Free Consultation: 858.450.1040 Payment | Client Login

MENUMENU
  • EDD
  • IRS
    • IRS Notices – What They Mean
  • About Us
    • MEET THE TEAM
    • PRACTICE AREAS
    • CONTACT US
  • TAX LAW & EDD RESOURCES
    • SMALL BUSINESS OWNERS TAX LAW GUIDE
    • EDD & IRS AUDITS
    • CRIMINAL TAX
    • SAN DIEGO TAX ATTORNEY
    • Orange County Tax Attorney Services
    • TAX BALANCE
    • INNOCENT SPOUSE RELIEF
    • OTHER TAX LAW MATTERS
    • SALES TAX AUDITS
    • UNFILED TAX RETURNS
    • OFFERS IN COMPROMISE
    • CALIFORNIA INCOME TAXES
    • INTERNATIONAL TAX
    • TAX COLLECTIONS
    • CORPORATE | BUSINESS TAX
    • PAYROLL TAX AUDITS
    • TAX LEIN
    • FAQs
  • SBA Loan Resources
    • PPP FORGIVENESS DENIAL APPEAL
    • SBA Criminal Defense
    • FAQs
  • RESOURCES
    • Blog
    • VIDEO LIBRARY
Home > Blog > The IRS is Coming After My Closed Business. What Do I Do?

The IRS is Coming After My Closed Business. What Do I Do?

January 3, 2018

A stressed woman worries while looking at her computer

When businesses close, they sometimes do not file taxes for their last year in operation. These taxes are still owed, and if any business has not closed its doors in accordance with state and federal laws, California’s Franchise Tax Board and the IRS will go after the money they’re owed. Penalties can be substantial, and may include liens issued against future income from the business or its former owners.

With guidance from an experienced tax professional, any closed business can be sure the proper taxes are paid or that they prepared when the state or IRS comes after their tax dollars. All business owners should also be aware of the proper procedures for closing a business.

How to Properly Close a Business

No matter the reason for closing your business, a business owner always should have a grasp of the full scope of the financial and tax implications of dissolution. Knowing each step, why it’s necessary, and what the implications are if it’s not properly followed will help any business get a complete picture of the process.

The first step of closing a business is to notify everyone involved and the proper government agencies. Partnerships and LLCs will have to follow the terms of their dissolution agreement. Sole proprietorships or partnerships without such agreements will only have to notify any partners or board members.

Sole proprietors also will not have to file with the state, but they should resolve any outstanding bills. LLCs and general partnerships must file dissolution papers with the state, letting creditors know that your business cannot take on any more debt. After the decision to dissolve the business has been agreed upon, a Certificate of Dissolution must be filed.

The IRS must also be notified of the closure. A thorough checklist of everything a business needs to do when closing to comply with the federal government is available from the IRS.

It’s critical that your business continues to pay owed taxes to the IRS after it’s closed. File quarterly, annual, and capital gains taxes, and continue to pay necessary payroll taxes for the prior and current year. The IRS takes unpaid payroll taxes particularly seriously. Be sure to file all the appropriate federal forms the IRS requires for closure. Some due dates on tax forms may also change or be expedited if a business be closing.

Tax Collection in California: What to Know

Tax laws vary from state to state, so it’s important to know certain facts about how California’s tax laws may affect your situation.

‘Responsible Person’ Standard

California uses a “responsible person” standard in determining who is liable for a business’s unpaid taxes. A “responsible person” is any manager, partner, shareholder, etc. whose responsibilities within the organization include filing and paying business taxes.

In California, a responsible person is liable for unpaid sales and use taxes, as well as interest and penalties on those taxes. He or she may also be liable for taxes on purchases a company executed as a consumer.

Statute of Limitations

The statute of limitations for California sales tax is three years from the date a return is filed. If the state does not have proper knowledge of a company’s closing, however, assessments against a responsible person can be filed eight years after a company is closed.

Any company taxes owed should be taken seriously. Properly preparing for and being able to handle post-closure tax collection from the IRS may require the help of a tax professional. The penalties can be substantial, especially to business owners who have recently closed shop.

Reaching out to the tax firm at Milikowsky Tax Law puts a professional on your side with your best interests in mind in the event the IRS or state goes after money owed by your closed business.

Filed Under: Blog, News Tagged With: IRS, Small business

Archives

Search

Categories

Questions About
Tax Audit/Controversies?

A representative will be in contact within 1 business day
PRIVACY POLICY

Get Monthly Updates on Important Tax Law Matters



Milikowsky Tax Law is located at: 4250 Executive Square, Ste. 650, La Jolla, CA 92037
o. (858) 450-1040 | m. (858) 212-0542 |
Privacy Policy

DISCLAIMER:
The information on this website is for general information purposes only. Nothing on this site should be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or viewing does not constitute, an attorney-client relationship.

Milikowsky Tax Law © All Rights Reserved. Clear1099.com | Cal1099.com | California1099.com © All Rights Reserved.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT