To close an EIN, you send the IRS a letter asking it to deactivate the business account tied to that number, and you send it only after every final return has been filed and every tax balance paid. The number itself never goes away. The IRS treats each Employer Identification Number as a permanent identifier that stays in its records forever and is never reassigned to another entity.1Internal Revenue Service. If You No Longer Need Your Employer Identification Number What the letter does is tell the agency to stop expecting returns under that EIN, so its automated systems stop generating notices and penalties years down the road.
If you walk away without sending it, the IRS keeps waiting for filings. Missing returns get flagged, penalty letters start arriving, and sorting through them later takes far more effort than the closure would have.
Finish These Filings Before You Write the Letter
The closure letter is the last step. Several obligations have to be squared away first, and the specifics depend on how the business is structured.
File a Final Federal Return
Every business has to file a final federal tax return for the year it stops operating. Mark “Final Return” at the top of the form so the processing center knows nothing else is coming under that EIN.2Internal Revenue Service. Closing a Business The form itself depends on the entity:
- Sole proprietors file Schedule C with Form 1040, plus Form 4797 for any business property sold and Schedule SE if net self-employment earnings reach $400.
- Partnerships file Form 1065, check the “final return” box, and issue a final Schedule K-1 to each partner with the “final K-1” box checked.
- C corporations file Form 1120 and report capital gains and losses on Schedule D.
- S corporations file Form 1120-S with Schedule D and final K-1s for each shareholder.
All accrued federal tax liability, including income tax and any excise tax, must be paid in full before the account can be closed.
File Form 966 If You’re a Corporation
This is the step people miss. Any corporation, including an S corporation or an LLC taxed as a corporation, that adopts a resolution or plan to dissolve must file Form 966, Corporate Dissolution or Liquidation, within 30 days of adopting the resolution.3eCFR. 26 CFR 1.6043-1 – Return Regarding Corporate Dissolution or Liquidation Attach a certified copy of the resolution and send it to the IRS service center where the corporation files its income tax return.4Internal Revenue Service. Form 966, Corporate Dissolution or Liquidation If the plan is later amended, file another Form 966 within 30 days of that amendment. Sole proprietors and partnerships do not file Form 966.
Close Out Payroll
If you had employees, wrapping up payroll takes several pieces:
- File a final Form 941 (or Form 944) for the quarter in which you paid final wages. Check the box on line 17 indicating the business has closed and enter the date wages were last paid. Attach a statement showing who is keeping the payroll records and where.5Internal Revenue Service. Form 941 – Employer’s QUARTERLY Federal Tax Return
- File a final Form 940 for federal unemployment (FUTA) tax and check the box marking it as a final return.2Internal Revenue Service. Closing a Business
- Give each employee a Form W-2 by the due date of your final Form 941 or 944, and transmit copies to the Social Security Administration with Form W-3.
Make all final federal tax deposits before filing these returns. A missed deposit triggers its own penalties on top of anything else.
Report Payments to Contractors
For tax years beginning after 2025, the reporting threshold for nonemployee compensation on Form 1099-NEC rose from $600 to $2,000.6Internal Revenue Service. 2026 Publication 1099 If you paid any contractor $2,000 or more during the calendar year, file a 1099-NEC for that contractor even though the business is closing.
Handle State and Local Filings Separately
Closing the IRS account does not close the business at the state level. Most states require their own filings: articles of dissolution for corporations and LLCs, final state income or franchise tax returns, cancellation of sales tax permits, final state payroll filings, and formally ending any registered agent arrangement. Skip them and the entity can remain legally active, running up state fees and penalties even after the federal account goes quiet.
Writing and Sending the Closure Letter
There is no IRS form for this. You write a plain letter and include:
- The full legal name of the business, exactly as it appears on the most recent tax return.
- The nine-digit EIN.
- The business address on file with the IRS.
- A brief reason for closing, such as “the business has ceased all operations.”
- A copy of the original CP 575 EIN assignment notice, if you still have it.
Mail it to:
Internal Revenue Service
Cincinnati, OH 459992Internal Revenue Service. Closing a Business
Send it certified mail with return receipt requested. The IRS does not usually send a confirmation acknowledging the deactivation, so that certified receipt may be the only proof you get. Keep the signed letter and the receipt permanently. Processing takes several weeks to a few months. To confirm the account was actually closed, call the IRS business and specialty tax line after a reasonable wait.
Closing an EIN You Never Used or a Duplicate
If you obtained an EIN and never used it — no bank account opened, no returns filed, no employees hired — the process is simpler. Write a letter explaining the EIN was never used and ask the IRS to close the account attached to it.1Internal Revenue Service. If You No Longer Need Your Employer Identification Number
The same approach works for duplicate EINs, which show up more often than you’d expect from the online application process. Pick the EIN you’ll keep, then write a letter identifying the duplicates you want deactivated and clearly naming the one you’re retaining so the IRS doesn’t close the wrong one. Send either kind of letter to the same Cincinnati address.2Internal Revenue Service. Closing a Business
One boundary worth naming: not every business change calls for closing an EIN. Some restructurings require a new EIN while the old one stays tied to the prior entity in IRS records. Incorporating a sole proprietorship, receiving a new corporate charter, and ending an old partnership to start a new one all fall in that category. Name changes, address changes, and most bankruptcies do not.7Internal Revenue Service. Do You Need a New Employer Identification Number (Publication 5845) If you’re restructuring rather than shutting down, check the rules for your entity type before you send a closure letter.
What Happens If You Skip the Letter
This is where people get burned. If you close the doors, dissolve at the state level, and never tell the IRS, its systems keep expecting returns. When those returns don’t arrive, automated penalties start stacking up.
The failure-to-file penalty runs 5% of the unpaid tax for each month (or partial month) the return is late, capping at 25% of the tax due. If a return is more than 60 days late, a minimum penalty applies: the lesser of $525 or 100% of the tax owed, for returns required to be filed in 2026.8Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges A failure-to-pay penalty of 0.5% per month, also capping at 25%, applies to any balance left unpaid after the due date.
Even with zero tax liability, the IRS can still generate notices for missing returns, and clearing them out takes phone calls, correspondence, and sometimes a formal penalty abatement request. One letter now avoids all of that.
How Long to Keep Records After Closing
Closing the account does not mean you can shred the files. The IRS retention windows start from the date you filed the return or paid the tax, whichever is later:
- General income tax records: at least 3 years from the filing date of the final return.
- Underreported income of more than 25% of gross income: 6 years.
- Bad debt deductions or worthless securities claims: 7 years.
- Employment tax records: at least 4 years after the tax becomes due or is paid, whichever is later.9Internal Revenue Service. How Long Should I Keep Records
There is no time limit if a fraudulent return was filed or if no return was filed at all, which is another reason to make sure every final return actually gets submitted. Keeping records for seven years covers the longest standard window with some cushion. Store the closure letter, the certified mail receipt, the final returns, and the CP 575 assignment notice (if you still have it) alongside them.