Final tax returns when you close a business

A closing business files the same returns it always has, one last time, marked final. The IRS tells you to check the “final return” box on your income tax return, file a final Form 941 or 944 with the date final wages were paid, file Form 940 for the year (checking box d), and give employees their W-2s by the due date of the final 941 or 944. A corporation also files Form 966 within 30 days after it adopts a resolution or plan to dissolve.

The federal checklist

What	Who	Note
Final income tax return, “final return” box checked	Every business	The form depends on the entity: 1120, 1120-S, 1065 or Schedule C
Form 966	Corporations	Within 30 days of adopting the dissolution plan, and again after any amendment. Not for deemed liquidations such as a section 338 election
Final Form 941 or 944	Employers	Enter the date final wages were paid
Form 940	Employers	Check box d, “Final”, for the year you stopped paying wages
Forms W-2	Employers	To employees by the due date of the final 941 or 944
Forms 1099-NEC	Businesses that paid contractors	Report contractor payments above the threshold in the IRS instructions for that tax year

Records you will need later

Final returns can be examined like any other. The IRS asks businesses to keep records for 3 years in general, 4 years for employment tax records, 6 years if income was underreported by more than 25%, and 7 years for a bad-debt or worthless-securities claim. Those records usually live in accounting software, payroll systems and email, so export them before you cancel those accounts. See how long to keep business records.

State returns

States run their own final returns, sales tax closures and withholding accounts, and some require tax clearance before they accept dissolution papers. Your state revenue department’s website lists the steps; your accountant will know them.