Among the logistical responsibilities that come with closing a business, some important tax-related steps need to be taken. Specifically you need to report the closure to the IRS, file the final tax return, and provide wage and withholding information to employees.
Final Tax Return
Usually, when you close a business, you are required to file an annual or quarterly tax return for the final year or quarter of operation. If your business was a partnership, corporation, S corporation, limited liability company or trust, then you need to check the boxes near the top front page of your tax return. Remember to check the box that specifies that this is your final tax return.
With you final tax return, attach a statement with the name of the person that keeps the payroll records and the address where the records are kept.
Final Employment Tax Returns
If you had employees, you are required to file final employment tax returns along with paying the federal tax deposits. You also need to issue final wage and withholding information to employees using Form W-2, Wage and Tax Statement.
Reporting Business Property Exchanges or Disposal
The disposing or exchange of business property, or change in the form of business, also needs to be reported to the IRS. To report the sale or exchange of property, use Form 4797, Sale of Business Property. To report sale of business assets, use Form 8594, Asset Acquisition Statement.
To file your tax return with or without a payment, use this IRS page.
Apart from these tasks, consider the following reporting responsibilities that you may need to fulfill, depending upon your business structure:
- Report information from W-2s that you issued. Use Form W-3, Transmittal of Income and Tax Statements
- File final income and allocated tips information return. Use Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips
- Report capital gains or losses. Use Form 1040, U.S. Individual Income Tax Return, or Form 1065, U.S. Partnership Return of Income, or Form 1120 (Schedule D), Capital Gains and Losses
- Report partner’s/shareholder’s shares. Use Form 1065 (Schedule K-1), Partner’s Share of Income, Credits, Deductions, etc., or Form 1120S (Schedule K-1), Shareholder’s Share of Income, Credits, Deductions, etc.
- File final employee pension/benefit plan. Use Form 5500, Annual Return/Report of Employee Benefit Plan
- Issue payment information to sub-contractors. Use Form 1099-MISC, Miscellaneous Income
- Report information from 1099s that you issued. Use Form 1096, Annual Summary and Transmittal of U.S. Information Returns
- Report corporate dissolution or liquidation. Use Form 966, Corporate Dissolution or Liquidation
- Consider allowing S corporation election to terminate. Use Form 1120S, Instructions