Are you a small business owner and have questions about your tax return? Here are the top questions the IRS gets from small business owners:

1. Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
For a business to be classified as a sole proprietorship:

Either the husband or the wife would be the ownerof the business.
Either of the spouses can work in the business as an employee.
If a married couple who file a joint tax return elects to conduct their business activities as a qualified joint venture:

The husband and wife must materially participate in the trade or business.
The spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture.

2. Must a partnership or corporation file a tax form even though it had no income for the year?
A domestic partnership must file an income tax form unless it neither receives gross income nor pays or incurs any amount treated as a deduction or credit for federal tax purposes.

A domestic corporation must file an income tax form whether it has taxable income or not.

3. What is the difference between a Form W-2 and a Form 1099-MISC?
Both of these forms are called information returns.

The Form W-2 is used by employers to:
Report wages, tips and other compensation paid to an employee.
To report the employee’s income tax and Social Security taxes withheld and any advanced earned income credit payments.
To report wage information to the employee, the Internal Revenue Service and the Social Security Administration.

A Form 1099-MISC is:
Used to report payments made in the course of a trade or business to another person or business who is not an employee.
Required among other things, when payments of $10 or more in gross royalties or $600 or more in rents or compensation are paid.
Provided by the payer to the IRS and the person or business that received the payment.

4. How do you determine if a person is an employee or an independent contractor?
The determination is complex, but is based on who has the right to control how, when, and where the person performs services. It is not based on how the person is paid, how often the person is paid, or whether the person works part-time or full-time.

There are three basic areas which determine employment status:
Behavioral control
Financial control and
Relationship of the parties

5. As an employer, do I have any liability if my employees receive tips but don’t report them to me?
You have a liability to withhold and pay Social Security and Medicare tax on your employees’ reported tips, to the extent that wages or other employee funds are available.

Employees who customarily receive tips are required to report their cash tips to their employers at least monthly, if they receive $20 or more in the month. Cash tips are tips received directly in cash or by check, and charged tips.
If the employee does not report tips to you, it places you at risk of possible assessment of the employer’s share of the Social Security and Medicare taxes on the unreported tips.
If you are a large food or beverage establishment (more than 10 employees on a typical day and food or beverages consumed on the premises), you are required to allocate tips if the total tips reported to you are less than 8% of gross sales. Report the allocated amount on the employee’s W-2 at the end of the year.

6.  If an employee claims more than 10 exemptions on their Form W-4, does the employer have to report this to the IRS?
This requirement has been eliminated:

In the past, employers had to routinely send the IRS any Form W-4, Employee’s Withholding Allowance Certificate, claiming more than 10 allowances or claiming complete exemption from withholding if $200 or more in weekly wages was expected.
Forms W-4 are still subject to review.
Employers may be directed (in a written notice or in future published guidance) to send certain Forms W-4 to the IRS.
The IRS also will be reviewing employee withholding compliance and you may be required to withhold income tax at a higher rate if notified to do so by the IRS.

7. Does a small company need a tax ID number?
A sole proprietor who does not have any employees and who does not file any excise or pension plan tax returns is the only business person who does not need an employer identification number. In this instance, the sole proprietor uses his or her social security number as the taxpayer identification number.
 
8.  If I pay personal expenses out of my business bank account, should I count the money used as part of my income, or can I write these expenses off?
You would include the money in your income.
You would not write the amounts off as expenses.
Only business related expenses can be deducted from your business income.
It is recommended that you not mix business and personal accounts as this makes it easier to keep records

9. For business travel, are there limits on the amounts deductible for meals?
Meal expenses are deductible only if your trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties.
The amount of the meal expenses must be substantiated. 
However, instead of keeping records of the actual cost of your meal expenses you can generally use a standard meal allowance. The amount allowed varies, depending on where and when you travel.
The deduction for unreimbursed business meals is limited to 50% of the cost that would otherwise be deductible.