Closing Your Business: Final Tax Filings

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It isn’t over until it’s over.

The old saying is certainly true when it comes to closing your business. Even after you lock the doors on the last day, you still have work to do, in the form of final tax returns.

Here’s a sample of some items you may need to report.

Payroll. In addition to making your final tax deposit, you’re responsible for sending quarterly and annual payroll returns to the Internal Revenue Service and state employment bureaus.

You’ll also need to supply annual federal and state wage statements (Form W-2) to former employees, and report miscellaneous payments to contractors and other non-employees on Form 1099.

Income and Expenses. Account for final business activity on federal and state income tax returns, including receipts and expenses arising after your official closing date. Don’t overlook deductions such as operating losses or depreciation carryovers, which can generally be claimed in full on your final return.

Sales of your business assets typically result in taxable capital gains or losses. If the sale of a group of your business assets includes, or could include, goodwill, you might also have to file Form 8594 with the Internal Revenue Service. Some states require notification of bulk sales.

Pension Plans. Depending on the kind of benefit plan you have in place, you may need to notify former employees, disburse plan assets and file a final tax return.

Other Reporting Requirements. Final returns for sales and use taxes and excise taxes may be required, along with forms notifying federal and state authorities of the dissolution of your business.

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