• Dissolve, Surrender, or Cancel Business Entity
• Federal and State Income Tax Changes
• How to Select a Tax Preparer
• Free month of Digital Accounting

Dissolve, Surrender, or Cancel Business Entity

It is very important for taxpayers to understand that business entities registered with the California Secretary of State (SOS) must be dissolved, surrendered, or canceled when they are ceasing operations in California.

Domestic corporations (those that originally incorporated in California) may legally dissolve.

Foreign Corporations(those that originally incorporated outside California) may legally surrender.

Limited liability companies and partnerships (both domestic and foreign) may legally cancel.

Until a taxpayer formally terminates the legal existence of the entity, the entity continues to exist. The entity's tax filing and annual tax due requirements also continue. Often, a taxpayer does not formally terminate the entity with SOS even though it stops doing business, and stops fulfilling its tax filing requirements. Not filing timely tax returns or paying the annual tax usually leads to an entity being suspended. Penalties, fees, and interest will accrue until the entity is formally terminated.

Steps to dissolve, surrender, or cancel a business entity

• File any delinquent tax returns.
• File the final/current year tax return. On this tax returns first page, write 'FINAL' at the top of the page and check the box labeled Final Return.
  Exception for a nonprofit tax-exempt church or tax-exempt corporation - It need not file a final return if its 3-year gross receipts average is not more than $25,000. But it must file a final return if its average exceeds $25,000, its a private foundation, or it has non-member or unrelated business income.
• Pay all tax balances, including any penalties, fees, and interest.
• File the appropriate dissolution, surrender, or cancellation form(s) with the SOS within 12 months of filing your business final tax return. To get the correct forms, visit http://sos.ca.gov, or call the SOS at 916.657.5448.
• Suspended or forfeited business - You must revive your business before you file dissolution, surrender, or cancellation forms with the SOS.
• Public benefit, religious, and mutual benefit corporations holding charitable assets - You must obtain a dissolution waiver from the Office of the Attorney General before filing dissolution forms with the SOS. For more information, visit http://www.ag.ca.gov/charities, or call the Office of the Attorney General at 916.445.2021.

Dissolving, withdrawing, or canceling a business legal status does not nullify its legal tax requirements or outstanding liabilities. The entity or its transferees remain liable for the business tax debts.

Federal and State Income Tax Changes

Federal
Effective April 1, 2009, the federal withholding tables changed due to the American Recovery and Reinvestment Act of 2009.

To get more information and verify you do not have too much or too little federal income tax withheld from your pay, use the IRS withholding calculator.

State
A new law raised state personal income tax rates and reduced the dependent exemption credit for the 2009 calendar year.

The new state withholding tables factor in changes for the tax rate increase only, so taxpayers claiming dependent exemption credits may need to modify their state withholding.

Revised 2009 withholding tables
The EDD expects to release revised withholding tables for 2009 to reflect a 10 percent increase in early October 2009.a budget trailer bill, inflates the withholding for all California wages paid on or after November 1, 2009, by adding an additional 10% to the amount currently being withheld.

How to Select a Tax Preparer

How to Select an Income Tax Return Preparer, FIB 982, is an educational tool for taxpayers. We, working in conjunction with the IRS, gathered these tips for taxpayers to consider when they looking for a tax professional:

1. Avoid preparers who guarantee that they can obtain a larger refund than other preparers.
2. Determine who will prepare your return before contracting for service.
3. Select a preparer who will be available to assist you in the future.

As a courtesy to all our readers, we will give you one month of free Digital Accounting services if you sign up by Sep 30, 2009. To learn more about this fabulous service, please give us a call for a free consultation.