Accounting Articles > Federal Payroll Tax:

941 deposit tax liability

Let’s remember that the 941 quarterly withholding tax return collects three different and distinct types of federal taxes.

  1. Withholding Tax, which goes into your eventual income tax.
  2. Social Security Tax, which has two sides:
    1. The personal portion, which is withheld from payroll.
    2. The business portion, which simply doubles the amount owed.
  3. Medicare Tax, which also has two sides:
    1. The personal portion, which is withheld
    2. The business portion, which again doubles the tax.

The liabilities for the tax are split between the corporation and the business owner or corporate officer in charge of getting the money to the government. The business portions of the Social Security and Medicare are solely a business liability. If you have a corporation that goes bankrupt, then that portion of the 941 tax liability is generally discharged.

But the income tax that was withheld from the employee’s checks, and the Social Security and Medicare that was also withheld cannot be discharged in a corporation bankruptcy. These monies were not the property of the corporation. The owner or responsible corporate officer is the trustee for the government. Their job is to get the money to the government. If they don’t do this, then they will be held personally liable for this liability. The only way out of this is to pay it, file an offer and compromise, or to file a personal bankruptcy.

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