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5 Biggest Benefits of Streamlined Accounting System For Small Businesses and Investors

Maintaining records allows you to gain perspective on your company and provides a basis for business decision making. The level of documentation and systems that you invest time and money into utilizing will depend on your level of business development and financial sophistication. ((http://bit.ly/CamusoCPAAcctI)

Business owners and investors in earlier stages of business often do not keep records or have very poor record-keeping systems which exposes their business to an unnecessary level of risk. The business owner or investor does not know how their business or investments are performing throughout the year and they cannot properly substantiate deductions.

Here are the top 5 benefits to establishing and maintaining a streamlined accounting system:

  1. Tax Minimization: Capture all expenses and write-offs
  2. Business Success: Make better management decisions throughout the year with a clear set of data
  3. Peace of Mind: Minimize stress and frustration knowing your books are in order and you know the financial health of your company
  4. Cut Costs: Save money and time by hiring a bookkeeper to manage your books rather then doing them yourself or leaving them disorderly until tax season
  5. Preemptive Support: Do proactive tax planning throughout the year saving more taxes when it’s tax time

Camuso CPA PLLC  offers a series of services to develop and tailor a first-rate accounting system for your business needs.  Reach out to our team regarding any questions about commingling funds or establishing a first-rate accounting system. Or give us a call for tax help for small businesses and investors in Charlotte.

Contact Us Today: https://www.camusocpa.com/contact/#/

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Streamline Your Accounting System – A CPA’s Perspective Part II

In the last article on upgrading your accounting system (http://bit.ly/CamusoCPAAcctI), we discussed developing basic recordkeeping systems for beginning investors and small business owners. As your finances become increasingly complex your focus will shift towards accounting automation, outsourcing accounting and hiring an in-house CFOs.

Automated accounting systems such as Quickbooks or Xero will increase your expenses but save you time and costly errors. As businesses expand, monthly revenue and expenses will continue to increase making it untenable to effectively manage your finances using a spreadsheet.

A system such as QuickBooks or Xero enables all your business bank accounts and credit cards to be linked in one central location. Further, each income and expense item is charted to specific income and expense categories to ensure the most accurate and advantageous tax position when filing.

At this level of financial sophistication, Camuso CPA recommends having a top-tier CPA set up and chart your account but to manage your monthly accounting tasks yourself to cut costs.

As your business and investments continues to expand to the point where the time investment combined with the risk of error outweighs the savings, it is time to outsource your accounting function to a top tier CPA firm. This is a significant business investment, but allows you to focus on your highest value tasks while still receiving accurate and professional financial reports. Generally, businesses and investors sped about 3-6% of annual gross revenues on accounting.

The transition to working with an outsourced accountant from a self-managed process usually takes about two to three months in which you should be virtually removed from the management of your accounting.

Camuso CPA PLLC  offers a series of services to develop and tailor a first-rate accounting system for your business needs.  Reach out to our team regarding any questions about commingling funds or establishing a first-rate accounting system.

Contact Us Today: https://www.camusocpa.com/contact/#/

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New to Real Estate Investing? Read This Before Investing In Education or Gurus!

Camuso CPA offers an alternative to overpriced, real estate gurus, who charge a high fees, often not even providing advantageous financial or business advice. We see a lot of investors who have invested time and money into courses and coaches who often do not give them the level of personal guidance they require and many times provide them with misinformation that leads to costly decisions regarding entity structure and other business decisions.

Investors, new and experienced, require a dedicated CPA that is part of their financial team that can provide them with accurate, preemptive advice to optimize their investments and business.

Contact Us today at http://bit.ly/CamusoCPA to build your real estate team and gain ongoing guidance from a real estate focused CPA.

The most common issues we see with new clients who have invested in these type of programs is that they are rushed into forming S corporations or other costly entity structures. S corporations are a great tax planning tools but pose a higher compliance cost which should be considered along with tax benefits. Many times, investors could benefit by simply forming a single member LLC but are misled to form an S corporation before it is necessary.

