Not all taxes are treated equally. Some tax debt may be discharged in bankruptcy proceedings while others may not. The IRS has and will assess the “Trust Fund Tax Penalty” against any and all individuals that were responsible for filing employment tax returns and depositing employment tax.
Trust Fund Tax is the employee’s share of Social Security and Medicare and the tax withheld from the employee’s wages.
If you are the controller at a company, you are considered the person responsible for filing employment tax returns and depositing employment tax. If you don’t make the required deposits the IRS may assess a penalty against you personally.
If you and your wife are partners in a business you may both be considered responsible persons. If the IRS assesses the Trust fund Penalty against both partners, you are both charged interest on the same tax. Yes that is correct, the same Tax can be assessed on multiple people and they are all charged interest for the same liability.
If you fail to file your employment tax returns and you fail to make the required deposits for your payroll tax, the IRS won’t be knocking on your door for several months. By the time they do show up the interest and penalties will be so high your company won’t be able to pay it. This has been the downfall of many companies.
As the business owner you are ultimately responsible for employment tax and employment tax returns. If your payroll service takes money from your bank account to pay employment tax, but fails to do so, the IRS will hold you responsible. Many payroll companies have disappeared overnight resulting in the taxpayers having to pay the same tax twice. Make sure this does not happen to you.
If you find yourself or your company in trouble for employment tax you definitely want to hire professional representation to minimize the damage.