If my small business files bankruptcy, what will happen if I owe state taxes?
Answer
Depending on the age of the tax bill, it may simply vanish in a court order. The older the bill, the more likely that is to happen.
If you are still within the timeframe that the state can collect taxes from your business, you will be personally liable for your business taxes if the business cannot pay them. If you cannot pay them, it's still very, very difficult to discharge them in bankruptcy. You'll need to work out a payment arrangement with the taxing authority. They're generally fairly easy to work with because they know that the money will come to them (with interest and penalties) regardless of the timeframe involved.
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