August 5, 2020
Closing a business? There is work to be done, first

This may be the year you decide to close your company. Consult with your accountant to do it the correct way.

Here at Kerby Accounting & Business Solutions, we offer lots of advice to keep business clients’ companies compliant and successful. But there are all kinds of reasons why businesses close that don’t involve poor profits or performance — an owner may have health issues, for example, and make the difficult decision to shut the door of his or her company.

We hear a lot about opening businesses, but when you close one, there are many steps to take as well. Flipping the “out-of-business” sign on your front door and giving employees the bad news is not the only action that must be taken.

In order to stay in the good graces of the IRS, there are tax-related things that should be on your business-closing checklist.

A good accountant will help guide you through these final steps.

Filing still required

You’ll need to file an annual tax return on the year you go out of business. Right under the entity information, there’s a box to check to show it’s your final return. (You still must pay taxes due by deadline or file for an IRS extension.)

If you have employees, you must file employment-tax returns on time as well. And let the IRS know who is keeping your payroll records and where they are being kept, in the form of a statement attached to the return.

(If you need information on where to send your taxes and don’t have an IRS pre-printed envelope, the IRS has this handy website page.)

In good form

The kind of forms you send in are dependent on what kind of business you have. All businesses won’t have to produce Form 8027 for example, to report final tip income and allocated tips information. All businesses also don’t have to report shareholders’ or partners’ share of income, credits and deductions.

But business that have assets and property, capital gains and losses, payments issued to subcontractors and an employee-benefit plan all must be officially documented and reported.

Whether a sole proprietor, LLC, S-corporation, corporation or partnership, it is in your best interest to pay a visit to your accountant to ensure you are providing all the final forms and information needed. Every business is different and has its own nuances and factors at play.

As you go about notifying employees, vendors and clients of your decision to close, a quality accountant will get to work notifying the IRS in the proper way. Expert help adhering to deadlines and filing the proper forms keeps the process problem free.

Kari Kerby

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