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If corp debtor fails to get out K1s in time (pre
Hello Holly:
I'm not checking this against any books, so take it with a grain of salt, but it might get you started on answers to these questions.Do the "former employees have recourse?" I assume you meant to add "against the corporation which is failing to fulfill its statutorily-mandated duty to report K-1s in a timely fashion?" Yes. As I tell many of my clients, "in this country, anybody can sue anybody for anything at any time." More important questions are whether the suit advances a meritorious argument, and what are the damages? I think a private cause of action against a corp for this dereliction raises a good argument at first glance. But the damages are probably pretty low; taxpayers have a duty to keep books and records so they can correctly report their income. Third-party reports are a check on this system to allow the government to see that everyone is being consistent. If the K-1s show up, but late, you might be able to convince a court to require the corporation to pay the victimized taxpayer's late penalties, but even that might be tough.Damages will never be measured by the amount of tax that a taxpayer should have but didn't report because of the lack of information. The taxpayer owes an objective amount, and that amount cannot be shifted to another taxpayer."These former employees are being sued." By whom, and for what cause of action?Bankruptcy will not relieve the corporation of the obligation to send and file K-1s. This is the type of administrative, "ministerial" action that would require something close to paraplegia on the part of all the corporate officers in order to waive any penalties.I hope this is helpful.- John
On Tuesday, February 27, 2018 3:02 PM, "Holly Roark hollyroark22@gmail.com [cdcbaa]" wrote:
Busy teeing up Chapter 11 for corporate debtor. If we do not get the former employees (who were stockholders) K-1's out on time, would they have recourse? These former employees are being sued. Can employees sue for damages for the late K-1s? Will filing the BK postpone requirement to get out K1s on time? (I'm thinking NO.)
Holly RoarkCertified Bankruptcy Specialist*
and Sports Lawyer
holly@roarklawoffices.com**primary email address**www..roarklawoffices.comCentral District of California & District of Idaho - Consumer Bankruptcy Attorney1875 Century Park East, Suite 600 Los Angeles, CA 90067T (310) 553-2600; F (310) 553-2601*By State Bar of California Board of LegalSpecialization
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