What happens when a corporation files bankruptcy but still has employee taxes to pay?

Answer by  Att4372 (1704)

Bankruptcy means you turn over all assets to the court. The court then pays off creditors according to priority rules. The Federal government get first dibs. These include payroll (employee) taxes. Other taxes come next. Any leftover assets pay remaining creditors.

Answer by  Att4372 (1704)

Bankruptcy doesn't mean no money, but that debts exceed assets and a court sets payment priority. Payment of payroll taxes comes before payment of any other debts of a corporation. If a corp cannot pay the payroll taxes, officers of the corp can be personnaly liable.

Answer by  cgroverla (516)

If a company goes out of business without paying payroll taxes, the IRS can assess those taxes on any person in the company who had responsibility for paying those taxes. The person can be made individually responsible to paying the taxes just as if the taxes were the person's own delinquent taxes.