Small Business

A responsible party which includes the sole shareholder, officer, or authorized signatory is personally liable for the "trust funds".
Trust fund money includes payroll taxes that were withheld from the employees and sales tax which was collected from customers.
Business owners should never spend trust fund money, nor temporarily borrow this money. Business owners get into trouble this way every year.

CPAs which service small businesses usually provide "post facto" payroll services. These include preparing the mandatory quarterly Federal form 941 and state wage reports. Other quarterly reports can also include state unemployment, disability and workers compensation reports.
These reports vary from state to state. CPAs can advise their client as to when tax payments must be made.
Penalties for making payments late can exceed any fee the CPA could charge for these services by thousands of dollars. Penalties for late payment of payroll taxes are extremely harsh. A CPA can advise you as to state and federal payroll requirements that apply to your given situation.
Annual routine audits by the state unemployment agency, the workers compensation and disability insurance company are handled by the CPA.
Some CPAs provide even more extensive day-to-day payroll services for their clients, but most CPAs prefer to work with a payroll service company for their larger clients. These payroll service companies take the responsibility for producing employee checks, withdrawing the money for the government from the client's bank account and making the timely tax payments to the government agencies.

A limited liability company, like a corporation, is set up and created under state law. Its owners are referred to as members. The entity gives its members the best of both worlds - Corporate liability protection with the advantages of partnership taxation. Forming a limited liability company is more expensive than forming a corporation and may not be necessary for your situation. Speak to your local CPA in detail to determine if forming or changing your entity status to a limited liability company is the correct choice for you.

It is to a small business' advantage to compute taxable income under the cash basis of accounting?. Special relief from the accrual method is available to some taxpayers with average annual gross receipts of $1 million or less. However, many businesses are required to maintain their books and records on the accrual basis of accounting. For example, if a business has inventory, the accrual basis of accounting must be used. The accrual basis of accounting means that the business records income when the product or service is invoiced, not when it is collected. The actual receipt of money is not required. Likewise, bills not paid by the business are recorded in the period incurred. The limitations on the use of the cash basis requires further discussions with a CPA in your community. Many businesses don't realize their exposure with the IRS until they are audited. Failure to comply with accounting rules initially when setting up your business can prove disastrous in later years.

If you give a business gift in the course of your trade or business, you can deduct the cost subject to special limits and rules. Generally you cannot deduct more than $25 for business gifts that you give directly or indirectly to any one person during the tax year. Keep receipts for all gifts you give for business purposes. These receipts will help you to prove your deductions if you are ever audited. Track your business gifts throughout the year so you don't have to go through all of your receipts individually at tax time. You should record who the gift was given to, what that person's relationship is to your business and how much the gift cost.