Ask Bankruptcy Attorney in Sacramento, Stockton, Fairfield, CA – How is Payroll Tax aka Trust Fund Tax Treated in Bankruptcy?

Payroll Tax, aka Trust Fund Tax, are treated as a nondischargeable priority debt in bankruptcy, whether you file for Chapter 13 Bankruptcy or Chapter 7 Bankruptcy.

Liability of the Trust Fund Tax is not dischargeable regardless of the age of the tax.  Chapter 13 Bankruptcy is a good option in dealing with Trust Fund Tax by providing an interest free repayment plan up to 60 months.

In general, officers and directors of corporations, partners, and anyone with signature authority on the employer's bank accounts may be held liable for unpaid Trust Fund Tax.

Excise tax becomes dischargeable with time pursuant to 11 U.S.C. § 507(a)(8)(E).  Sales tax are treated like excise tax in the state of California. See In re Raimon, 172 BR 933 (9th Cir BAP 1994); In re Ilko, 651 F.3d 1049 (9th Cir. 2011); George v. California State Board of Equalization (In re George), 95 B.R. 718, 720 n.4 (B.A.P. 9th Cir. 1989).  In contrast, some states treat sales tax as trust fund tax.  Trust Fund Tax does not become dischargeable over time.

Materials in this website is only for informational purposes and should not be construed as legal advice.  Bankruptcy law and tax law can change and are too complex to be fully discussed in a website context.  For more information on how bankruptcy can help your tax troubles, schedule a consultation with Muoi Chea Bankruptcy Attorney.  Be sure to get a copy of your "Account Transcript" from the Internal Revenue Services at local branches in Sacramento and Stockton, California as well as complete Tax Return with all Schedules and IRS bills.