Small businesses are not exempt in paying their taxes. Though they are small but still they are obliged to pay necessary tax credit in order to legally operate their business. What to do if you process small business process? Observe all the requirements and familiarize them all so you will not miss any of them. Otherwise, you will be in IRS audit. Remember that you should have to report form 1099 income. There are observations that mistakes are always happening and IRS knows all the lapses and the failures of different small corporations. Observe to report officer salary. If you do a retailing business, report an inventory of your products. Otherwise you will be subject of an IRS audit. Report properly because the IRS might have no deductions at all. There is a need to report medical insurance properly. Be sure to make the right decisions on the first tax return. Accounting method that can be use in small business taxes are accrual basis and cash basis. Expenses and income are considered as cash. For tax purposes, it is better to use cash basis of accounting. Financial statements are reliable once you properly do on the computation. The fluctuation of small business from year to year makes difficult to identify the liability until the year is over. So compute properly all your expenses and all your income properly. To avoid overpaying if estimated tax, do your effort to track all your income and expenses by month. You can hire on a book keeper or an accountant in order to prepare exact amount of reports every month. Summary of your financial stability each month is important both from a business management aspect and tax aspect. Paying the last year’s liability by the current year, you can calculate the minimum amount of estimated tax. This is known as the “Safe Harbor Method” and it is a safe escape so that you don’t need to pay penalty. Small business owners must carefully and properly observe filing taxes on time and giving all the necessary reports on time to avoid difficulty and problem.