Posted by Unifirst Financial & Tax Consultants

What Going Out of Business Means for Your Taxes

What Going Out of Business Means for Your Taxes

If you had employees, you will also need to file a final employer’s federal tax return and a final unemployment return.  These can be filed according to the regular due dates.  When filing these, you will also submit a statement showing the location of the individual or company who will be holding the payroll records from the closing business.  You will want to keep all your business records for at least seven years.

    Your employees will need their W-2 statements by the due date of the following year after closing, and all contractors must receive a 1099-MISC.  If your employees had benefits directly connected with the job, like a pension plan, you will close the plan.  Depending on the type of plan you provided, you will have different timelines in which to do this, as well as different methods of doing so.

    The Internal Revenue Service will still collect income or payroll taxes when a corporate dissolution occurs.  The remaining assets of the corporation are still vulnerable to liens or levies, should the corporation continue to owe the IRS.  If the business files for bankruptcy, the IRS will hold off collections until six months after the court process concludes.

If you are closing your business through bankruptcy, additional rules apply.  A Chapter 7 personal bankruptcy will take care of your personal debts, and often the debts that are keeping you from paying your business debts.  If accepted, your debt is discharged, and your nonessential assets are paid to distribute financially among your debtors.  If you are an LLC or other corporation, you will file for bankruptcy differently.  You can wait until your LLC or corporation status is no longer valid and then use the business assets to pay your debts before dissolving your corporation.  However, you will be responsible for the debt of the business.  You can receive tax refunds while in bankruptcy, but they may be delayed.

In order to properly close your business and ensure that you are being financially responsible and leaving your business name, employees, and remaining business assets in a positive place, it is highly recommended that you hire a professional service like Unifirst Financial & Tax Consultants.  There are several steps to closing a business, and with all of the non-financial or tax-related steps to take care of, having someone to help with the paperwork and financial guidelines is essential to making sure things go smoothly.


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