In a perfect world I have just created you an amazing tax plan. You’ve kept tens of thousands of dollars in your own pocket instead of needlessly giving it to the government (and you’ve paid me a couple of those thousands to show you how!). You have a great big smile on your face and are beginning to recognize the financial balance you’ve always wanted. It’s a good life.
And now the rubber is meeting the road.
You need guidance and accountability to stay on track. Most of us do, so don’t feel alone. The thing is, your tax plan needs to be maintained. We’re going to stick with you to make sure you never feel alone in your financial situation again. As we work together, with us forging ahead to plan the (tax) route, I’m going to give you a rule that you must follow.
It’s kind of a big one but it’s for your own good.
Keep business and personal expenses separate.
That’s the rule. It must be followed. We will check up on you. We will remind you. But remember when I said it was for your own good? Here’s why:
If you were ever to be audited (please don’t start hyperventilating at the thought), the burden of proof is on you to show that every business deduction you claimed was actually for a legitimate business purpose. If all your income and expenses are mixed together in one big messy place, it will be much harder to prove something was a business expense.
And if you can’t prove it, the IRS may disallow the deduction causing not only tax to be owed on the amount, but likely heavy penalties and interest as well.
So do yourself (and your bookkeeper) a favor and go out and set up your business bank account. You’ll want a checking account and two savings accounts (which I’ll tell you about in another post). If you use a credit card (as a die-hard Dave Ramsey fan, I don’t recommend it), get one specifically for your business.
And then never again run a personal expense through your business account or a business expense through your personal account.
You want clear lines. You want order. You want our help. That’s why we’re here.