Take care of all tax debt when closing down a business
Closing a business is not always a sign of disaster. In Nevada as well as everywhere else, it may instead signify closing out an old approach and entering into new financial vistas and opportunities. In any event, it’s not possible to shirk the business’s tax responsibilities simply because it’s closing down. When closing the company, all tax debt should be resolved and paid. Remember to notify the IRS of the closing and the termination of the company’s tax identification number.
It’s necessary to file any required tax returns for the final year of operation. Even if a final tax is not due, it’s best to err on the side of caution and file a return to be perfectly safe. Notification to the IRS of the demise of the company is an important last step because it can prevent reams of notices and frantic messages from the IRS if the agency doesn’t know why a company has stopped filing returns.
If back taxes cannot be fully paid then the IRS should be contacted and final agreements negotiated for IRS payment plans or other payment of all final tax debt for the company. Where installment payments must be made, negotiate affordable amounts or a hardship deferral. In particular, make arrangements to take care of any back payroll taxes that were not paid.
Payroll taxes, which include vital withholding for Social Security and other critical purposes, play a primary role and must be addressed. Because payroll taxes are critically important and a mandatory legal requirement, failure to comply with all procedures and submissions can in some instances possibly lead to criminal or quasi-criminal prosecutions. The owner of a closely-held small corporation may also be assessed personally for payroll tax deficiencies of the business.
In Nevada and everywhere else, taking care of the employee withholding and payroll taxes is necessary even if the company is closing. This could be a problem mostly in the case of the very small business with only a few employees. If the business was having cash-flow problems payroll withholding and other tax debt may have been neglected. These problems must be given priority in the final process of closing down the business.
Source: New Pittsburgh Courier, The right and wrong way to close your business, Carlee McCullough, Dec.19, 2013