Today TaxMama hears from Rawan in the TaxQuips Forum who tells us, “I closed my business in September. I was wondering if I need to close my business checking account before I file my final 1120S form?”
I am so glad you asked. You’d be surprised how many people close their corporations and never bother to close their bank accounts.
You may still need some money for final costs or fees. Unless there is a really urgent reason (creditors banging on your door, etc.), never close a corporation before December 31st. Otherwise, you will have to prepare the final tax return before the forms or software for that year are ready.
When you close the corporation in September, your tax return will be due December 15th. If you think you’ll be ready to file the final tax return by then, fine.
Meanwhile, keeping the bank account open to pay incidentals is fine. The business is no longer an active, or going concern. Ideally, do finalize the closure so you can shut the company down no later than 12/31 and get the tax returns prepared as soon as possible. Then, once you’ve paid the final bills, close the account.
Caution, if you have refunds coming from anywhere – tax refunds, security deposits, etc. , keep the bank account open until you receive all the money. You have no idea what a pain it is to try to cash or deposit checks made out your S corp once the account no longer exists.
You can include those transactions in the final tax return even if you receive the money early in the following year. When you’ve received all the money, cash out and close the account.
And remember, you can find answers to all kinds of questions about closing businesses and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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