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Tax To-Do List When You are Closing Your Business


When you close a business, there are almost as many things to do as when you opened. And you can't forget tax issues that must be dealt with when you close a business. Here is a to-do list so you don't forget something. Some of these items may not apply to your business (for example, if you don't have employees), but review all of them just in case.

1. Federal Tax Deposits for Payroll Taxes

Pay last payroll tax deposit for Social Security/Medicare and for federal income tax withheld.

2. File Quarterly Federal Tax Report on Form 941

File Form 941 showing amounts withheld and amounts due for Social Security/Medicare withheld from employees and for federal income tax withheld from employees.

3. File Annual Unemployment Tax Return on Form 940

Employers must file an annual federal unemployment tax return showing the amounts owed on unemployment tax, based on employee gross pay, and amounts paid into the fund. In this accounting, any amounts owed must also be paid.


4. Submit Final Annual Wage Statements for Employees (W-2)

After the final payroll, prepare and submit form W-2 for each employee. These reports are due at the end of January, for the previous year's wages, and must also be submitted to the Social Security Administration.


5. Submit Final Wage Statements for Independent Contractors (Form 1099-MISC)

After making final payments to independent contractors and other non-employees. Then prepare Form 1099-MISC for each individual. These reports are due at the end of January, for the previous year's work, and must also be submitted to the Social Security Administration.

6. Submit Year-End Wage Reports to IRS (W-3 and 1096)

Before the end of February of the year following the business closure, submit all W-2s for employees and 1099-MISC forms for non-employees and contract workers, along with transmittal forms, to the Social Security Administration. 

7. Submit Final Income Tax Report

Work with your tax preparer on your final business tax return.


8. Report Corporate Dissolution

Work with your attorney on resolutions for the ending of your corporation, LLC, or partnership. These forms must be submitted to your state's secretary of state.


9. Report the Sale or Exchange of Property Used in Business

 Use for 4797 to report the sales of business property to the IRS.

10. Cancel Your Employer ID Number/IRS Account

Once you apply for and use your Employer ID Number, it is yours forever. But you can close your business account with the IRS. Here is how....

11. Make Final Sales Tax Report and Payment

After your final sales, make your final sales tax report and payment to your state.


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