Who is Liable for Employee Withholding and Social Security (FICA) Taxes?

ALSB Journal Of Employment and Labor Law, Summer 2013

16 Pages Posted: 7 Aug 2013

See all articles by Michael J. McDermott

Michael J. McDermott

Millersville University of Pennsylvania

Nancy J. White

Central Michigan University

Joseph J. Galante

Millersville University of Pennsylvania

Date Written: April 16, 2013

Abstract

When a contractor or subcontractor is forced to liquidate because of cash flow problems, there may remain a significant financial liability to the federal government for collected, but unremitted, payroll taxes withheld from employees’ paychecks but not yet paid to the federal government. By law, employers are required to withhold from employee’s salaries certain employee-owed taxes on wages and to pay these funds to the federal government. These include the The Employee Federal Insurance Contribution Act (“FICA”) taxes, Medicare, and income taxes, collectively referred to here as “payroll taxes”. These funds, withheld from employees’ paychecks and owed to the Internal Revenue Service (“IRS”), may have been improperly used to pay the businesses’ “more pressing” creditors instead of being paid over to the IRS. While it is clear the actual employer, whether partnership, corporation, or other, is liable for the taxes, other “responsible parties” are also liable. This paper examines many cases involving the court’s determination of who may be considered “responsible parties” for the taxes and penalties; penalties that can be as high as 100% of the taxes due.

Keywords: construction industry, taxes, FICA

Suggested Citation

McDermott, Michael J. and White, Nancy J. and Galante, Joseph J., Who is Liable for Employee Withholding and Social Security (FICA) Taxes? (April 16, 2013). ALSB Journal Of Employment and Labor Law, Summer 2013, Available at SSRN: https://ssrn.com/abstract=2306636

Michael J. McDermott

Millersville University of Pennsylvania ( email )

Millersville, PA 17554
United States

Nancy J. White (Contact Author)

Central Michigan University ( email )

Dept. of Finance and Law
Mt. Pleasant, MI 48858
United States
989-774-1842 (Phone)

Joseph J. Galante

Millersville University of Pennsylvania ( email )

Millersville, PA 17554
United States

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