Steps to Closing Your Business.
Closing your business is a big decision. Once you have decided to close your business there are steps you have to take from a tax perspective and for your employees.
A tax return is required for the year you close your business. The type of business you have (sole proprietor, partnership, or corporation) will determine what type of return you file and the associated forms you need.
You must pay your employees any final wages and compensation owed. It is required that you pay final federal tax deposits and report employment taxes. A wage and tax statement (W-2) must be given to each employee for the final calendar year. You must also file a W-3 for the Social Security Administration. If applicable, final tip income and allocated tips must also be reported.
If you are terminating a retirement plan, upon termination participants must be immediately 100% vested for all accrued benefits. Assets must be distributed as soon as administratively feasible.
You must pay any taxes that you owe.
You must report payments you have made to contractors in excess of $600.
Part of closing your business includes canceling your employer identification number (EIN) and closing your IRS business account. The IRS can close your account once all required returns are filed and all taxes owed are paid.
Keep your business records. Property records must be kept until the period of limitations is over, or the period of time when your tax return can no longer be amended by you or the IRS. Records of employment taxes must be kept for at least four years.
For more information on how to take the steps to close your business look at www.irs.gov/businesses. There is a wealth of detailed information on exactly how to take the necessary steps as well as relevant forms you need to file. To discuss a planned, potential, or actual business closure contact Shoffner & Associates, Counselors to Small Business and Families.
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Amanda Y. Cordes, Esq.
Shoffner & Associates
Counselors to Small Business and Families.
Give Amanda a call at (617) 369-0111
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