Closing Your Business? Keep This Checklist From the IRS in Mind
There are typical actions that are taken when closing a business. You must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns, in addition to making final federal tax deposits of these taxes. Also attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.
The annual tax return for a partnership, corporation, S corporation, limited liability company or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.
You will also need to file returns to report disposing of business property, reporting the exchange of like-kind property, and/or changing the form of your business. If this sounds like a lot to do, that is because it is. Luckily, the IRS has put together this helpful checklist below.
Make final federal tax deposits
File final quarterly or annual employment tax form.
Issue final wage and withholding information to employees
Report information from W-2s issued.
File final tip income and allocated tips information return.
Report capital gains or losses.
Report partner's/shareholder's shares.
File final employee pension/benefit plan.
Issue payment information to sub-contractors.
Report information from 1099s issued.
Report corporate dissolution or liquidation.
Consider allowing S corporation election to terminate.
Report business asset sales.
Report the sale or exchange of property used in your trade or business.
Pay your taxes
Closing a business does not have to be a bad thing. Perhaps a shareholder rolled their equity into a new entity. Whatever the reason for closing an entity, the professionals at The Center for Financial, Legal, and Tax Planning are more than knowledgeable with regards ways to ensure compliance with IRS guidelines. Please contact us at (618) 997-3436 with any questions.