How to Close an LLC With the IRS

Determine Which Final Return Your LLC Files

The IRS doesn't tax an LLC as its own category; it follows whatever classification your LLC has, so the correct final return depends on that classification:

• A single-member LLC that is a disregarded entity reports its final year of activity on Schedule C, filed with the owner's individual Form 1040.
• A multi-member LLC taxed as a partnership by default files a final Form 1065, with Schedule K-1s issued to each member for their share of the final year's activity.
• An LLC that elected corporate tax treatment files a final Form 1120 (C corporation) or Form 1120-S (S corporation), as applicable.

Whichever form applies, check the "final return" box on that form, which tells the IRS this is the last return the entity will file.

Settle Any Employment Tax Obligations

If the LLC had employees, closing it with the IRS also means wrapping up employment tax filings. File a final Form 941 (quarterly) or Form 944 (annual), whichever the LLC normally used, marking it as the final return, and file a final Form 940 for federal unemployment tax. Provide a Form W-2 to every employee for their final year of wages, and submit the accompanying Form W-3 to the Social Security Administration.

Report Final Contractor Payments

If the LLC paid any independent contractor $600 or more during its final year, issue a Form 1099-NEC to that contractor and submit the corresponding Form 1096 to the IRS, following the normal annual deadlines even though the business is closing.

Handle Asset Sales or Business Sale Forms if They Apply

If closing the LLC involved selling business assets, you may need to file Form 4797 to report the sale of business property. If the entire business was sold to another party, Form 8594 reports the allocation of the purchase price among the assets sold. Not every closing LLC needs these forms; they apply only when assets or the business itself changed hands as part of the closure.

Cancel the EIN by Letter, Not by Form

Unlike most IRS interactions, there is no form to cancel an EIN. Instead, send a letter to the IRS that includes the LLC's complete legal name, its EIN, its business address, and the reason you want to close the account. Mail it to the IRS's EIN cancellation address in Cincinnati, Ohio (currently Internal Revenue Service, Cincinnati, OH 45999). If you have a copy of the original EIN confirmation notice, include it with the letter. The IRS does not reuse or reassign a canceled EIN to another business; it stays permanently associated with your closed LLC.

Keep Records After You Close

The IRS requires you to keep employment tax records for at least four years after the tax becomes due or is paid, whichever is later. Keep records related to property, including what you paid for it and how you reported its sale or disposal, until the statute of limitations expires for the year you dispose of the property.

This Is Separate From Dissolving Your LLC With the State

Closing your federal tax accounts with the IRS does not dissolve your LLC as a legal entity; your state still considers the LLC active, with ongoing annual report obligations and fees, until you file your state's own dissolution document, commonly called Articles of Dissolution, a Certificate of Termination, or similar, with its own filing fee. Complete both processes; neither one substitutes for the other.

Order Matters: Settle State Taxes Before You Dissolve

Many states require proof that the LLC has settled its state tax obligations, such as Texas's requirement for a Certificate of Account Status from the Comptroller, before the state will accept a dissolution filing. Check your state's specific requirement, since filing your IRS final return doesn't automatically satisfy any state tax clearance step.

Don't Assume You're Done Once You Mail the EIN Letter

Canceling the EIN closes that specific account with the IRS, but it doesn't substitute for filing the final tax return itself. Both steps, the final return and the EIN cancellation letter, are necessary; doing only one leaves the closure incomplete.

A Multi-Member LLC's Final Return Affects Every Member

If your LLC is taxed as a partnership, each member needs their final Schedule K-1 to correctly report their share of the LLC's last year of income or loss on their own personal returns. Make sure every member receives this before they file their individual taxes for that year.

Outstanding Debts Don't Disappear When You Close the EIN

Canceling an EIN and filing a final return address your tax filing obligations; they don't resolve any outstanding tax balance owed. If the LLC owes back taxes, that liability doesn't go away simply because the business has closed, and depending on your state and how the LLC was structured, it's worth understanding what, if anything, members remain responsible for.

Talk to a Tax Professional for Anything Beyond the Basics

If your LLC's closure involves selling business assets, settling an ownership dispute among members, or working through an existing tax liability, talk to a tax professional before filing the final return. This guide covers the standard closing steps, not every situation a closing business might face.