top of page

The Tax Responsibilities That Come With Shutting Down a Business

Writer: James D. LynchJames D. Lynch

● File “final” tax returns. The business must file an annual income tax return for the year it goes out of business. That income tax return should be marked as final. The last payroll tax returns for the business should also be marked as final. This communicates to the IRS that the business is closing and will no longer be filing tax returns.


● Pay taxes owed. Business owners with one or more employees must make federal tax deposits and report employment taxes on the employees’ final wages or compensation.


● Report payments to contract workers. Business owners who pay contractors at least $600 during any given calendar year (including the year in which they go out of business) must report those payments.


● Close EIN business account. After you have filed all necessary returns and paid all taxes owed, send the IRS a letter that includes the complete legal name of the business, the business EIN, the business address, and the reason you wish to close the account. If you still have a copy of the EIN Assignment Notice, you should include a copy with your letter. The IRS business account associated with the EIN will be closed, but the EIN will not be canceled. If you ever need the EIN again in the future, it will still belong to the business entity even after the account is closed.


● Keep business records. Keep all records of employment taxes for at least four years. Records relating to property should be kept until the period of limitations expires for the year in which you dispose of the property. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax.



Comments


Law Office of James D. Lynch, PLLC

Texas:

(512) 745-6347 - Austin / Round Rock

‪(210) 628-9896‬ - San Antonio

(830) 992-7443 - Fredericksburg

(713) 257-9577 - Houston

(214) 489-7506 - Dallas

(361) 654-4212 - Corpus Christi

(956) 435-7813 - Brownsville

(806) 731-4357 - Amarillo

(432) 242-6691 - Midland

(432) 360-3728 - Fort Stockton

(915) 247-6094 - El Paso

California:

(714) 745-3875 - Orange County

(310) 289-3578 - Los Angeles

(760) 424-4111 - Palm Springs / Coachella Valley

(951) 465-3902 - Riverside

(619) 326-9020 - San Diego

  • LinkedIn Social Icon
  • Facebook Social Icon
  • Twitter Social Icon
  • alignable_square
  • Yelp Social Icon
  • avvo
  • Justia-Icon
  • lawyer_com favicon
  • taxbuzz
  • ptin-seal
  • tx_austin_bankruptcy-attorney_2021
  • tx_austin_immigration-attorney_2021
  • 170927-usnsquarelogo-design
  • favicon-32x32
  • mail icon

©2024 by Law Office of James D. Lynch, PLLC. The information contained in this website is for informational purposes and is not to be considered legal advice.  Any correspondence between you and the Law Office of James D. Lynch is not intended to create an attorney-client relationship.  Please do not send confidential information to us until after an attorney-client relationship has been established by an engagement letter signed by the proposed client and our attorney.

bottom of page