More on S corporations here:  http://bit.ly/SCorps

A decision like this can compound in errors if investors are not working with a knowledgeable CPA to follow best practices in maintaining and planning for taxes with S corporations. Additionally, many accounting firms will also rush clients into S corporations since it means a higher price tag on the client’s compliance needs.

Often, CPAs do not provide comprehensive support to clients regarding tax planning for S corporations; around March or April when investors finally reach out to their CPA they realize they have made costly errors throughout the year which could have easily been avoided.

Camuso CPA is changing the local Charlotte CPA firm landscape. A CPA firm delivering clients relevant and proactive insights for tax minimization, cash flow improvement, profit improvement and of course, overall compliance.

As a response to the shift of CPA firms serving in an advisory role from a compliance role, Camuso CPA is part of a new generation of firms focused on building business relationships not collecting clients.

The goal is to become a financial expert that is a fundamental part of your business. By integrating into your business on an ongoing basis we gain a greater perspective of your finances and can deliver more value in the form of time and money.

Our memberships address three unique needs of real estate investors:

  1.  Traditional tax and finance needs
  2.  Ongoing, dedicated support from a CPA
  3.  Financial education

Clients receive ongoing access to a financial expert focused on the real estate industry. We are building an organization that focuses on building long-term relationships with clients and developing a financially focused real estate community. We take the time and care to guide our clients and to deliver them with valuable information, updates, and financial tools to optimize their business and expand their real estate financial knowledge.

Camuso CPA PLLC takes an industry focused approach to offering a tailored, comprehensive financial solution focused on cash flow improvement, profit improvement, tax minimization, and financial retirement. If you’re looking for help with real estate taxes in Charlotte, we are the people to call.

Contact Our Team Today: https://www.camusocpa.com/contact/#/

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What Advisors Are Not Telling You – Unlock Cash Flow With This IRA Investment Opportunity

Many individuals and investors are unaware of their accessibility to options that provide them with control over the IRA investments. If a substantial amount of your life savings are locked up in a retirement account this can provide a great opportunity to make a large investment in a  non-traditional investment vehicle.

Generally, major financial institutions that manage most U.S. retirement accounts don’t see the profit in offering real estate or nonpublic traded assets in retirement plans as this would create a substantial administrative burden among other considerations. This leads to self-directed IRAs, which are IRAs where the custodian of the account allows the IRA to invest into any investment allowed by law, to become widely overlooked as a viable option.

When employing this investment strategy it is crucial to ensure you have a truly self-directed retirement fund with an independent trustee or custodian. Many plans may appear to be self-directed but limit choices to a custodian’s list of pre-approved investments.

These investments typically include real estate, promissory notes, precious metals, and private company stock.

Under current law, a retirement account is only restricted from investing in the following:

  • Collectibles such as art, stamps, coins, alcoholic beverages, or antiques
  • Life insurance
  • S corporation stock
  • Any investment that constitutes a prohibited transaction
  • Any investment not allowed under federal law

Self-directed retirement accounts are exposed to prohibited transaction. The rules detail restrictions regarding whom your IRA may transact with.  Prohibited transaction rules restrict your retirement account from engaging in a transaction with a disqualified person.

Disqualified persons include:

  • The account owner
  • Spouse
  • Children
  • Parents
  • Business Partners

Consult with a trusted CPA before executing investment decisions or initiating any substantial changes to your investment plans.  CPAs know your finances better than any other advisor and should have the expertise and network to offer valuable, preemptive recommendations.

Investors and business owners of all types should look for an advisor that serves as a partner; an ideal CPA is a financial expert with companies within your industry that can provide ongoing financial and business advice when you need it most.

Camuso CPA PLLC’s focus and specialization delivers a unique perspective on best industry practices to provide the most value to clients.

Contact us today for financial and tax planning and get your finances in order: https://www.camusocpa.com/contact/#/

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Streamline Your Accounting System – A CPA’s Perspective

Maintaining records allows you to gain perspective on your company and provides a basis for business decision making. The level of documentation and systems that you invest time and money into utilizing will depend on your level of business development and financial sophistication.

Business owners and investors in earlier stages of business often do not keep records or have very poor recordkeeping systems which exposes their business to an unnecessary level of risk. The business owner or investor does not know how their business or investments are performing throughout the year and they cannot properly substantiate deductions.

