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Small Business Tax Questions

There are many, many questions small business owners have about paying taxes, especially in the first few years. One of the most important things to know about is how payroll taxes work. The IRS will demand compliance with this. Since you pay employees and take tax out of their pay checks, it is your responsibility to pay that tax to the IRS and state tax department. Payroll taxes add up quickly and are usually your biggest expense as a small business owner. A single mistake in payroll can cost you thousands of dollars in fines and penalties. Depending on the size of your business you can hire your employees as independent contractors and it then becomes your employee's responsibility to pay taxes on the money they earn from you. However, too many independent contractors in a small business will be a flag to the IRS and they will audit.

Some else to consider when asking small business tax questions is in regards to your purchases for your business. Save your receipts. Every single one. If you are planning to make a deduction, you had better have a receipt. If you are going to write off that ten dollars in gas, you had better have a receipt for the purchase of ten dollars in gas. If you miscalculate or forget something in your filing, but have your receipts for every write off, when you are audited you will be able to show proof of your business spending.

You also need to make sure you separate business from personal. This is true in all forms- from banking to purchases. If you run out of paper for your business printer and run to a store to purchase the paper and also get a gallon of milk and some pencils for your child- you cannot write off the milk and pencils even though they are on the same receipt. You need to separate those things. You can highlight what you purchased for the business and the total for the business purchase to show they are separate and add that to your file of purchases. There are many things that can be done to avoid having many problems for tax time. Small business tax questions are common every time of the year but especially during April. In order to have fewer questions during tax time, save all of your receipts and keep track of everything.

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