Closing a business can be a difficult and challenging task. First, before you close your business, find out if tax relief, your local county, or the CARES Act legislation can help you stay open. Also, be sure to consult with your professional team such as an attorney or accountant.
There are typical actions that are taken when closing a business. This blog post focuses on tax responsibilities with the IRS and FL Department of Revenue. It does not address non-tax obligations such as those associated with the vendors, contracts, or the FL Division of Corporations.
You must file an annual return for the year you go out of business. If you have employees, you must file the final employment tax returns in addition to making final federal tax deposits of these taxes. Also, attach a statement to your return showing the name of the person keeping the payroll records and the address where those records will be kept.
The annual tax return for a partnership, corporation, S corporation, limited liability company, or trust includes check boxes near the top front page just below the entity information. For the tax year in which your business ceases to exist, check the box that indicates this tax return is a final return. If there are Schedule K-1s, repeat the same procedure on the Schedule K-1.
You will also need to file returns to report disposing of business property, reporting the exchange of like-kind property, or changing the form of your business. Below is a list of typical actions to take when closing a business, depending on your type of business structure:
- Make final federal tax deposits
- File final quarterly or annual employment tax form
- Issue final wage and withholding information to employees
- Report information from W-2s issued
- File final tip income and allocated tips information return
- Report capital gains or losses
- Report partner’s/shareholder’s shares
- File final employee pension/benefit plan
- Issue payment information to sub-contractors
- Report information from 1099s issued
- 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
- Cancel your EIN and close your IRS business account
- Make and pay final sales tax and reemployment tax returns with the FL Department of Revenue
- Keep your records (time period depends – at least 7 years)