The first step to implementing a proper system is to develop a better system for documenting all income and expenses and maintaining them properly.  Business owners and investors can do this by first establishing a separate business bank account and following best practices detailed in an earlier article regarding commingling funds: https://www.camusocpa.com/finance/commingling-funds-a-cpas-perspective/#/

All payments that are made to vendors or creditors should be paid by cash or credit to maintain a document trail to track payments. All receipts and miles driven for businesses should be tracked and recorded in apps that allow ease of use and accessibility.

Additionally, before allowing any contractor to perform work for your business, they should be required to complete a W-9. All work and payments that you make should be codified in a signed agreement.

All records should be maintained on a business computer, with two backup versions maintained on the cloud and a thumb drive with a folder hierarchy that allows you to easily find and sort data.

Following the above guidelines is the first step to developing a system that will allow you to gain value from utilizing comprehensive software as your business advances.

After business owners or investors have established and integrated a documentation system they can utilize technology to help organize and file applicable documents. This will allow greater freedom to generate financial information so that you can measure business or investment performance.

At this level of financial sophistication and business activity taxpayers do not need comprehensive automated accounting systems but do need timely and accurate financial information for personal and bank purposes. This can be accomplished through a combination of the use of spreadsheets and banking tools.

Business owners and investors should create separate checking accounts for each business, rental property, or investment that they own.

This streamlines the process of tracking expenses and developing financial statements. Each quarter take the time to analyze and log your income and expenses into an excel spreadsheet, reconcile your bank accounts, and review your financial position with your CPA. https://www.camusocpa.com/contact/#/

In the next article on upgrading your accounting system, we will discuss accounting automation and outsourcing your accounting function: http://bit.ly/CamusoAcctII

All investors, agents and business owners should implement best practices regarding business account segregation and general accounting practices.  Maintaining separate personal and business accounts is the first step to establishing foundational accounting practices for your finances.

 

Camuso CPA PLLC  offers a series of services to develop and tailor a first-rate accounting system for your business needs.  Reach out to our team regarding any questions about commingling funds or establishing a first-rate accounting system.

Contact Us Today: https://www.camusocpa.com/contact/#/

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Cost Segregation: Accelerated Cash Flows and Opportunities For Growth

Cost Segregation studies allow tax payers to capture accelerated depreciation deductions by reclassifying components of a building into accelerated recovery periods Most commercial properties are depreciated over 39 or 27.5 years. Cost segregation studies are an approved method from the IRS that requires engineers and CPAs to reclassify portions of commercial properties to shorter depreciation lives, as short as 5 years. These accelerated deductions apply to both federal and state income taxes, allowing for significant cash flow increases.

Any commercial property is eligible for a cost segregation study. For every dollar, a cost segregation reclassifies from 39-year property to 5-year property results in an estimated 22 cent benefit. Cost segregation studies can provide a substantial return on investment.  A top-quality CPA firm with high-quality cost segregation services will be able to provide a fee proposal and estimated tax savings to determine the cost/benefit of the analysis and compliance. Contact Camuso CPA PLLC (CamusoCPA.com) today for a free initial consultation regarding a comprehensive cost segregation study, if eligible you will receive a free quote.

Case Study:

An apartment building with a tax basis of $1.5 million, with one year of standard 27.5 year accumulated depreciation can accelerate $263,424 in tax deductions in just 4 years with $143,314 in year 1.

Take a look at the chart below for an illustration, the red represents the accelerated cash return from the cost segregation study while the yellow represents a conservative estimated rate of return you can get from the accelerated cash flows.

Technology Disruption Offers Opportunity to Small Investors and Small Businesses

Traditionally, many CPAs do not have the expertise and depth within their professional network to deliver cost segregation studies.

Our team (CamusoCPA.com) and systematic process takes a comprehensive approach to cost segregation, by leveraging our network of licensed professional civil engineers, cutting edge technology and top-tier knowledge our team can efficiently do properties of any size.

