Many small businesses have closed due to COVID-19. If yours is one of them, you should be aware that there is more to closing a business than laying off employees, selling office furniture, and closing the doors - you must also take certain actions as required by the IRS to fulfill your tax obligations. For example, if you have employees, you must file final employment tax returns as well as make final federal tax deposits of these taxes. You will need to attach a statement to your return listing the name and address of the person that keeps the payroll records (this could be you or another person) as well. If you are disposing of business property, exchanging like-kind property, and/or changing the form of your business, you must file a return to report these actions too. You must also file an annual tax return for the year you go out of business.
Depending on your type of business structure, you may need to take the some or all of the following steps:
- File final federal tax deposits
- File final quarterly or annual employment tax form (Forms 94x)
- Issue final wage and withholding information to employees (Form W-2, Wage and Tax Statement
- Report information from W-2s issued (Form W-3, Transmittal of Income and Tax Statements)
- File final tip income and allocated tips information return (Form 8027, Employer's Annual Information Return of Tip Income and Allocated Tips)
- Report capital gains or losses
- Report partner's/shareholder's shares (Schedules K-1)
- File final employee pension/benefit plan
- Issue payment information to sub-contractors (Form 1099-MISC, Miscellaneous Income)
- Report information from 1099s issued Form 1096, Annual Summary and Transmittal of U.S. Information Returns)
- Report corporate dissolution or liquidation
- Consider allowing S corporation election to terminate
- Report business asset sales
- Report the sale or exchange of property used in your trade or business.
If you find yourself in the position of having to close your business, help is just a phone call away.
Mr. Maker is a certified Public Accountant and serving the South Asian community since 1993.
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