IRS advises business owners to follow these steps when closing a business
There are many reasons a business owner may choose to close their doors, and there are many things that must be done to officially “go out of business”. Two important steps all business owners must take are fulfilling their federal tax responsibilities and informing the IRS of their plans. The closing a business page of IRS.gov is designed to help owners navigate the process of shutting down.
Small businesses and self-employed taxpayers will find a variety of information on the page including:
- What forms to file
- How to report revenue received in the final year of business
- How to report expenses incurred before closure
The page also details steps all business owners should take 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.
The page also provides helpful information for business owners declaring bankruptcy, selling their business and terminating retirement plans. If you need assistance planning your business wind down, consult a ShindelRock tax professional.