Tax Alerts and Tips
Recent Tax Changes and News:
- Extensions -- As you know, when you get an extension for your tax return, it gives you additional time to file the return but not additional time to pay any tax that is due. If you have an extension but pay a balance due after April 15th, you may be assessed penalties and interest. Currently, the late filing penalty is only .5% per month, so if you owe $500 and pay it by the end of April your penalty would be $2.50 which is highly unlikely to generate a penalty letter from the IRS. So, the sooner you pay the better your chances to possibly avoid a penalty. Here is some more info about IRS penalties and interest.
- Direct Pay -- The IRS has launched a new way for taxpayers to pay their tax liability online. The IRS Direct Pay website allows taxpayers to pay their Form 1040 tax bill or make estimated tax payments directly from their checking or savings account at no cost. The taxpayer receives instant confirmation that a tax payment has been submitted. Bank account information is not retained in the IRS systems after payments are made. Read More...
- How to Pay Federal Taxes by Credit Card.
- Ohio Sales Tax Reporting Requirements -- The Ohio Department of Taxation is reminding all taxpayers that monthly sales and use tax returns are due the 23rd of each month for the previous monthly filing period, unless the due date of the 23rd falls on a weekend or holiday, the return is due the next business day. This return must be filed electronically using the Ohio Business Gateway or TeleFile. For more information on electronic filing, see the sales tax electronic filing page on the departments website.
CLOSING A BUSINESS:
Closing your business can be a difficult and challenging task. The IRS has resources that can help you navigate this. On this page, you’ll find the steps you’ll need to take to close your business from a federal tax perspective regardless of your business type and information to help you take care of your employees. Whether a sole proprietorship, partnership or corporation, information on this page will help you understand what to file and how to report income you receive and expenses you incur before closure. Remember to check your state responsibilities when closing a business.
Steps to Take to Close Your Business
- File a Final Return and Related Forms: You must file a final
return for the year you close your business.
The type of return
you file – and related forms you need – will depend on the type of business you
have. A limited liability company (LLC) is a business organized under state
law. An LLC may be classified for federal income tax purposes as a partnership,
a corporation or an entity disregarded as separate from its owner.
A corporation is a separate
taxpaying entity with at least one shareholder. This includes S corporations.
- A sole proprietor is someone who owns an
unincorporated business by themselves.
- A partnership is a
relationship between two or more partners to do trade or business.
- Take Care of Your
Employees: Employment Taxes: If you have one or
more employees, you must pay them any final wages and compensation owed. You
must also make final federal tax deposits and report employment
If you don’t withhold or deposit employee income, Social Security and Medicare
taxes, the Trust Fund Recovery
apply. To report employment taxes, you may need to file the following forms: You must also provide a Form W-2, Wage and Tax Statement, to each of your employees for the calendar year in which you pay them their final wages. You should provide Forms W-2 to your employees by the due date of your final Form 941 or Form 944. Generally, you furnish copies B, C and 2 to the employees. You file Form W-3, Transmittal of Income and Tax Statements to transmit Copy A to the Social Security Administration. If your employees receive tips, you must file Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, to report final tip income and allocated tips. Pension or Benefit Plans: If you provide a pension or benefit plan for your employees, see how to Terminate a Retirement Plan. If you provide Health Savings Accounts or similar programs for your employees, see About Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.
- Pay the Tax You Owe: See Paying Your Taxes for ways to pay
the tax you owe.
- Report Payments to Contract Workers: If you have paid any contractors at least $600 for services (including parts and materials) during the calendar year in which you close your business, you must report those payments. Use Form 1099-NEC, Nonemployee Compensation. Use Form 1096, Annual Summary and Transmittal of U.S. Information Returns, to send paper copies of all Forms 1099 to us. Some filers must file Forms 1099 electronically.
- Cancel Your EIN and Close Your IRS Business Account: The employer identification number – or EIN – assigned to your business is the permanent federal taxpayer identification number for that business. To cancel your EIN and close your IRS business account, you need to send them a letter that includes:
If you kept the notice they sent you when assigned your EIN, you should enclose a copy of it with your EIN cancellation letter. Send both documents to: Internal Revenue Service Cincinnati, Oh 45999 They cannot close your business account until you have filed all necessary returns and paid all taxes owed.
- The complete legal name of the business
- The business EIN
- The business address
- The reason you wish to close the account
- Keep Your Records: How long you need to
keep your business records depends on what’s recorded in each document.
For more details,
see How Long Should I Keep Records?
Generally, keep records relating to property until the period of
limitations expires for the year in which you dispose of the property. The
period of limitations is the period of time in which you can amend your
tax return to claim a credit or refund, or the IRS can assess additional
Keep all records of employment taxes for at
least four years.