A business owner must wear multiple hats and have expertise in various areas. For example, when the company sells to a customer and offers credit terms, the business assumes the role of a bank. Money is owed to the company on credit terms, so you become a banker.
Another role, over and above just running the company, is that of tax collector. The IRS wants its taxes and you are responsible for collecting and paying them. When it comes to payroll taxes, the owner of the company in particular is responsible for all payments regardless if the company goes out of business. The IRS will always go after the individual owner(s) for unpaid company payroll taxes.
Some less informed business owners think they can avoid paying payroll taxes by designating someone working for them as a 1099 Contractor. The problem is the IRS has very detailed instructions on who qualifies for a 1099 status. Basically, if you tell someone where to be, or what to do, or when they should do it, you have an employee. With the budget shortfalls both at the Federal and State levels there is increased scrutiny on Misclassification. Agencies are emphasizing collecting unpaid payroll taxes plus fines and penalties.
Treating a person as a contractor means they should bid on the work that needs to be done and once you give the go ahead your only involvement is accepting the finished work. If you decide to classify a person as a contractor, then that person should be paying their estimated individual sole-proprietor taxes. Just like a factoring company does with their clients, you should protect yourself – ideally by requiring each 1099 Contractor show proof (canceled check) they paid their estimated tax. Since it is your responsibility to properly classify the individual, you will be liable for unpaid tax on misclassified employees.