Cost Segregation is now cost effective for smaller properties by using cutting edge technology and online software designed for CPAs who are strategically aligned with engineers that are experts in cost segregation.

Traditionally, cost segregation studies would only be recommended for larger properties with a tax basis over $1,000,000. The cost segregation industry is being disrupted, offering a great opportunity to smaller investors and business owners who can recognize this opportunity and capitalize on it to accelerate cash flows to improve their business or secure an additional strategic investment on properties with a tax basis as lows as $100,000 to $200,000.

Here is an additional article regarding technology disruption in the cost segregation industry: https://www.linkedin.com/pulse/technology-disruption-offers-tax-maximazation-small-camuso-cpa

The Process

The cost segregation process utilizes an engineering approach to identify assets that can be reclassified for accelerated depreciation, evaluating all available information and presenting the conclusions in a professionally documented format.

  • Review of all cost detail for the property
  • Inspection of facilities
  • Review of all blue prints
  • Reconciliation of all construction costs and estimates to the actual amounts incurred by tax life
  • Pro-rata allocation of soft costs

Timing

Tax regulations allow for taxpayers to retrospectively capture missed deductions provided by a cost segregation study.

Cost segregation studies can be performed at any time but in order to maximize tax deductions one should be performed as soon as possible.

Estate Planning Opportunities

Cost segregation studies can be a powerful estate planning tool.  Cost segregation studies offer an additional opportunity to reduce the decedent’s original tax basis for real estate assets that are recorded on their tax depreciation schedule before death. A cost segregation study can be done after a death occurs, but must be completed before filing the decedent’s final income tax return.

This can generate accelerated depreciation that can eliminate tax owed on the final federal income tax return, while reducing the building’s pre-stepped up tax basis. Since the federal income tax basis of the building is reset to fair market value on the date of death, neither the decedent nor the heirs realize any offset to future deductions typically associated with cost segregation studies.

Additionally, the recapture tax that is paid upon sale of the property on the accelerated depreciation deductions does not occur in estate planning situations.

Additional Strategies

Cost segregation studies can be combined with 1031 exchanges as a powerful tax planning toolset, allowing investors to accelerate the growth of their portfolios by capturing large tax deductions and deferring gains on the sale of properties.

Additionally, cost segregations can be combined with other studies, incentives and tax planning strategies including bonus depreciation, 179D Deductions, 45L Energy Credits, Insurance Replacement Appraisals, Tangible Property, Repairs & Maintenance Studies and much more.

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Real Estate Professional Status – A CPA’s Perspective

There are significant tax benefits for investors who can qualify with the IRS for real estate professional status.

This is a great tax planning strategy that is particularly beneficial when you have multiple rental properties and have an adjusted gross income below $150,000. When your income is $100,000 or less per year, you can take a real estate loss of $25,000 per year against other income. If you make over $150,000, you can’t take any real estate loss. And, if you make somewhere between $100,000 and $150,000, the amount of allowed loss phases out.

If you can qualify for this designation, then you can take an unlimited amount of real estate paper loss against your other income, no matter how much you make or how much the real estate loss is.

There are three categories the IRS uses to classify real estate investors, each having different pros and cons. The first classification is a passive investor which is the least beneficial category and only allows a taxpayer the ability to deduct passive losses against passive gains.

The second classification is that of an active investor. This designation allows a taxpayer to deduct an additional $25,000 of losses against ordinary income, however, this deduction phases out completely at the Adjusted Gross Income (AGI) level of $150,000 for a married couple filing jointly and $100,000 for a single individual.

The third real estate professional classification allows taxpayers to deduct 100% of all real estate losses against ordinary income.

Many clients making this special election on their tax return, and who also have several rental properties, can create thousands of dollars in tax deductions resulting in a zero tax liability at the end of the year.

To qualify as a ‘Professional’ for tax purposes, a taxpayer, or their spouse, must meet a two-part test; the taxpayer must spend the majority of his or her time in real property businesses and  the taxpayer must spend 750 hours or more in the real property business and rentals in which her or she materially participates.

The most common question we receive from clients is what activities qualify as real property businesses. The IRS does not statutorily list which jobs qualify creating ambiguity around this consideration which should be discussed with your CPA.

