Yet, these very same taxing authorities would not permit the debtor to make these payments at the front end of a plan of reorganization if the Congress adopts the government's proposals. The practical result will be that these officers will be made personally liable for taxes for which no statute provides personal responsibility. As a result, they would now be held hostage for trust fund taxes until every other penny of tax liability will be paid. These proposals contravene the goals of the Bankruptcy Code and should be rejected. Our narrow focus here is on balancing the preservation of the government's alternative sources of collection against the responsible officer's legitimate expectation that the debtor will satisfy the obligation.
Similar rules apply to federal, state and local sales and excise taxes.
These amounts are not property of the estate and should be collectible by the taxing authority under applicable tracing principles. Otherwise, they are collectible in accordance with priority and deferred payment rules. Outside of Chapter 11, failure by the employer to pay gives the taxing authority immediate collection remedies against individuals determined to be responsible, and this is proper. But although a literal reading of Internal Revenue Code Section 6672 might impose liability on the responsible person in addition to the employer, or upon more than one individual for the same amount, the IRS concedes that Internal Revenue Code Section 6672 is merely a device to collect a tax once. Payment by the employer will relieve the responsible officer of liability.