Final income tax returns
The IRS closing a business page states the baseline: “You must file a final return for the year you close your business.” The return depends on how the entity is classified, which for an LLC may be a partnership, corporation or disregarded entity.
| Entity | Final return | Also on that return |
|---|---|---|
| Sole proprietor (or single-member LLC disregarded) | Schedule C with Form 1040 for the year of closing | Form 4797 for business property sales; Form 8594 if the business is sold; Schedule SE if net earnings are $400 or more |
| Partnership | Form 1065 for the year of closing, final return box checked | Final K-1 box on each Schedule K-1; Schedule D; Forms 4797 and 8594 as applicable |
| C corporation | Form 1120, final return box checked | Schedule D; Forms 4797 and 8594 as applicable |
| S corporation | Form 1120-S, final return box checked | Final K-1 box on each Schedule K-1; Schedule D; Forms 4797 and 8594 as applicable |
The 2025 Form 1120-S instructions say to check the final return box “If this is the corporation's final return and it will no longer exist”, and to check the final K-1 box on each Schedule K-1. A late final return is still subject to the per-shareholder or per-partner penalties; see the section 6699 and section 6698 pages.
Employees and payroll returns
The IRS page lists the payroll steps for a business with employees: pay final wages, make final deposits, and file the employment tax returns. On Form 941 (or Form 944), check the box saying the business closed and enter the date final wages were paid (line 17 of Form 941 or line 14 of Form 944), and attach a statement giving the name of the person keeping the payroll records and the address where they will be kept. File Form 940 for the calendar year of final wages and check box d in the Type of Return section to mark it final. Furnish Forms W-2 to employees by the due date of the final Form 941 or 944, and send Copy A with Form W-3 to the Social Security Administration. Employers with tipped employees file a final Form 8027.
The page warns that if income, Social Security and Medicare taxes are not withheld or deposited, “the Trust Fund Recovery Penalty may apply.” Closing the business does not end personal exposure for responsible persons; see the trust fund recovery penalty.
Information returns
Payments to contractors in the year of closing still need Forms 1099-NEC, transmitted on paper with Form 1096 or filed electronically if required. The thresholds and filing rules are on the payer side at Form 1099-NEC. Name and TIN mismatches on those final forms can still produce CP2100 notices after the business closes; see CP2100 and B notices.
Form 966 for corporations
A corporation that adopts a resolution or plan to dissolve or to liquidate any of its stock files Form 966, Corporate Dissolution or Liquidation, which is required under section 6043(a). The form instructions set the deadline: “File Form 966 within 30 days after the resolution or plan is adopted to dissolve the corporation or liquidate any of its stock.” If the plan is amended or supplemented, another Form 966 is due within 30 days of the change. File it with the service center where the corporation files its income tax return.
Two exclusions: exempt organizations and qualified subchapter S subsidiaries do not file Form 966, and the instructions say “Do not file Form 966 for a deemed liquidation”, such as a section 338 election or an election to be treated as a disregarded entity. The instructions also remind filers that a corporation recognizes gain or loss on distributing its assets in a complete liquidation, measured at fair market value.
Deactivating the EIN
An EIN is permanent. The IRS EIN page says: “If you no longer need your employer identification number (EIN), we can't cancel it, but we can deactivate it.” The request is a letter giving the entity's legal name, EIN, address, the reason for closing, and a copy of the EIN assignment notice if available.
The IRS publishes two different addresses. The closing a business page (updated July 21, 2026) says to mail the letter to Internal Revenue Service, Cincinnati, OH 45999. The EIN deactivation page (updated November 5, 2025) gives Internal Revenue Service, MS 6055, Kansas City, MO 64108, or MS 6273, Ogden, UT 84201. IRM 21.7.13.6.4 says: “All requests for EIN closings/cancellations are processed by the BMF Entity functions in Kansas City or Ogden.” Exempt organizations use Attn: EO Entity, Mail Stop 6273, Ogden, UT 84201 or fax 855-214-7520, and cannot deactivate if they applied for exemption, are covered by a group ruling, or filed an information return.
