THE BENEIFITS OF HAVING SEPARATE BUSINESS AND PERSONAL ACCOUNTS

Posted at 4:34 pm on 11/13/2017

Very often, small businesses (especially new start-ups) blend personal and business activities together. This may make things seem easier in the beginning, and it can sometimes be the only way to start. Unfortunately, if the separation of the two never happens, it will end up doing more harm than good. Not only is it not allowed by the IRS, but it can also rob you of potentially big savings and other business benefits. Because these benefits can be reaped whether your business/farm is home-based, or if you run it out of a separate location, it’s simply a waste of money if not done.

Tax-time is a consistent way for a business to save money, but the IRS requires that business and personal finances be separate to reap these benefits. Done to protect the business owner’s private finances, it makes filing taxes simpler and the separation of personal and business also enables a clear track of deductions. If you use your personal accounts for business uses, the IRS can be hesitant or not allow those deductions, regardless of whether they are legitimate business expenses.

According to the IRS the Burden of Proof is defined as, “The responsibility to substantiate entries, deductions, and statements made on your tax returns is known as the burden of proof. You must be able to prove certain elements of expenses to deduct them.” When your personal expenses are mixed in with your business expenses, fulfilling the burden of proof becomes difficult to impossible. Take note, for businesses and farms that double as a home, there are strict regulations made by the IRS as to how things can be deducted, making burden of proof more critical.

Here is a beneficial link from the IRS regarding deductions for home-based businesses: TAX TIME GUIDE: MANY HOME-BASED BUSINESSES CAN USE SIMPLIFIED METHOD FOR CLAIMING HOME OFFICE DEDUCTION: TAXPAYERS MAY DEDUCT UP TO $1500 A YEAR - www.irs.gov This link provides the statement of the IRS regarding keeping your books straight: GOOD RECORDKEEPING HELPS AVOID HEADACHES AT TAX TIME www.irsvideos.gov avoidheadaches

If webinars are a more helpful way to get information, then go to link for a page of informative IRS webinars.: WEBINARS FOR SMALL BUSINESSES - www.irs.gov Lastly, this link is an entire IRS small business recordkeeping workshop: SMALL BUSINESS TAXES: VIRTUAL WORKSHOP www.irsvideos.gov

So, if you aren’t already using separate accounts to handle business and personal, year-end is one of the best times to set up your business for great savings and deductions. It only takes a little shuffling of business and personal debit/credit cards and accounts. In following blogs, I’ll have tables of important records needed by a small business at tax-time, as well as the reasons why they are needed. Please contact me if you ever need help getting your business books in order (352-229- 4868). In the meantime, put profit first and trot on.

Jamie W

Kismet Business Services, LLC 

Virtual Bookkeeping and More

YOUR EQUINE INDUSTRY SPECIALIST

KismetBiz.site

352-229-4868



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