Reincorporations are federally qualified employer reorganizations in which a company, incorporated in one state, reincorporates as a new business in a new state. The new company becomes subject to the laws and regulations of the new state. Employers undergoing business restructures are required to follow specific federal regulations in regard to payroll tax reporting requirements.
Under the Internal Revenue Code, a reincorporation occurs when Corporation A chartered in state X reincorporates in a new state Y as a new Corporation B under the laws of state Y. Under the IRS code, the business, assets, liabilities, and any relocated employees of the two corporations remain unchanged. In addition, the "old" Corporation A does not have to file a final return and the new Corporation B should continue to use Corporation A's federal EIN Employer Identification Number. A reincorporation under these circumstances will have no special federal tax filing implications, although the new Corporation (B), will have to register for a new state EIN.
The Reincorporation Chart details the tax filing ramifications of a reincorporation.
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Reincorporation (Company A moves to new state as Company B) |
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At time of Reincorporation: |
After Reincorporation: |
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Corporation: A |
New Corporation: B |
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EIN: 11122-00 |
EIN: 11122-00 |
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Employees: Taxable wages end (i.e., considered unemployed by Corp A) |
Employees: Taxable wages begin (i.e., Corp A employees may be re-employed by Corp B) |
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Form 941: Filed as normal under Corp A reporting wages and taxes paid by Corp A up to point of reincorporation |
Form 941: Filed with same EIN but under Corp B. Reports wages and taxes paid by Corp B after point of reincorporation |
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Form 940: Not filed |
Form 940: Filed with EIN under Corp B, reporting all employer wages and taxes for calendar year for both Corp A and Corp B |
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Forms W-2: Not filed |
Forms W-2: Filed with EIN under Corp B, reporting all employee wages and taxes for year for both Corp A and Corp B |
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State EIN: 01-123-4567 |
State EIN: 01-456-7890 (Corp B must register for a new State EIN.) |
Employer Responsibilities
1. Notify the Tax Service as soon as possible prior to your company completing a Reincorporation.
2. Provide the Tax Service with a copy of the legal corporate documentation including the following information:
• Effective date of the reincorporation
• New State EIN to be used
• Number of W-2s required
3. Forward a copy of the liability breakdown by liability period for each taxing jurisdiction to the Tax Service so that we may update our system and balance the transaction.
While your Tax Service Representative can assist you with ensuring that we have the proper information to set up your Reincorporated account on our system, the Tax Service does not provide legal advice or information of any nature regarding Reincorporations. If you have questions about the legal ramifications of a Reincorporation, contact your CPA or attorney.