When closing a small business, there are many things to consider. On a federal level, typically a business must file an annual return for the year it goes out of business. Depending on the business structure or whether the business had employees, there are a number of tax forms that typically must be filed with the IRS before a business is deemed closed by the federal government. Not to mention state tax requirements…..but once the fiscal responsibilities have been met and the entity has been formally dissolved, one step that is frequently overlooked is canceling the EIN.
Many business owners think that once all final tax filings have been made, the IRS will automatically close or discontinue the entity’s EIN, but just as the title of this article implies the EIN for the business is never discontinued, reassigned or reused. Regardless of whether or not an EIN was ever used, the number is PERMANENT. An EIN cannot be canceled by the IRS; however, the business account associated with the EIN may be closed. If the EIN is needed in the future, it will still belong to the business entity even after the account is closed.
To close a business account with the IRS, a written letter is required to be sent to: Internal Revenue Service, Cincinnati, OH 45999. The letter must state the reason for closing the account and include the EIN, the complete legal name of the entity, and the business address. If a copy of the EIN Assignment Notice is available, be sure to include it with your letter. For entities that are deemed liable for business taxes or have been notified that business tax returns are due, the appropriate tax returns will need to be filed before the EIN account can be closed. To be absolutely sure that all necessary filings have been made to close your business with local, state, and federal tax agencies, Harvard Business Services strongly suggests that you seek the assistance of a qualified tax professional.