IRS Tax Tip 2020-131, October 5, 2020 Closing a business is always a difficult decision regardless of the circumstances. With this in mind, the IRS redesigned the closing a business page of IRS.gov to help business owners navigate the federal tax steps when closing a business. Small businesses and self-employed taxpayers will find a variety of information on the page including: What forms to file How to report revenue received in the final year of business How to report expenses incurred before closure The page also details steps all business owners should take when closing. File a final tax return and related forms. The type of return to file and related forms depends on the type of business. Take care of employees. Business owners with one or more employees must pay any final wages or compensation, make final federal tax deposits and report employment taxes. Pay taxes owed. Even if the business closes now, tax payments may be due next filing season. Report payments to contract workers. Businesses that pay contractors at least $600 for services including parts and materials during the calendar year in which they go out of business, must report those payments. Cancel EIN and close IRS business account. Business owners should notify the IRS so they can to close the IRS business account. Keep business records. How long a business needs to keep records depends on what's recorded in each document. The page also provides helpful information for business owners declaring bankruptcy, selling their business and terminating retirement plans.
