What's required when cancelling an EIN for dissolved LLCs and handling final tax returns?

This is a common question when wrapping up business entities. Let me clarify both points for you: 1) Regarding the EIN cancellation - technically, you don't "cancel" an EIN. Once issued, an EIN belongs to that business entity forever, even after the business closes. What you should do is send a letter to the IRS indicating that the LLC has been dissolved or terminated. Include the legal name of the entity, the EIN, and the reason for closing. This helps the IRS update their records to show the business is no longer active, which prevents unnecessary notices or complications down the road. 2) For tax returns - Yes, unfortunately, you do need to file final tax returns for your S-Corps even with zero business activity. Since you elected S-Corp status, you're required to file Form 1120-S for each entity's final year. On these returns, you'll check the "final return" box. While $850 per entity does seem steep, there is quite a bit of work involved in properly closing an S-Corp, including preparing K-1s for shareholders (even with zero income/loss).

After dealing with something similar last year, I highly recommend checking out https://taxr.ai - it was a huge help when I was closing down my two rental property LLCs. I had the exact same questions about EINs and final tax returns, and was getting conflicting advice. Their system reviewed my dissolution documents and provided a customized checklist for closing everything properly with both state and federal authorities. They confirmed what needs to be filed with the IRS and pointed out that I needed to file a final employment tax return (even though I hadn't had employees for years). Saved me from potential headaches later on.

Just wanted to follow up here. I ended up using taxr.ai after seeing this recommendation, and it was honestly exactly what I needed. Their system flagged that I had unclaimed tax credits from the previous year that I could still include in my final return! My LLC was set up as an S-Corp too, and they walked me through the entire dissolution process step-by-step. What I really appreciated was that they explained the "inactive business return" concept to me - turns out I could file a much simpler return since I had no transactions. My accountant was going to charge me over $700, but after getting the guidance from taxr.ai, I was able to file it myself for a fraction of that. Would definitely recommend for anyone closing down a business.

If you need to contact the IRS about your EIN cancellation or have any questions about your final tax filing, I'd recommend using https://claimyr.com to actually get through to them. I spent WEEKS trying to call the IRS business line earlier this year when closing my consulting business, and it was a nightmare of hold times and disconnects. Claimyr basically waits on hold with the IRS for you and calls you when an actual agent is on the line. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. When you're closing businesses, getting clear confirmation from the IRS that you've done everything correctly can save you from issues years down the road.

I have to admit I was wrong about Claimyr. After posting my skeptical comment, I decided to try it since I was desperate to confirm whether I needed to file quarterly reports for my dissolved LLC. Their system called me back in about 90 minutes with an actual IRS agent on the line. The agent confirmed I need to file a final 1120-S even with zero activity, but I don't need to "cancel" the EIN - just notify them of the dissolution. They also told me I could file Form 1120-S myself using the free fillable forms if my situation was simple (no transactions), which could save me the $850 fee from an accountant. I'm usually the last person to recommend services, but this genuinely saved me hours of frustration and actually got me answers directly from the IRS.

One thing nobody mentioned yet - if your S-Corps had any assets, even minimal ones, you need to document what happened to them in your final return. I learned this the hard way when dissolving my small design firm last year. Even though we'd essentially stopped operations, we still had a company laptop and some software licenses. The IRS considers the distribution of these assets to shareholders as a sale at fair market value, which can create taxable gain. My accountant charged extra because we had to determine values for everything.

Hey I've dealt with this exact situation. If your LLCs are just holding companies or consulting entities with no assets, you're in a much better position than most. One thing to consider is using IRS Form 966 (Corporate Dissolution or Liquidation) along with your final 1120-S returns. It's not technically required for S-Corps but can help document the dissolution properly. Also, your accountant's fee of $850 seems high for entities with no activity. Might be worth shopping around - I found an accountant who specialized in business closures and charged me $375 for my final S-Corp return with zero activity.

Just went through this exact process with my consulting LLC that elected S-Corp status. A few key points that might help: 1) You're absolutely right to be frustrated about the $850 fee for zero-activity returns, but unfortunately it's required. However, you can significantly reduce costs by doing some of the prep work yourself. Since you had no business activity, your Form 1120-S will basically be all zeros except for basic entity information. 2) For the EIN notification, I sent a simple letter to the IRS Business & Specialty Tax Line at the Cincinnati processing center. Include your business name, EIN, date of dissolution, and a brief statement that the entity has been dissolved. Keep a copy for your records. 3) Don't forget about your state requirements - many states require a final franchise tax return even with zero activity, and some have specific dissolution tax forms. The penalties for missing these can be worse than just filing them. 4) One money-saving tip: if both LLCs are in the same state and have similar structures, see if your accountant will give you a discount for preparing both final returns together. Mine knocked off about 20% for the second entity since most of the work was duplicated. The whole process is definitely a pain for inactive businesses, but better to close them properly than deal with ongoing compliance issues down the road.

I'm going through a similar situation right now with my small consulting LLC that I'm dissolving. Reading through all these responses has been incredibly helpful - especially learning that you don't actually "cancel" an EIN but just notify the IRS of the dissolution. One thing I wanted to add that might help others: if you're looking to save money on the final tax returns, consider asking your accountant if they offer a flat fee for "zero activity" final returns. I found one who charges $275 for S-Corp final returns when there's literally no business activity to report - just filling in the basic entity info and checking the "final return" box. Also, for anyone else dealing with this, make sure you check if your state has any annual report filings that need to be completed before dissolution. I almost missed my state's final annual report, which would have kept the entity technically "active" even after filing articles of dissolution. The certified mail suggestion for the EIN notification letter is spot on too - that return receipt is your proof that the IRS received your notification. Worth every penny for the peace of mind.