Skip to main content

What happens to sales taxes, corporate taxes, payroll taxes owed by a S-Corp after filing for bankruptcy? Are they discharged?

Atlanta, GA |

My partner and I are planning on closing our S Corp. We own approx. $5,000 on sales taxes, corporate taxes, payroll taxes. What happens to those taxes if we file bankruptcy? What happens to us personally if we file bankruptcy?
The S Corp does not owe anybody else except the above tax.

Attorney Answers 3


Some taxes are dischargeable in bankruptcy while some are not. Here you and your partner would be obligated personally for sales taxes and some of the payroll taxes. You need to get with a tax and bankrutpcy attorney in your area before you do anything.

Hope this helps. If you think this post was helpful, please check the thumbs up (helpful) tab below and/or designate my answer as best answer. Thanks.
Mr. Fromm is licensed to practice law in PA with offices in Philadelphia and Montgomery Counties. His phone number is 215-735-2336 or his email address is listed below.
Mr. Fromm is ethically required to state that the response herein is not legal advice and does not create an attorney/ client relationship. Also, there are no recognized legal specialties under Pennsylvania law. Any references to a trust, estate or tax lawyer refer only to the fact that Mr. Fromm limits his practice to these areas of the law. These responses are only in the form of legal education and are intended to only provide general information about the matter within the question. Oftentimes the question does not include significant and important facts and timelines that if known could significantly change the reply or make such reply unsuitable. Mr. Fromm strongly advises the questioner to confer with an attorney in their state in order to ensure proper advice is received.
By using this site you understand and agree that there is no attorney client relationship or confidentiality between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area in your jurisdiction, who is familiar with your specific facts and all of the circumstances and with whom you have an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question or omitted from the question.
Circular 230 Disclaimer - Any information in this comment may not be used to eliminate or reduce penalties by the IRS or any other governmental agency.

Mark as helpful


Why would your corporation need to file bankruptcy if you don't owe anyone besides the taxes? Those taxes are usually not dischargeable, so filing bankruptcy wouldn't accomplish much. As always, check with a local bankruptcy attorney to find out what applies in your specific case.

Mark as helpful


Some taxes are discharged in bankruptcy and others are not. Sales taxes and payroll are fiduciary taxes and are assessed a trust fund recovery penalty if they are not paid making responsible parties (owners, check signers, return signers) personally liable for the taxes. These taxes are not discharged in a bankruptcy. You are typically not personally liable for corporate taxes. You should consult with a local bankruptcy attorney familiar with these matters to review your particular situation.

Any individual seeking legal advice for their own situation should retain their own legal counsel as this response provides information that is general in nature and not specific to any person's unique situation. Circular 230 Disclaimer - Advice given in this response cannot be used to eliminate penalties with the IRS or any other governmental agency.

Mark as helpful

Business topics

Top tips from attorneys

What others are asking

Can't find what you're looking for?

Post a free question on our public forum.

Ask a Question

- or -

Search for lawyers by reviews and ratings.

Find a Lawyer

Browse all legal topics