It depends. If you were an active member of the corporation and involved in the day to day operations including the paying of bills, then you probably will be deemed to be a “responsible party” by the IRS. For the Kentucky  withholding tax obligations, you may be deemed personally “responsible” simply by being an officer of the  orporation even if you were not an active party in the bookkeeping operations of the business.

As a responsible party, you may be personally liable for any unpaid trust fund obligations of the corporation. What is a trust fund obligation? It is that portion of the tax liability that was withheld from an employee’s paycheck and not turned over to the government. The matching FICA obligation of the company is not a trust fund obligation and will be deemed uncollectible by the IRS if the company goes out of business. Also, all sales taxes collected from a customer are deemed to be trust fund taxes.

If your business does have to close down, then you may need to file an individual Chapter 7 bankruptcy in order to get relief from any personal guarantees that you may have obligated yourself to in order to get the business up and running. However, you cannot discharge in bankruptcy any trust fund tax obligations that you may have. You will have to work out a payment plan after the bankruptcy is over with the IRS and the state or you may consider filing a Chapter 13 in order to pay back the tax liabilities over five years without the accrual of interest or penalties.