Tax Relief for Having to Pay C-Corp debt

[DanPaul02]

I was an officer at a small C-Corp.  The business folded in 2016.  At that time I learned that the person in charge of paying state sales tax had not been sending in the payments.  That person had walked away with the money.  After much legal discussion it was determined that I was responsible for paying that debt.  

That was the price I paid for never insisting that there be LLC or an S-Corp.  At the time, we all trusted each other.  I ended up having to pay over $8,000 personally.  I understand that it was my responsibility and paid my portion in 2020.

Is there anything I can do on my 2020  personal taxes to get any tax relief from this?  I feel it is a personal loss, but don't see anywhere where it would apply.

[Mike9241]

I don't think being an LLC or S-corp would have helped.  you paid because the state determined you were the responsible person for collecting and remitting the sales tax.  if a C-Corp doesn't protect you neither would an LLC or S-corp.

anyway, I would regard this as an unpaid debt owed to you by the corp ( I assume the corp is out of business and has no assets). I would then treat it as a nonbusiness bad-debt - gets reported on form 8949 which flows to schedule D.  net schedule D losses are limited to $3,000 per year.  

[DanPaul02]

Thank you so much.  I have been racking my brain on this for quite a while.  The company was a group of fraternity brothers.  We all trusted each other.  The person who was actually responsible for collecting and paying state taxes did not do it.  My attorney said that because it was a C-Corp that I had to assume the liability since I was an officer.  

Treating this as an uncollectable debt makes sense.  That is what it would be if our company had any assets.

I really appreciate your help.