The pandemic has been hard on businesses of all kinds, making pandemic bankruptcy a common experience over the last few years. With more than 200,000 extra closures recorded during the first year of the Covid-19 pandemic, now more than ever, entrepreneurs are turning to assistance for small businesses.
If you’re a small business owner facing bankruptcy and the closure of your small business, there is more to going out of business than locking the doors and walking away. These 5 things can help if you had to go out of business due to the pandemic.
Apply for COVID Bankruptcy Relief
Small businesses are struggling! One of the many unfortunate consequences of the global pandemic is the toll it has taken on small businesses over the last two years. If you’ve found yourself saying—I want to close my business and walk away—you’re certainly not alone.
If you are facing closure, you may qualify for pandemic assistance. One specific example available to small businesses is bankruptcy relief. Additional provisions were created to help out struggling small businesses as part of the CARES Act, including extension of payment plans and excluding Covid-19 assistance payments from qualifying as income when filing for bankruptcy.
Take Care of Your Employees
Employers facing the closure of their business because of economic hardship aren’t excused from their responsibilities to their employees. First and foremost, any employees should be paid any compensation owed in full even when you are facing COVID bankruptcy. In addition to cutting their final checks, you’ll be required to pay any remaining medicare or social security taxes on their behalf. Lastly, don’t forget to mail out your employee’s final W-2s so they can file their taxes when the time comes.
File Your Final Tax Return
After your business is closed due to pandemic bankruptcy, you’ll be expected to file a final tax return. Small business owners must report everything from income to expenses and employee payroll.
The type of business you own determines which forms you should file. In many cases, you’ll be expected to indicate that the return you are filing is a final return. Filing a final tax return may be complicated by the circumstances of your closure, so turn to your accountant for help to be certain you’re not missing any details.
Get the Details on Government Assistance for Small Businesses
In response to Covid-19, the government is offering assistance for small businesses who are struggling due to the pandemic. All over the world, businesses are facing closure because of the economic hardship caused by the last two years.
If you’ve decided to close your business, there may be government aid available to you. This pandemic assistance could include PPP loan forgiveness, ERC and other tax credits, and even cancellation of debt.
Organize and Store Your Business Documents
Even a business that has closed can be audited by the IRS. After you’ve taken care of your final tax return, spend some time getting all of your most important paperwork in order. Depending on the specifics of your situation, you may need to hold onto tax-related documents for as long as 7 years. This will allow you to provide the required documentation if you are audited by the IRS, or if you need to amend your return.
Click here to schedule your free consultation with a member of the ClaimYourAid team to find out if your company going out of business can qualify for government grants, credits, or refunds.