In my small business is it OK to pay myself a small salary & use a schedule e for business profit? I do this to avoid high ss taxes and medicare taxes.

That's a loaded question. You can and you can't. A great way to keep your taxes down is to write off a bunch of stuff on the profit of your business. So if you are with $30,000 income let's say, you might be able to write off $10,000, so now your down to $20,000.

Then you say you made X amount of dollars, lets say $15,000. You are now taxed on the $15,000 instead of $30,000. And then claim $500.00 as profit for your business.

The reason I'm leaning more towards not writing off as much as business profit, is if you get audited, you better ready to show that you didn't use the money for personal use.

My opinion as a small business owner! However, you can ask an accountant and they can tell for you sure!

The first question that needs an answer is what kind of a business entity are you? I am making an assumption that you are probably a sole proprietor. If so, you don't pay yourself a paycheck and you report your business activities on a Schedule C on your income tax. If you have a profit, you will pay self employment taxes on that profit.

You need to consult an accounting professional in your area that can discuss how small business taxes work. Make sure you are complying with local county and city tax regulations. Finding out later than sooner can be a very costly mistake.