Form 966, also known as the Corporate Dissolution or Liquidation form, is a document that must be filed with the Internal Revenue Service (IRS) when a corporation decides to dissolve or liquidate. It serves an essential purpose in ensuring that the corporation meets its tax obligations before ceasing operations.
The primary purpose of Form 966 is to notify the IRS of the corporation's intent to dissolve or liquidate. By submitting this form, the corporation informs the IRS about the decision, allowing the agency to make the necessary revisions to its records.
Filing Form 966 is crucial for several reasons. Firstly, it helps the IRS identify corporations that are no longer active, enabling them to close the company's tax account effectively. This ensures that the corporation will not be liable for any future tax obligations or filings.
Additionally, Form 966 provides valuable information about the corporation's final tax return. It includes details regarding the final tax year, the distribution of assets among shareholders, and any outstanding tax liabilities. By reporting this information, the corporation allows the IRS to assess and reconcile its tax records.
Furthermore, Form 966 helps protect individuals associated with the corporation from potential personal liability. Once the form is filed, it starts the clock for the statute of limitations on any future tax assessments and audits. This ensures that shareholders, directors, and officers are not held personally responsible for any tax liabilities that arise after the dissolution or liquidation.
In summary, the purpose of Form 966 is to notify the IRS of a corporation's intent to dissolve or liquidate, ensure proper closure of tax accounts, provide details about the final tax return, and protect individuals from personal liability. It is a crucial document in the process of formally winding up a corporation's operations and concluding its tax obligations.