Bookkeeping Advice for Small Business Expenses
Running and owning your own business is not a skill they teach in high school or even college, for that matter. Mixing your personal and business expenses happens to nearly every client we talk to that consider getting help with their bookkeeping tasks. You might be asking, “What problems can come up if I mix my personal and business expenses?”
Keep life simple by adhering to this very important rule: Personal and Business never mix
It might be tempting at the moment while you are on vacation or at a store and you forgot your company check or credit card. Just one little purchase, right? You find yourself making a promise that you will keep that receipt and move the money over later – but that time never really comes.
Here is what the IRS recommends: according to attorney Frederick W. Daily, author of Tax Savvy for Small Business, “Money you spend in a reasonable way, with an expectation of bringing business revenue, is a deductible expense.”
None of us have a crystal ball and we never know when our number is up for an IRS audit. That promise you made yourself 2 months ago about keeping the receipt for that vacation or in-store purchase now comes back to haunt you.
Entrepreneur posted these 4 important IRS audit traps in a recent article called Why You Should KeepBusiness and Personal Expenses Separate
Business debit/credit card used for personal expenses.
You should have one card for business and one for yourself at all times, and never misuse them.
Business trips with family or friends.
Avoid this mashup by carving out separate schedules for company business and personal time, with no overlap.
Concentrate all your work papers and equipment in one room and keep personal stuff (the TV, game consoles, collectibles) out of it.
Toys or apparel disguised as office equipment.
It’s tempting for small-business owners to claim new toys as business deductions. But that Xbox isn’t a business expense unless you’re reviewing games with the intention to make a profit. The $6,000 Hermes laptop bag is also iffy, especially if you’re claiming four other fashionable carryalls as well.
Simplify your accounting with some of these bookkeeping tips we just mentioned. Mixing personal and business expenses are one of many simple rules to keeping your books in order. We realize that businesses are wanting to grow, which means more items to keep track of in the books! If you need more helpful information on keeping proper financial records, try downloading our free guide for organization tips on better small business bookkeeping practices. To get more helpful bookkeeping advice visit our blog where we discuss this and more on Tulsa bookkeeping.