Are You Making This Common Mistake and Will it Hurt You at Tax Time?
Using your company credit card for personal purchases could create problems later on.
A common mistake many small business owners make is combining business and personal expenses in one bank account. Later on, it can get tough trying to separate the expenses especially if you don’t keep receipts. You can’t depend on the credit card statements as there is no clear interpretation of the expense.
Enrolled Agent, Jeffrey Schneider, EA, CTRS, NTPI Fellow recommends separate checking, savings, and credit card accounts for business and personal.
If you incorporated as a C Corp, S Corp or LLC, you’re required to keep personal and business finances separate. Violating this rule, could void your liability protection and put your personal assets at risk.
Regardless of your corporate entity structure, commingling expenses also make it difficult to gauge the financial health of your business. As the balances aren’t segregated determining your business profit can be tricky. You won’t know if you’re actually showing a profit and making money.
Come tax season it could mean extra work for your EA or tax preparer and a higher cost for you
It’s easier, in the long run, to keep everything separate, even if you aren’t required to do so.
A sole proprietor is not required to maintain separate business accounts but it helps separate expenses from the beginning. Carry both cards with you, and you won’t run into any of these headaches.
If you have concerns about your bookkeeping practices and need assistance Enrolled Agent, Jeffrey Schneider, EA, CTRS, NTPI Fellow can help.
