When you start a company and a business, you hope that it will live forever. But, unfortunately, sometimes you have to think about closing your corporation. During the global pandemic, the number of closing companies increased. To do everything right, you have to draw up some documents. One of them will be Form 966.
This document is drawn up by all corporations if a decision is made to dissolve the corporation or liquidate any of its stock. The form must be created within 30 days after such a decision is made. Regardless of your reasons for closing the company, you must issue this paper. This document serves as a notice to the Internal Revenue Service that you are closing the company, along with your final tax return.
This paper must be issued by a corporation or a farmer’s cooperative if a decision is made to liquidate the company or any of its stock. But there are exceptions to the rule:
These types of companies will have to provide other reports to the Revenue Service.
For foreign corporations, see Form 5471 for more information. But if the company has not filed a U.S. tax return, then usually filling in 966 is not required.
The document must be completed within 30 days after the decision to terminate the activity is made. If, after you created the form, you changed the plan or the decision was canceled altogether, you need to create a new form reflecting the changes. Also, when submitting a new form, you will need to attach a copy of the first.
After filling out the document and signing it, the paper must be sent to the same address where you sent all the tax returns of the company.
You will not be charged any direct penalties if you fail to complete the form on time or at all. But indirect penalties or other damages may follow.
The size of the fines is difficult to predict; they will depend on each specific situation. Therefore, it is still better not to risk it but to fill out the form. Besides, the document takes only 1 page and does not take much time.
Below you will find our illustrated step-by-step guide to filling out the form. We recommend that you use our form-building software. This is a great tool to avoid losing any part of the document and get it done as soon as possible.
We present our illustrated tips for completing the document.
1. Identify the Company
First, you need to provide identifying data:
This information should be entered in block letters or printed.
2. Select the Type of Return
In the upper right corner, you need to check the box next to your return type. If there is no suitable option, then mark “Other” and enter the required number.
3. Indicate the Details of the Company’s Incorporation
You need to enter the data regarding the registration of the company, where and when it was registered.
4. Give the Details of the Solution
In point 3, check the box next to the appropriate option whether the liquidation of the company will be full or partial.
In point 4, put in the date when the decision was documented.
5. Provide Information about Immediately Preceding Tax Return
You must enter:
If you submit the form electronically, in paragraph 5, enter “e-file.”
6. Date the Last Tax Year
Enter the date on which the corporation’s last tax year will come to an end.
7. Check Box 7b
If the corporation’s final tax return was filed as part of a consolidated income tax return, check the appropriate box and proceed to fill in the following items.
If not, then check “No” and skip steps 7c-7e. In our guide, skip straight to point 9.
8. Give Data About Consolidated Return
If in the previous question you marked “Yes,” next you need to indicate:
9. Specify the Number of Shares
You need to indicate the amount that is current on the date of the plan.
10. Date All Changes
If any amendments or additions were made to the adopted plan, you must indicate the dates of all adopted changes in point 9.
11. Identify the Code
Provide the number of the Code valid for liquidation.
12. Enter the Date of the Previous 966 (if Any)
If an up-to-date form is generated to enter data on changes to the plan, and another form has already been drawn up, you need to indicate the date of the previous form.
You must also attach a copy of the plan, which includes all decisions and amendments. The copy must be certified.
13. Sign the Document
The Form must be signed. It is necessary to put:
The signature must be affixed by a person who has the appropriate rights.
14. Send the Document
Once the document is properly completed and signed, send it to your IRS office.