There are a few things business owners need to do before they close their business. Of course, they need to fulfill their federal tax responsibilities. It’s also important to notify the IRS of their plans.
Business owners must take these steps when closing a business:
- File a final tax return and related forms. The type of return to file and related forms depends on the type of business.
- Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes.
- Pay taxes owed. Even if the business closes now, tax payments may be due next filing season.
- Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments.
- Cancel EIN and close IRS business account. Business owners should notify the IRS so they can close the IRS business account.
- Keep business records. How long a business needs to keep records depends on what's recorded in each document.
IRS.gov has information to help guide business owners through the process of shutting down. Small businesses and self-employed taxpayers can find information including:
- What forms to file
- How to report revenue received in the final year of business
- How to report expenses incurred before closure
Business owners can also get helpful information on declaring bankruptcy, selling their business and terminating retirement plans.
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At Alpha Omega Tax Solution we believe that every financial decision you make affects your taxes. If you have a tax question, we have a tax solution.
