SOLE PROPRIETOR TAX STRATEGIES
Tax Tips for Small Business Owners

IRS Dangers – Sole Proprietor Tax Strategies

The Dangers of Operating a Small Business as a Sole Proprietor and The Tax Pitfalls

Sole Proprietor Tax Filing

A sole proprietor files a Schedule C in conjunction with the individual 1040 income tax return. Profits are taxed as ordinary income and losses reduce your taxable income.
See Sole Proprietor – IRS IRS Website- Sole Proprietor
If your sole proprietorship earns $400 or more, you must also file Schedule SE
See Self-Employment Tax – IRS IRS Website-Self-Employment Tax

See S-Corporation Tax Tips S-Corporation Tax Tips

The IRS Is Targeting The Sole Proprietor

As of January 2010 the word is out that as a result of internal audits by the IRS, an annual revenue collection shortfall of $300 billion dollars per year has been found. The IRS believes that the shortfall is not coming from the large corporations, but from the small businesses. The IRS is primarily targeting the sole proprietor — approximately 67% of all small businesses — who file taxes on a 1040 Schedule C return.

See IRS Study on Tax Gap IRS Website – Tax Gap Study

Is Your Small Business Operating as a Sole Proprietorship?

If this is you, you would be wise to consider converting to one of the forms of corporate entity.

By IRS statistics, if you operate your business as a sole proprietorship, you are 300% more likely to be audited by the IRS, compared to a corporation or LLC.

See IRS Audit Tips IRS Audit Tips

Is Your Small Business Really Just A Hobby?

Very important! If you are just starting a small business, home business, or perhaps an internet business, it is vitally important that you see the following information:

See Business or Hobby? IRS Your Business a Business or Hobby?