Without regard to extensions, the typical filing deadlines for business tax returns are March 15th for C Corporations and S Corporations and April 15th for Partnerships following the close of the calendar year. What happens if a business shuts down midyear? If a business shuts down anytime other than December 31st for calendar year filers then a tax return is required to be filed by the following deadlines:
· 2 months and 15 days after the business ended for C Corporations and S Corporations
· 3 months and 15 days after the business ended for Partnerships
Failure to file a tax return by the appropriate deadline can result in a $195 per month late filing penalty per partner or shareholder. While this penalty may be waived if the company as a good record of compliance the goal is to get all returns filed timely. Other than the business shutting down, a part year tax return may be required for other reasons if a termination occurs within the partnership. Terminations can occur in any of the following scenarios:
· Real Termination – The partnership now longer has two or more partners. This typically occurs if one partners buys another out. The business will still exist, but the partnership is no longer since there is only one owner.
· Technical Termination – Within a 12 month period there is a sale or exchange of 50% or more of the total interest in a partnership. This is called a technical termination since the partnership continues to exist, but a final tax return must be filed.
If considering significant changes in ownership or shutting down a business you should consult your tax professional. Other tax items to consider when closing a business include:
· Make final Federal and state estimated tax payments
· File final quarterly or annual employment tax forms
· Issue final forms 1099-MISC to contractors and form W-2 to employees
· Report gain or loss from the sale of the business