IRS Small Business Campaign offers tips on avoiding pitfalls
Self-employed small business owners are the subject of a new IRS education campaign aimed at promoting tax compliance by small businesses. In announcing this effort, the agency acknowledged that, despite their contributions to our nation’s economy and admirable display of personal achievement, individuals engaged in starting their own businesses are often either ignorant of or overwhelmed by the tax filing requirements that launching a business brings.
The new IRS program is geared towards sole proprietorships, those businesses owned by one individual who files a Schedule C, Profit or Loss from Business, or Schedule C-EZ, Net Profit For Business, with their own personal Form 1040 income tax return. According to the IRS, these “Schedule C” taxpayers are significant because they account for one out of every seven federal income tax returns filed with the agency.
The IRS plans to offer updated educational materials, small business workshops, and other events to assist small business in their tax compliance efforts. In the meantime, the IRS offers the following tips to help taxpayers avoid the most common pitfalls affecting small businesses:
- Classify your workers properly as employees or independent contractors,
- Deposit your federal payroll taxes according to the proper schedule,
- Make quarterly estimated-tax payments for your own income tax and social security self-employment tax liability, and
- Avoid abusive tax avoidance schemes.
Some of these requirements may require some legal interpretation. As a result, the IRS also recommends considering enlisting a tax professional to assist in filing Schedule C or Schedule C-EZ. Should you have any questions about making one of these determinations for your small business or need any small business tax advice in general, please feel free to contact our offices.
IR:2008-63
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