2. 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 taxes. If you don’t withhold or deposit employee income, Social Security and Medicare taxes, the Trust Fund Recovery Penalty may apply.
To report employment taxes, you may need to file the following forms:
- Form 941, Employer’s Quarterly Federal Tax Return, or Form 944, Employer’s Annual Federal Tax Return, for the quarter in which you make final wage payments.
- Check the box to tell the IRS your business has closed and enter the date final wages were paid on line 17 of Form 941 or line 14 of Form 944.
- Attach a statement to the return showing the name of the person keeping the payroll records and the address where those records will be kept.
- Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, for the calendar year in which you paid final wages.
- Check box “d” in the Type of Return section to show that the form is final.
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.