The IRS may have to return to a bankruptcy estate a bankruptbureau’s tax deposits that were collected from clients but were used to satisfy its own tax liabilities. A federal trial court has ruled that the bankruptcy trustee may be able to void transfers of the clients’ money to the IRS.
Upshot: These defrauded clients who have now paid twice—once to the service bureau and again to the IRS—may be able to get back some of their embezzled money. (Slobodian et al. v. U.S., No. 1:13-cv-02677, D.C. M. Pa., 2014)
Voidable transfers. In a bankruptcy proceeding, all creditors are supposed to be equal. To support this policy against preferential treatment of creditors, bankruptcy law allows a bankruptcy trustee to void and recover certain payments made by an insolvent debtor. In general, a bankruptcy trustee can recapture preferential transfers if they’re made between 90 days and one year before the bankruptcy petiti...(register to read more)