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May 2011
Did You Borrow From the Government?
By Gary Smith

Did You Borrow From the Government?

     Many business owners make the mistake of borrowing from the government by not paying taxes when they are due, or not filing tax returns. This mistake not only costs you more money in the long run, but you could also face jailtime for criminal penalties.

    However, what if, despite your best efforts, you canít afford to pay your taxes when they are due? What should you do?

    First, always file your tax return on time. Next, make the biggest payment you can when you file your return. The IRS also has procedures you can use to request payment extensions, installment payment terms and special consideration of your situation that could lead to reductions or eliminations of certain tax liability.

     If you donít file your tax return when it is due, you face a penalty of 5 percent of the taxes owed per month up to 25 percent of the taxes owed. If you file your tax return but donít pay your taxes, the penalty accrues at 0.5 percent per month up to a maximum of 25 percent of the taxes due. If you donít file a return and donít pay the taxes due, the total penalty can reach up to 47.5 percent of the amount of taxes you owe. In addition to penalties, you must also pay interest on the amount of taxes due. The IRS can also lien and seize your assets and enforce criminal penalties against you.


     While your situation may be bad because you canít pay your taxes, your situation is far worse if you donít proactively work with the government about what you owe.



Employer Investigations

     When an employer learns of potential discrimination or harassment of any type, many employers arenít sure what to do. You have to make certain discrimination and harassment donít occur, but what should you do when you arenít sure exactly what happened?

    Two decisions from the Eighth Circuit Court of Appeals have highlighted what employers must do. In these cases, supervisors investigated what happened when they learned of the potentially harassing behavior.

     Although the supervisors did not initially report the incidents to their human resources department, once the supervisors reported the incidents to their HR department, that department investigated the claims as well.

     The employers were held not liable for the harassment because they promptly investigated the complaints. Remember, however, that the duty to investigate and take action applies when an employer becomes aware of the potential harassment or discriminationóhowever the employer becomes awareóeven though no formal complaint has been filed, or the employer may have only become aware of the issues indirectly.



Under the Catís Paw

     Your best salesperson just told you that he thinks the manager of his division is doing a horrible job. However, what your salesperson did not tell you is that he really just doesnít like the manager because the manager is also in the Army. Your salesperson is a retired Navy veteran.

     You really like and respect your salesperson, and you decide to fire the manager based on what the salesperson said. You had no discriminatory intent and simply fired the employee because you wanted your salesperson to be happy. You had no idea that your salesperson was simply lying about why he didnít like the manager.

     The Supreme Court has held that an employer can be liable for discrimination when the person making the decision, who has no discriminatory intent, is influenced by a person who has discriminatory reasons for wanting the decision to be made.

     This case and the theory it presents are being referred to as ďcatís pawĒ because of the influence exerted over the decision maker by the other person.

     The employer can possibly avoid liability if the employer conducts its own investigation and determines that a certain action should be taken without regard to what the original person with discriminatory reasons said. This means, in our example, if the employer investigated the manager and decided to fire the manager for its own reasons without considering what the salesperson said, it could potentially avoid liability.



When Your Customer Harasses Your Employees

     Some customers are very hard to deal with, and your employees may have constant complaints about them. All you have to do is to tell your employees to make the customer happy, right? Not here in the Fourth Circuit Court of Appeals. If you know or should have known that your employees are being harassed by a third party, you have to take appropriate steps to address the situation.

     In the case, employees of a customer were alleged to be harassing the vendorís employee. The vendorís employee complained to his employer, and the employer took no action. After a few months of problems and complaints, the employer offered the employee another shift with longer hours and less pay and that interfered with his being able to take care of his children. When the employee refused the offer, he was fired.

     An employer has a duty to act when its employees are harassed by a third party just as if the harassment was between the employerís own employees. The employer in this case did nothing to protect its employee from harassment by the customerís employees. Further, the court found that, in any event, the employerís policy for dealing with harassment was insufficient to satisfy the employerís responsibilities to its employees. This employer was liable for what it did and did not do when it learned of the harassment by the customer.

     Content provided by Wishart, Norris, Henninger & Pittman, P.A., which partners with owners of closely-held businesses to provide comprehensive legal services in all areas of business, tax, estate planning, succession planning, purchases and sales of businesses, real estate, family law, and litigation. For more information, contact Gary Smith at 704-364-0010 or visit


Gary Smith is an attorney at Wishart, Norris, Henninger, P.A.
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