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Can I include my personal checking account on my business Quickbooks? I'm thinking of running all transactions through a "Personal Expenses" account?

Since I end up using my personal checking account for business related transactions, can I keep my personal checking account on our business Quickbooks?  I'm thinking of creating an account in "Chart of Accounts" called "personal expenses" and then adding some sub accounts for groceries, household purchases, etc.  Will this mess up P&Ls for the business?  Can I somehow exclude these non-business related transactions from our tax numbers?
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Best answer 12-10-2018

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Do not do it, that is called commingling of funds and the...

Do not do it, that is called commingling of funds and the IRS will key on that in an audit, and not only will your business be audited but your personal finances will be open to the IRS too.  The IRS specifically says that is wrong and requires a company accounting file per business, and a tax form per business even if a sole proprietor.

QB is actually not very good for personal finance, quicken as a desktop software (best option IMO) or mint if you like keeping everything on line

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Established Community Backer ***

Do not do it, that is called commingling of funds and the...

Do not do it, that is called commingling of funds and the IRS will key on that in an audit, and not only will your business be audited but your personal finances will be open to the IRS too.  The IRS specifically says that is wrong and requires a company accounting file per business, and a tax form per business even if a sole proprietor.

QB is actually not very good for personal finance, quicken as a desktop software (best option IMO) or mint if you like keeping everything on line

View solution in original post

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My business is set up as a sole prop...does that apply to...

My business is set up as a sole prop...does that apply to my business anyways?  As far as I know, all of our personal expenses are already available to the IRS during an audit because of this.   

I'm not attempting to write off any of those personal transactions.  I would put them in an "income" account.  

Or am I not understanding?
Established Community Backer ***

See if this article helps, <a rel="nofollow" target="_bla...

See if this article helps, <a rel="nofollow" target="_blank" href="http://www.qblittlesquare.com/2011/04/reimbursing-yourself-for-business-expenses/">http://www.qblitt...>
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This commingling statement is not true. Commingling only...

This commingling statement is not true. Commingling only applies to funds held for a client that got mixed with personal funds, not for mixing as described here.
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@ Megan Yes it applies to a sole proprietor too, the comp...

@ Megan

Yes it applies to a sole proprietor too, the company file should only contain the company transactions.

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Re: Do not do it, that is called commingling of funds and the...

Hi I see you're very active on here and I have a related question.

 

So when we opened our company last July we began purchasing things and paying rent...etc with a credit card BEFORE THE BUSINESS ACCOUNT was created. 

 

eg) We started paying for things with a personal credit card on 7/18/18 and used that method for over 20 expenses and a few operating expeses like marketing. 

 

I have our business account linked to QBO now, but I am trying to enter journal entries for those beginning expenses. What account should I link that to for the journal entries.

 

I know commingling is never good, but it was only done for the first month to get up and running.

 

Thanks!

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Re: My business is set up as a sole prop...does that apply to...

See my answer below. Sorry, can't seem to delete this.

Community Explorer **

Re: @ Megan Yes it applies to a sole proprietor too, the comp...

I'm not entirely sure that it does apply to a sole proprietorship. Since a sole proprietorship is usually under your SSN, then technically it is "you," just as your personal finances are also "you." Commingling funds occurs when you use the same accounts for both personal and business purposes, particularly if you have a corporation, a partnership, or other such entity. The main purpose of using separate bank accounts with a sole proprietorship is to maximize your business deductions and make it easier for you at tax time. However, having a personal account in Quickbooks in the same file as your sole proprietor account does not mean you are comingling funds. If you are careful to properly label transfers between your business and personal accounts, then I believe you are fine.  In 35 years of running sole proprietorship companies, we have kept them together (granted when we started it was Quicken), but we are very particular about properly identifying transfers between the accounts. So we use our personal account for personal transactions and the business account for business ones, but we transfer freely between the accounts labeling those transactions accurately.  In order to label them accurately and still benefit from the ability to transfer easily between accounts, we create  payee names that do the job. Your labels for the company account could be as simple as, "Cash in" and Cash out." So, Rustler, if you want to disagree with all this, please explain to me. In the meantime, sole proprietor, you might want to read this web page: https://odgerslawgroup.com/commingling-funds/

Community Explorer **

Re: Can I include my personal checking account on my business Quickbooks? I'm thinking of running all transactions through a "Personal Expenses" account?

P.S. The way you can find out what is allowed for your business structure is to ask your bank. For example, I am allowed by my bank to transfer funds between my personal account and my sole proprietorship account. I am also allowed to transfer between my husband's and my partnership and our personal account. However, I'm not allowed to transfer between the partnership and the sole proprietorship account.  When I transfer funds between the partnership and my personal account, the money going out of the partnership account is called by its name on my tax return: "Cash draw." When I transfer funds into my partnership account, it is labeled in that account and my personal account as, "Paid in capital." This has always been approved by our (highly compensated) accountant who is also a business attorney. When the accounts are used for separate purposes, and you're not paying personal expenses out of the business account, then you're not comingling which at any rate isn't illegal for a sole proprietorship but which makes it harder to report at tax time. BTW, my husband sometimes slips and uses the partnership account debit card for a personal expense, so when he does, that gets labeled "Cash draw," or we record it and pay the company back. Mistakes are okay, as long as you have good recordkeeping. (Years ago, an accountant saw the records I kept about paying our then corporation back for certain things, and he said he had never seen any business keep track like that.) 

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