Small business owners sometimes forget that their income is their income. Small businesses are rarely incorporated; in fact, in order to avoid even appearing to be part of a corporation is one of the reasons that many small businesses are created. This does create the problem that some do not know how to report the income from their businesses, as well as which tax laws apply to them. This can create a number of problems, especially when it comes to the possibility of fines and jail time for those that did not report that income. Fortunately it is an easy enough matter to deal with.
Reporting the income from the business itself is easy enough. As part of your regular taxes you need to fill out a Section C, which will carry forward to your regular tax forms. You may also need to fill out additional forms, such as a Form 4562 if you are claiming depreciation. That should take care of most of your problems. If you have any employees, your best bet is have them fill out Form 1099 so that they are responsible for their own taxes. For those that lack the confidence when it comes to dealing with their taxes, it can help to have a regular accountant; a regular accountant knows what your issues are and can help you deal with them.
There are a number of issues that a single proprietor will need to deal with. Business expenses is one of the bigger headaches, but it must be dealt with at some point. One one hand, the small business owner must remember that anything he buys for the business can be considered a business expense. However, he must also remember that it must be used exclusively for the business in order to get the full deduction. Just slapping a company banner on the car does mean that the owner can claim any transportation through it as a business expense; only the mileage specifically used for company business can be claimed. This means that anything used for personal and company business must be split and only the percentage used for company business may be claimed.
It should be noted that some tax laws simply do not apply to a single proprietor as they do a regular business. For example, a business must incorporate in order to be considered a non-profit charitable organization; you cannot have all of the profits going to you and that income go untaxed. It is highly advised that you do your taxes with a tax consultant the first year in order to determine all of the laws that apply to you and your business, at least the first year. It is an expense that may save a lot of frustration later on.
All told, filing taxes for a single proprietorship can be a lot simpler than it may appear at first. It just takes a certain amount of patience and willingness to keep track of everything. In the end it can be worth it, especially when you see the refund at the end of the year.