Business owners should visit IRS.gov for help with tax actions when closing a business

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.