Tax considerations when closing a business / going out of business 8/17/08
Sometimes businesses close for planned and or unplanned reasons. In addition to:
- corporate dissolution or limited liability company of the entity with the Secretary of State (or other state agency)
- cancellation of certificate of limited partnership)
- withdrawal from qualification to do business
- cancellation of fictitious name or trade name registrations
- winding up business affairs
- collecting debts and
- dealing with creditors,
there are a number of tax matters to deal with, including considering tax or gain from disposing of business assets. The IRS has "help" at http://www.irs.gov/ and www.irs.gov/businesses/small/index.html to guide you through all the cycles of operating a business, including “going out of business.” The IRS provides both checklists and important addresses.
Steps to Take: Checklist of Owner Responsibilities
- Notify the IRS
- Submit the appropriate forms to IRS
- Submit Change of Address Form 8822, to the IRS center to which you sent your business returns
- Include your Employer Identification Number (EIN)
- Cincinnati IRS Center
Cincinnati, OH 45999
- Ogden IRS Center
Ogden, UT 84207
Attn: BMF Entity Control Unit
- Outside US:
Philadelphia IRS Center
Philadelphia, PA 19255
Forms and schedules
The following are the typical final forms and schedules you may need to file depending on your type of business structure if you go out of business. For more information, see the instructions for the listed forms.
- 1120 for a corporation or 1120S for an S corporation
- 1165 for a partnership or limited liability company (taxed as a corporation)
- Schedule C or C-EZ with Form 1040 (sole proprietorship) for the year in which you go out of business
- Form 4797 with your Form 1040 for each year in which you sell or exchange property used in your business or in which the business use of certain section 179 or listed property drops to 50% or less
- Form 8594 with your Form 1040 if you sold your business
File Schedule SE with your Form 1040 for the year in which you go out of business.
- Form 941 (or Form 944) for the calendar quarter in which you make final wage payments. Note: Do not forget to check the box and enter the date final wages were paid on line 16 of Form 941 or line 15 of Form 944
- Form 940 for the calendar year in which final wages were paid. Note. Do not forget to check the box, If you will not have to file returns in the future …, under Question D.
- W-2 to your employees for the calendar year in which you make final wage payments. Note: These forms are generally due by the due date of your final Form 941 or Form 944
- Form W-3 to file Forms W-2. Note: generally due within 1 month after the due date of your final Form 941 or Form 944
- Forms 1099-MISC to each person to whom you have paid at least $600 for services (including parts and materials) during the calendar year in which you go out of business. File Form 1096 and Form 1099-MISC.
- Form 966 for corporations
- Comparible state forms and returns (both in the jurisdiction organized in and states in which the entity is qualified to do business)
- Sales or use tax
- Unemployment compensation (in Missouri, the Department of Labor and Industrial Relations, Division of Employment Security)