TAX LIABILITY ON BALANCE SHEET
In reviewing the BS for a commercial janitorial and maintenance company I saw a relatively large FICA and Payroll tax liability that seems to be growing YoY (resulting in a negative Owners Equity). Company averages around $1M/yr EBITDA for at least the last three years and has both w-2 and 1099 janitors. Although the owner understands this liability would remain with him after the sale, I am wondering if this is something that will affect my cash flow in future years and should account for it in my modeling in addition to what's on the P/L (e.g., is there supposed to be additional tax expense that's not there today that I need to account for)? I'm not sure why he wouldn't just pay it down given it seems to be generating healthy cash flow and profit. Thanks!