests at heart, it may turn into a terrible tax situation. If you have questions about transferee liability, an experienced tax attorney can help.

No Comments

Leave a comment
Comment Information

Send Us A Quick Message

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Law Offices of Robert T. Leonard, APC

Woodland Hills Office
21700 Oxnard Street
Suite 2060
Woodland Hills, CA 91367

Toll Free: 888-408-9486
Phone: 818-224-7935
Fax: 818-587-3833
Woodland Hills Tax Law Office

Los Angeles Office
10100 Santa Monica Blvd.
Suite 300
Los Angeles, CA 90067

Toll Free: 888-408-9486
Phone: 818-224-7935
Fax: 818-587-3833
Map & Directions

Call Today