Common Questions

Your Questions, Answered

At David Sivcovich CPA, PC., we understand that navigating financial and tax matters can be complex. That’s why we’ve compiled this comprehensive FAQ to address your most pressing questions. From tax planning for small businesses in St. Louis to estate planning tips for Missouri entrepreneurs, our goal is to provide the information you need to make confident financial decisions. Dive in to learn more about our services and how we can help you achieve your goals.

1. What is the best tax structure for my small business in Missouri?

Choosing the right business structure is one of the most critical financial decisions you will make as a business owner. It determines how much you pay in taxes, your level of personal liability, and how much paperwork and compliance work you must deal with. Many Missouri business owners default to forming an LLC because it offers liability protection and pass-through taxation. However, that’s just the starting point.

For example, a single-member LLC is a good starting structure, but it may not be tax-efficient as your business grows. Electing S-Corp status allows you to split your income between salary and distributions, potentially saving thousands in payroll taxes, but it comes with stricter IRS compliance requirements. If you're looking for investment opportunities or planning to reinvest profits into growth, a C-Corporation might be a better fit, but keep in mind that it is subject to double taxation—once at the corporate level and again when profits are distributed as dividends. Partnerships, too, can be beneficial, but they require well-drafted agreements to avoid future disputes.

Every structure has legal and tax implications that extend beyond the surface-level benefits most business owners consider. A misinformed choice can result in unnecessary tax burdens, compliance headaches, or limited financial flexibility. Working with a CPA ensures that your business entity supports your long-term growth plans rather than holding you back.

2. How can I legally reduce my small business taxes?

Tax savings don’t happen by accident—they happen by design. Many business owners assume that simply tracking expenses and filing deductions at year-end is enough, but true tax optimization requires year-round strategy and planning.

One of the most effective ways to lower taxes is through strategic expense management. For example, investing in equipment, software, or business improvements before year-end allows you to claim depreciation or a Section 179 deduction, reducing taxable income. If your business owns real estate, you can take advantage of cost segregation studies to accelerate depreciation and significantly lower your tax liability.

Retirement contributions are another underutilized tool. By establishing a SEP IRA, SIMPLE IRA, or 401(k), you can defer thousands of dollars in taxable income while building long-term wealth. Business owners can also look into tax credits such as the Work Opportunity Tax Credit (WOTC) for hiring from underrepresented groups or R&D credits if their business engages in product or process innovation.

Tax reduction isn’t about aggressive write-offs or loopholes—it’s about understanding how the tax code applies to your business and taking proactive measures before tax season arrives. We ensure our clients take advantage of every legal deduction, credit, and deferral available to them.

3. What’s the biggest payroll tax mistake small business owners make?

Payroll is one of the most overlooked yet dangerous areas of tax compliance. The biggest mistake? Misclassifying employees as independent contractors.

Many business owners try to avoid payroll taxes by paying workers as 1099 contractors instead of W-2 employees. While this may seem like a cost-saving measure, it comes with serious risks. The IRS and Missouri Department of Revenue use strict guidelines to determine whether a worker should be classified as an employee or contractor. If a contractor works regular hours, uses your equipment, or performs duties under your direct supervision, the IRS can reclassify them as an employee. If this happens, you could be hit with back taxes, penalties, and even fines for failing to withhold and remit payroll taxes.

Another common mistake is late payroll tax deposits. Payroll taxes are not just another business expense—they are considered trust fund taxes held on behalf of your employees. Failure to pay them on time can result in the Trust Fund Recovery Penalty, one of the most severe IRS penalties, which can hold business owners personally liable for unpaid taxes.

Handling payroll correctly requires diligence and expertise. That’s why we work with business owners to ensure accurate payroll processing, tax withholding, and compliance with Missouri and federal regulations.

4. What should I do if I get audited by the IRS?

An IRS audit can be a frustrating, intimidating, and disruptive experience—especially if you don’t have the right support. First, do not assume that an audit means you did something wrong. Many audits are randomly selected or triggered by discrepancies in reporting. However, if the IRS flags excessive deductions, missing income, or inconsistencies in tax filings, they will demand documentation to verify your claims.

The worst thing you can do is handle an audit alone. IRS agents are trained to ask pointed questions that can easily lead to expanded inquiries into additional tax years or areas of your business. A small issue can quickly become a full-blown tax investigation if not handled carefully.

If you receive an audit notice, contact us immediately. We will review your financial records, prepare supporting documentation, and represent you before the IRS. We also handle audit appeals if you receive an unfair determination. The IRS has teams of tax professionals—shouldn’t you have one on your side too?

5. How do I protect my business from payroll tax penalties?

The IRS considers unpaid payroll taxes one of the most serious violations a business can commit. Unlike income tax, payroll taxes are considered funds held in trust for employees, and failure to pay them on time is viewed as theft. The penalties are severe, often including asset seizures, bank levies, and personal liability for business owners.

One of the best ways to protect your business is to set up automated payroll tax payments to ensure timely remittance. Additionally, Missouri business owners should verify that they are properly reporting new hires to the Missouri Department of Revenue and ensuring compliance with local employment tax laws, especially in St. Louis and Kansas City, where additional payroll tax rules may apply.

If you’re behind on payroll taxes, do not delay action. We specialize in negotiating payroll tax settlements, penalty abatements, and structured repayment plans with the IRS. The sooner you address payroll tax issues, the more options you have.

Expert Tax & Financial Advice for Missouri Businesses

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