Closing a Business When You Have Employees

Filing Your Final Federal Employment Tax Returns When You Close Your Business

If you have employees when you close your business you'll have to file the final employment tax returns and issue W-2s to the employees.

If you had employees you'll file the following:

  • Form 941, Employer's Quarterly Federal Tax Return
  • Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return
  • Form W-2, Wage and Tax Statement
    • Form W-2 and W-3 Instructions
  • Form W-3, Transmittal of Income and Tax Statement

Employment Tax Returns

1. Form 941, Employer's Quarterly Federal Tax Return

Form 941 is filed quarterly and is used to report federal income taxes and social security and Medicare tax withheld from employees' pay. The employer's share of social security and Medicare taxes are also reported.

Form 941 is due by the last day of the month following the end of each quarter.

For example, if you close your business May 15, 2012 (the second quarter: April, May, June), file Form 941 no later than July 31, 2012.

On the final return:

  • Complete Part 3 on page 2 of Form 941.
    • Check the box on Line 16 and enter the final date wages were paid.

2. Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return

File Form 940 by January 31 of the following year (i.e. tax year 2011 due January 31, 2012).

For the final return:

  • Check the box on page 1 indicating you won't have to file returns in the future.

Forms 940 and 941 may be filed electronically. Request IRS authorization to participate in the e-file program for employment returns by submitting a letter of application (LOA) either on paper or electronically.

For technical help with e-filing employment tax returns, contact:

  • The Electronic Filing Help Desk in Austin, Texas, at (512) 460-8900, or
  • Memphis Tennessee, at (901) 546-2690 ext. 7519.

3. Form W-2, Wage and Tax Statement:

When to file:

  • Employees:
    • Paper returns and electronically filed returns must be received by employees by January 31 of the following year.
  • Social Security Administration:
    • Paper returns:
      • File Copy A of Form W-2 (and the accompanying transmittal Form W-3) by February 28 (or the 29th during a leap year).
    • Electronically filed returns:
      • File by March 31.
  • Thirty-day filing extension:
    • You can request a filing extension of 30 days with the Social Security Administration by sending Form 8809, Request for Extension of Time to File Information Returns.
  • Where to file:
    • Send Copy A of Form W-2 (and one transmittal Form W-3) to:
      • Social Security Administration, Data Operations Center, Wilkes-Barre, PA 18769-0001.
    • Certified mail (recommended):
      • If you use certified mail, change the zip code for the above address to 18769-0002.
    • If you use an IRS-approved private delivery service, add two things to the above address:
      • Attn: W-2 Process, 1150 E. Mountain Drive.
      • Change zip code to:18702-7997.

Electronic filing: For electronic filing of Form W-2 visit: www.socialsecurity.gov/employer

4. Form W-3, Transmittal of Income and Tax Statement:

Form W-3 is a transmittal form used to summarize the data on each individual W-2 form. You submit only one Form W-3 along with all W-2 forms.

File your personal and small business taxes (Schedule C)