What Happens to Your EIN When Dissolving a Corporation?

Closing down your small business involves many tasks at the local, state and federal levels. When your business is set up as a corporation, it has an independent legal identity that must be properly put to rest properly to end your responsibilities as a business owner. The Internal Revenue Service is one of the federal agencies that keeps track of your corporation through the assignment of an Employer Identification Number. The proper management of your corporation's EIN is as important as managing your personal Social Security number.

An EIN is just like a Social Security number for your corporation. A corporation is a taxpayer under the Internal Revenue Code and must file a federal income tax return annually under its own name. The IRS uses the EIN to set up the corporation's tax account when you first form the company. Through the consistent use of the EIN, the IRS is able to track your corporation's tax payments and any other business between the agency and the entity.

An EIN is permanently assigned to your corporation. Just like a Social Security number, it is never reassigned, even if the corporation goes out of business. This makes sense because the IRS or some other person or entity may need to look at the corporation's historical record of tax filings. If an EIN was reassigned, there could be confusion with regard to the tax accounts of different businesses.

When you dissolve your corporation, your EIN is retired and your federal tax account is closed. You are required to let the IRS know that your corporation has gone out of business so the agency can close your account. If you do not properly close out your tax account and associated EIN, the IRS will assume that you are still in business. If you fail to file annual corporate tax returns, the agency will continue to assess fees and penalties for failing to file.

The easiest way to close out the business tax account associated with your corporation's EIN is to mark the "final return" box on its last federal income tax return. If your corporation is inactive — you obtained an EIN but never got the business up and running — you can close your business account by writing to the IRS and stating the reason you want to close the account. The IRS will not close a business tax account if any business taxes are due, or if the agency has notified you that a tax return needs to be filed.