Income and Expenses

While you may be ready to put the business you were engaged in behind you, there may be tax reasons that require you to continue to file one or more tax returns beyond the time period you thought the business had ceased. If you receive additional revenue or incur additional expenses related to your business after closing the doors, the business is not over. Examples of additional income or expenses could be:

  • Account receivables,
  • Account payables,
  • Refunds,
  • Reimbursements,
  • Legal settlements,
  • Legal expenditures, or
  • Disposal of inventory.

Your method of accounting may affect the timing of when to report these items. For more information, refer to Publication 538, Accounting Periods and Methods.

Any continuing business or financial activity has a corresponding tax responsibility, even if the primary business activity has been abandoned. In other words, use the same forms that you used previously to report income received and expenses incurred after the business has closed its doors. Refer also to Closing a Business Checklist.