Small Business

Beginning on January 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be 55.5 cents per mile for business miles driven.
In 2011, the standard mileage rate(s) for 1/1/11-6/30/11 is business = 51 :The standard mileage rate(s) for 7/1/11-12/31/11 is business = 55.5 :

Yes, but if you are a sole proprietor you don't have to withhold Social Security and Medicare taxes. Your child must receive a W2 and report this income on his or her return.

When starting a business, your choice of entity includes: operating as a SOLE PROPRIETORSHIP if you own it by yourself; forming a PARTNERSHIP if there are two or more owners; or being designated as a CORPORATION or a LIMITED LIABILITY COMPANY. Your choice to operate as a corporation involves tax and non-tax considerations which require in-depth analysis of your particular situation and can only be done with a CPA in person. However, generally speaking, a corporation provides protection against personal liability for business obligations and offers the greatest flexibility in terms of ownership and transferability. Most businesses for this reason are incorporated. Further discussions with a CPA are recommended before finalizing your decision.

Payroll taxes include Social Security, Medicare, federal and state taxes that are withheld from an employee's check, as well as the taxes which are due by the employer for having employees.
For example, an employer must match the amount of Social Security and Medicare tax withheld and remit those taxes in a timely manner.

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.

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.

Man should never live by tax deductions alone! While leasing a car for business often results in a larger deduction, leasing does not necessarily make business sense. If you are going to travel an enormous amount of miles during the year(in excess of 15,000 miles/year), or if excessive wear and tear on the vehicle is probable, then do not lease the auto or truck. If you do decide to lease a vehicle given those circumstances, you may be shocked when you go to turn in the vehicle at the end of the lease.