The IRS will not close the account while anything is open: “We cannot close your business account until you have filed all necessary returns and paid all taxes owed.” Before sending the letter, pull the account transcript and confirm every filing requirement has a return or a reason for none. See reading an account transcript.
How BMF Entity closes the account
IRM 3.13.2.10.7 starts with: “Any correspondence which indicates the taxpayer will be going out of business or is no longer liable for tax returns will be thoroughly researched.” What happens next depends on what the research shows:
| What the research shows | What BMF Entity does |
|---|---|
| No filing requirements, or all closed | Updates the wages-paid and business-closed dates on the entity record and acknowledges with Letter 696C |
| Final returns have been filed | Closes the filing requirements with TC 591 closing code 020, updates the closed dates, sends Letter 696C |
| Final returns have not been filed | Sends Letter 696C requesting the final return and telling the taxpayer to mark it final |
| Business never opened, never did business, or the EIN was a mistake | Inputs TC 020 to remove the EIN from the master file, with manager or lead approval, and sends Letter 696C. If any tax module exists, the TC 020 does not complete. |
| Taxpayer says it never requested the EIN | TC 020 and Letter 696C |
| No employees and never will have | TC 591 closing code 020 on all employment tax filing requirements |
The same IRM table covers situations short of a full closure. If the taxpayer reports no liability for a particular period, the campus satisfies that period with TC 590 closing code 020. If the taxpayer expects possible future liability (a business that is paused rather than closed), the campus inputs TC 590 closing code 020 only up to the present quarter or the date given, leaving the filing requirements in place. If the taxpayer says it filed an extension, the campus sends Letter 696C asking it to mark the eventual return final. If the taxpayer says the final return was already filed, the campus takes no action when fewer than 10 weeks have passed, and after 10 weeks contacts the taxpayer for a copy. A signed return attached to the correspondence showing no liability is edited and routed for processing as an original return.
If the taxpayer gives no specific closing date, the IRM uses the date of the correspondence. The IRM also tells examiners to verify that the person writing is the taxpayer or owner of the EIN; if the relationship cannot be verified, the case goes to the Fraud Detection Center. Correspondence that comes in through Accounts Management about closing an account is routed to BMF Entity regardless of account activity (IRM 3.13.2.10.5).
Records and reopening
The IRS page says to keep property records until the period of limitations expires for the year the property is disposed of, and employment tax records for at least four years. The assessment statute for the final returns still runs normally; see the assessment statute page.
A deactivated EIN can be reactivated if the same entity resumes business. Under IRM 3.13.2.10.8, if the EIN is inactive because of a TC 020 and is valid, the examiner inputs TC 012 to reactivate it with the filing requirements requested and sends Letter 147C. The same entity should not apply for a second EIN.
Questions practitioners ask
Does dissolving the entity with the state close the IRS account?
No. The IRS account stays open until final returns are filed, taxes are paid and the IRS processes a closure request or a final return showing the business has ended.
Is Form 966 required for an S corporation?
Yes, if the corporation adopts a plan to dissolve or liquidate. The IRS page says corporations, including S corporations, must file Form 966 in that case. A QSub does not file it.
What if the client received an EIN but never used it?
IRM 3.13.2.10.7 has the campus remove the EIN from the master file with TC 020 when the taxpayer states the business never opened or the EIN was requested by mistake, provided no tax modules exist.
Which address should the deactivation letter go to?
The IRS currently publishes Cincinnati, OH 45999 on its closing a business page and Kansas City (MS 6055) or Ogden (MS 6273) on its EIN deactivation page. The IRM says Kansas City or Ogden BMF Entity processes the requests.
How long must payroll records be kept after closing?
At least four years for employment tax records, according to the IRS closing a business page. The final Form 941 or 944 must include a statement saying who keeps them and where.