In a down economy, companies can face tight cash flow and the need to re-examine or re-prioritize expenditures. Unfortunately, financial distress leads some companies to divert payroll taxes to fund immediate operating expenses. That is not a wise decision. Under federal law, the government can hold a company's individual officers and employees personally liable for the failure to collect and remit the income and FICA (Social Security and Medicare) taxes the company withheld from employees' wages.
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