It’s critical to comprehend the distinction between termination and dissolution before moving on to the procedure of informing the IRS of a business shutdown. Dissolution is the legal process of closing down a business and selling its assets, whereas termination refers to the stop of business operations.
You must file Articles of Dissolution with the Secretary of State of your state or another appropriate authority if your business is closing. The legal existence of your company will so be terminated.
Who Controls a Dissolved Company’s Assets? Any assets left over after a company is dissolved must be dispersed in accordance with state legislation. Normally, any unpaid obligations and taxes come out of the earnings from the sale of assets first. Any remaining cash are given to the company’s shareholders or owners after those obligations have been paid.
Within 30 days following the date of dissolution, you must submit Form 966, Corporate Dissolution or Liquidation, to the IRS informing them that your company has closed. The IRS receives information about the business’s assets, liabilities, and final tax return via this form.
You must submit a final tax return for the business along with Form 966. The time period covered by this return should be from the start of the tax year to the date of dissolution. You must submit final employment tax returns and make final federal tax deposits if you have employees.
The Electronic Federal Tax Payment System (EFTPS) of the IRS allows you to cancel payments you’ve already made if you need to. Log into your EFTPS account and choose “Cancel a Tax Payment” from the main menu to stop a payment. To stop the payment, follow the instructions.
A tax return cannot be electronically canceled once it has been submitted. However, you can file an updated return using Form 1040-X if you’ve already filed a return and need to make adjustments or revisions. This form cannot be electronically submitted; it must be submitted on paper. When submitting your updated return, make sure to include all required supporting evidence.
To wrap up your company’s operations and prevent any further tax problems, it is crucial to inform the IRS of a business closure. You may make sure that your company closes successfully and smoothly by recognizing the difference between termination and dissolution, knowing who owns a dissolved firm’s assets, and adhering to the correct processes for notifying the IRS.
Form 1040X, Amended U.S. Individual Income Tax Return, must be filed if you have already filed your tax return but need to cancel it later because your business is closing. You must include both the information from your first tax return and the modifications you are making on this form. In the space designated on the form, you can additionally provide an explanation of the amendment’s cause. It is crucial to keep in mind that you cannot amend your tax return if the IRS has not yet notified you of an audit or other problem with it.