This is Not the Time to Mingle!

Posted by Valeri on Oct 8, 2014 in Accounting blog | 0 comments Mingling your personal and business finances is not only a bookkeeping nightmare but also leaves the business owner open to IRS audit and personal liability.   The most troubling of the three scenarios is being held personally accountable for the business’ liabilities. Usually an entrepreneur will choose to create a Limited Liability Company (LLC) or Corporation (S or C) to protect themselves from being personally liable for the company’s debts, lawsuits or bankruptcy. This protection is the Corporate Veil. However, if the LLC or Corporation isn’t conducted according to specific requirements, separating personal and business expenses included, the Corporate Veil can be pierced and you can then be held personally liable. This can and will occur if the IRS or a court of law has determined that your personal and business finances are not kept a reasonable distance apart. In other words, if the IRS or a court of law determines that you are basically using the business accounts for your own personal use, the protection of the Corporate Veil is null and void. This can occur by, but not limited to, simply using one credit card for both personal and business expenses. The piercing can open up the business owner to being personally liable for anything from the business’ credit debt to tax liabilities to personal injury lawsuits. In addition to losing the protection of the Corporate Veil, any business can be flagged for audit. One of the quickest ways to be flagged for audit is by mingling your personal and business finances and inflating eye-catching business deduction categories. Once these inflated deductions have caught the attention of the IRS, you can expect the IRS agent to review every expense receipt, every employee benefit, every gift and donation until you owe more taxes. Then, to add insult to injury, the IRS can and usually will audit the year or two prior as well as proactively flag the next year for audit. In essence, you can be in audit for 3 years. Lastly, for this article, but definitely not the final reason to separate personal and business finances, is the inevitable bookkeeping nightmare. Hiring a financial accountant as soon as possible is very important. However, having them bill their time to separate your personal and business finances is not the best use of their skills or your resources. Save yourself the headache, frustration, and potential personal liability by opening...
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Always on IRS’s Radar?

Posted by Valeri on Oct 8, 2014 in Accounting blog | 0 comments Receiving an audit notice from the IRS is intimidating enough but realizing that you could forever be an IRS target can be downright enervating. So, does or can the IRS have an unlimited time to audit your business? Isn’t there supposed to be a statute of limitations? In some situations, the statute of limitations can be doubled or extended indefinitely. And yet, business owners have strict time limits for amending returns. The IRS statute of limitations for conducting an audit is subject to a variety of variables. Robert W. Wood of Forbes does an excellent job of outlining how and when the IRS statute of limitations to audit can be extended. Read “IRS Can Audit You Forever, But Key Steps Can Prevent It” and make sure you are...
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The Breaking Point…When to Hire a Financial Accountant, aka Bookkeeper.

Posted by Valeri on Oct 8, 2014 in Accounting blog | 0 comments Many business owners are referred to a financial accountant by their CPA when their financial books are in a state of disarray. Most business owners begin their business handling everything themselves. Whether fully knowledgeable in accounting or not, they undertake the whole process of working their business and their financial books in an effort to save resources. Unless accounting is their business, this is rarely beneficial in the long term. So when should you hire a financial accountant? Ideally, at the very beginning of starting a business. A skilled and knowledgeable financial accountant will assist in everything from the formation of the business (filing corporate documents, businesses licenses, federal filings, etc.) to choosing accounting software and tailoring that software for the business’ industry. Hiring a financial accountant at the beginning will save you countless hours of research, hundreds of dollars in erroneous filings, and will ultimately allow you to focus on what you do best from the very beginning, that is: running your business. For the business owner compelled to handle everything for the first few months to a year, until business stabilizes after the initial start-up rush, hiring a financial accountant can bring great relief. After bringing the books current, a financial accountant can handle the day-to-day tasks of accounts receivable, accounts payable, collections, posting credit card expenses, tracking assets, filing employee paperwork, and processing payroll. In addition, a qualified financial accountant will produce financial reports, file all quarterly and annual reports and ensure the books are ready for the CPA at tax time. Having a financial accountant at this point will give you the freedom, time, and knowledge to be more strategic with your business. In the event you are in the heated throes of running your business and have discovered that, 1) it has been too long since updating your books, 2) you’re not sure of the state of your P&L and Balance Sheet, 3) you’re running your business week by week based on cash flow, or any combination of the three, don’t wait any longer; you have now hit critical mass and it is vital that you hire a financial accountant. In this situation, a proficient financial accountant can clean up records that incorrectly mingled personal and business expenses, repost incorrectly coded expenses and assets, bring the records up to date, reconcile accounts, and produce financial reports to allow you to make educated decisions for...
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