Frank S. Duke, Jr. <dukefs[at]one.net> wrote:

[Importance of separate checking accounts]

- quote -

Thanks for this description.

We do something that is, I think, just as complete but does
not involve Quicken or other software. Instead it is all
on paper. For receipts, we keep a (paper) contemporaneous receipt log
for each of the two businesses. This shows amount, date received,
invoice number, customer, check number and check date. But we do
not deposit each check separately (I usually do, but my wife gets many
checks per month and deposits them in rouhgly monthly batches).

Schedule C expenses each have a one-page "expense report form",
also prepared contemporaneously, to which is stapled the credit
card receipt, cash receipt, or rarely, contains a reference to the
check number if paid by check. This form states date,
business purpose, etc. and goes into a file folder labeled
"expenses".

The joint, personal checking account itself is not part
of the recordkeeping of the businesses, since revenue and expenses
are completely recorded elsewhere per the above.

We've never been examined; our EA considers us "detail oriented"
and seems very comfortable with the eventuality of an examination.

Steve

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in article jztxl.15124$D32.5058[at]flpi146.ffdc.sbc.com, San Diego CPA at
gcollect1[at]sbcglobal.net wrote on 3/22/09 6:27 PM:

- quote -

our 2 businesses. I use the class feature to distinguish each business and
personal. Every income and expense item has a class of CPA or Teaching.
Personal has no class designation. At any moment in time, I can pull an
income and expense statement for either business by class. I do the same
thing with every credit card transaction. If I go to the store and buy
office supplies and groceries on the same charge, I mark up the receipt and
have two sub category entries for the purchases, one personal and one CPA.
If I buy a case of copy paper, I make 3 entries and allocate 1/3 to each
business and 1/3 to personal.

Every deposit that goes into the checking account is identified in the same
way, by class. We copy the checks onto the invoices and deposit them one at
a time so they are individually identifiable. Deposit slips form the ATMS
are stapled to the invoice and check copy. We seldom have cash receipts but
if we do, we copy the bills showing serial number and write the client and
date received. That goes into the file with the checks. We do not keep
separate bank accounts or credit cards but we have meticulous records backed
up by well organized receipts. I have never felt uncomfortable with this
arrangement but I have also never had a client who records and tracks as
meticulously as I do. The less organized you are, the more you need
separate accounts.

Uncompensated advice guaranteed correct or double your money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

--
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San Diego CPA <gcollect1[at]sbcglobal.net> replies to my post,

- quote -

Right, that makes sense. i.e. if TP did have a business checking
account, deducted all spending from it, but had no records
of what it was for, that is obviuosly not good. I was more
concerned about generalized statments made earlier that one
*should*, for compliance, have a separate business checking account,
and I'm thinking that this must depend upon circumstances.

- quote -

I understand the listed property issues. Thanks.

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Steve Pope" <spope33[at]speedymail.org> wrote in message
news:gq6ein$u1d$1[at]blue.rahul.net...
- quote -

Your writing 3 business-purpose checks a year from an otherwise
personal is very different from what I was getting at above. My
point is that you do not want to comingle business & personal
deposits & expenditures in your *business* accounts.

The basic rule for maintaining "adequate books & records" comes
from Reg Sec 1.6001-1. However, that Reg Section does not
define what adequate books and records are. While the burden
of proof is virtually always on the taxpayer, you make it much more
difficult for yourself where you do not segregate your business and
personal finances. Again, this is in the context of running a business,
not running the occasional business-purpose check through your
personal checking account. There is case law on this although I cannot
provide any cites off the top of my head. An indication of the IRS's
view of this which was supported in court (Tax Court I believe) has to
do w/ cell phone usage. Taxpayer had a celluar plan with lots of minute
used primarily for business purposes. Made occasional personal calls.
Entire deduction was disallowed becuase the Court accepted the IRS's
argument that given the plan, the business use didn't create "incremental
additional expense" to the taxpayer, whereas the taxpayer's argument was
that he needed a large number of monthly minutes because of heavy
business use and that the occasional personal call didn't incur any
incremental
charges and should be ignored. As you probably know, cell phones are
"listed property" and as such, all usage must be diligently tracked and
usage
allocated between business and personal or the entire deduction is at risk.
Congress was supposed to be working on an update to this but they're
distracted trying to see how much more damage they can do to the
economy at the moment.

--
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San Diego CPA <gcollect1[at]sbcglobal.net> wrote:

- quote -

Thank you.

Is this opinion backed up by experience from IRS examinations?
Say, if one client has a business checking account, and another
does not, and they both have adequate expense records otherwise
(receipts, contemporaneous records describing business purpose, etc.),
the second client loses out in the examination more than the first?

I'm very curious to know if this is an actual as opposed to a
theoretical concern. I write about three business-purpose checks
per year on our personal checking account and my wife writes none.
In addition health insurance is deducted from this account.
Am I exposed? It would be quite a hassle to set up two new
bank accounts that we don't really need and would barely use, transfer
money into them, etc.

Steve

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

"Steve Pope" <spope33[at]speedymail.org> wrote in message
news:gplv51$q6h$1[at]blue.rahul.net...
- quote -

Separating business & personal accounts is vitally important.
Where you are self-employed, whether a small "side business",
your primary source of living or anything in between, you should
always have separate accounts used exclusively for business purposes
which separate your business and personal finances. The risk
of comingling business & personal assets/funds is that the IRS will
take the position that the expenditures are personal, not business. While
the burden of proof is always on the taxpayer, comingling asset
significantly increase the burden of proving business vs. personal
expenditures.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Paul Thomas, CPA <paulthomascpapc[at]bellsouth.net> wrote:

- quote -

How important is this? My wife and I each run a business,
reported on Schedule C, but neight of us has ever had
a business checking account. We each maintain books that
contain business revenues and expenses, but we only have
one personal, joint, checking account and no other
checking accounts.

Is this problematical?

Steve

--
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"Teak" <tlabramson[at]gmail.com> wrote
- quote -




You each should have separate checking accounts for each business and at
least one other joint account for personal non-business income to be
deposited into and personal expenses to be paid from.

At the end of the year you can pull the household expenses that relate to
the "home office" deductions from the joint personal account, leaving the
rest of the business accounting to be culled from each business checkbook.





- quote -




Right.






--
Paul Thomas, CPA
Watkinsville, Georgia

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Greetings -

My fiance and I are both self-employed. We work in different
professions. I am a freelance communications professional. He has his
own photography business. I have very few expenses. He has many big
expenses -- equipment, insurance for equipment, etc. and a separate
checking account set up for his business.

We are getting married and I want to create a joint checking account
for common/household expenses; however, we each deduct a portion of
these shared expenses (mortgage, property taxes, utilities) on our
individual taxes (Schedule Cs). What is the best way to do this? We
will file jointly next year. Can we pay these shared expenses from a
joint account and then each claim a portion for deductions on our
separate Schedule Cs (assuming there is no double dipping)?

Also - I assume he should keep his separate checking account to
account for his business, right?

Thank you.

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >