The following list of requirements will give you an idea of what is involved in closing a business and the kinds of information you might need to provide your professional advisor.

Of course, the business must file a final income tax returns and some other related forms for the year it closes.

The type of return to be filed – and the required related forms – will depend on the type of business you have: C Corporation, S Corporation, Partnership, Sole Proprietorship, or LLC, which is organized under state law but may be classified for federal income tax purposes as a partnership, a corporation, or an entity disregard-ed as separate from its owner.

There also are obligations related to employment taxes of employees of the business. 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 taxes. Failure to withhold or deposit employee income, Social Security and Medicare taxes can result in full personal liability for what’s known as the Trust Fund Recovery Penalty.

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 on Form 1099-NEC, Non-employee Compensation.

If your business has a retirement plan for employees, you will want to terminate the plan and will need to distribute benefits to participants. There are detailed notice, funding, timing and filing requirements that must be met by a terminating plan.

There are also complex requirements related to flexible spending accounts, Health Savings Accounts, and other similar programs for your employees, these issues should be addressed by the pension administrator handling your type of plans.

The length of time you need to keep your business records depends on what’s recorded in each document. Generally, keep records relating to property until the period of time expires during which you can amend your tax return to claim a credit or re-fund, or the IRS can assess additional tax for the year in which you dispose of the property. Keep all records of employment taxes for at least four years.

Other tax issues. Some sundry items that might need to be ad-dressed with the closure is, including Paycheck Protection Plan (PPP) loans, COVID-19 employee retention tax credit, employment tax deferral, debt cancellation, use of net operating losses, freeing up any remaining passive activity losses, depreciation recapture, and possible bankruptcy issues. There are many special tax rules contained in pandemic-related legislation, and there may be additional retroactive changes in future legislation that could affect your situation, including the deductibility of business expenses paid with PPP loan proceeds.

You also must cancel your Employer Identification Number (EIN) and close your IRS business account. This is done by sending a letter to IRS that includes the complete legal name of the business, its EIN and address, and the reason for closing the account. If you kept the notice from when the IRS assigned your EIN, a copy should be enclosed with the cancellation letter.

If your business is unable to pay all the taxes it may owe, most jurisdictions have as an option payment plans.