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Trust fund taxes

Liability for trust fund taxes (the portion of an employee's wages that a employer withholds from the employee's paycheck)  is not dischargeable regardless of the age of the tax.  

If you were an employer, or a "responsible person" for a corporation or partnership that did not pay withheld funds to the taxing authority, you may have personal liability for the taxes withheld if those funds were not paid over to the taxing authority.  

Trust fund taxes or the penalty assessed against a responsible person can be paid through a Chapter 13 plan.   More on the power of Chapter 13 for sorting out tangled tax situations.

Distinguish the trust fund portion of the tax from the employer's portion of various taxes:  the employer's portion of employment taxes can be discharged if it is not a priority tax or a trust fund tax.   

Under the law of some states, sales taxes are also trust fund taxes.  In other states they are excise taxes. (California adopts the excise tax approach).   Excise taxes become dischargeable with time;  trust fund taxes do not.

  Back to Discharging taxes in bankruptcy