Taxpayers must also materially participate in the management of the properties. Taxpayers can qualify for material participation under 7 different categories. A qualified real estate activity is anything in which you “develop, redevelop, construct, reconstruct, acquire, convert, rent, operate, manage, lease, or sell” real estate.

Taxpayers must perform services in these activities, but you do not necessarily must be the individual performing the work. You can be supervising, meeting and planning the work since all the activities are included in running a business.  This is another consideration that should be discussed with a financial expert.

There are drawbacks to incorporating the real estate professional status into your tax planning strategy which must be considered. Taxpayers who are classified as a real estate professional will have business income treated as ordinary income subject to self-employment tax. Establishing an S-Corporation is generally a necessary measure for an effective tax strategy incorporating the real estate professional status.

Reach out to our team regarding any questions about the Real Estate Professional Status or establishing a first-rate comprehensive tax strategy. We can provide real estate professional tax help in Charlotte and the surrounding areas. For more information about our tax services, please do not hesitate to give us a call at your earliest convenience. One of our friendly and knowledgeable representatives will be happy to answer any questions that you may have.

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S Corporation Business Structure – When Does It Make Financial Sense- A CPA’s Perspective

S corporations can save their owners a significant amount of tax. This tax savings can exceed their entire annual CPA fee. The IRS is naturally monitoring for abuses in this area as the potential dollar savings are substantial. An ideal CPA to advise in this area is a financial expert that works primarily with real estate agents and other professionals utilizing S corporations so they have industry data and up to date knowledge of the acceptable standards.

To reduce your self-employment tax bill, you can create an S corporation and hire yourself as an employee. You pay the yourself who is classified as an employee a reasonable wage for your work. If there is profit left over at the end of the year, the partner which would also be yourself split the earnings. Self-employment tax is only paid on wages — not on the company profit which results in significant tax savings.

Tax planning and industry financial expertise is critical in this area. Setting your salary too low exposes you to risk of IRS examination which can result can be payment of unpaid employment taxes and hefty penalties and interest. Setting your salary too high leads overpaying taxes. Over the course of your business’ life the overpayments of tax and lost investment opportunities can cost you hundreds of thousands of dollars.

Clients at Camuso CPA PLLC receive an annual in depth analysis of reasonable compensation. Our team of CPA’s is constantly gathering support from every level of legislative and administrative tax authority. This is essential and should be offered by the CPA advising you. While there are other options, S-Corporation tax structure is an advanced tax planning strategy available to real estate agents and other self-employed professionals that can financially benefit.

A common question we receive from our clients is when should I form an S corporation to take advantage of the tax savings?

The answer to this question requires an analysis of the reasonable compensation that you will pay yourself, this will dictate the level of tax savings you can realize by avoiding self-employment tax when you distribute your remaining earnings to yourself. If your salary cannot be reasonably set significantly below your overall gross income you will not make a distribution large enough to receive a substantial tax benefit. After you have a reasonable estimate of the amount of tax savings you can capture by structuring as a S corporation you must consider whether the amount of tax savings will significantly exceed the additional compliance and administrative cost burden related to an S corporation.

The S corporation creates extra tax-related paperwork each time you take money (or any other asset) out of the corporation, because you must treat each withdrawal in one of three basic ways:

1.     As a salary or bonus paid to you in your capacity as a corporate employee,

2.     As a distribution of corporate earnings paid to you in your capacity as a corporate shareholder, or

3.     As proceeds from a loan made by the corporation to you.

Additionally, you face the extra cost of tax returns and corporate compliance. Unlike the Form 1040 Schedule C of a proprietorship, the S corporation tax return includes a balance sheet in addition to the required Schedule K-1 pass-through information. You also must have a reasonable compensation study to substantiate the salary that you set for yourself to protect yourself from IRS scrutiny.

Reach out to our team regarding any questions about entity structuring or establishing a first-rate comprehensive tax strategy. We are the people to call for S Corporation tax services in Charlotte. For more information, please do not hesitate to give us a call at your earliest convenience.

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Real Estate Investor or Dealer IRS Classification – A CPA’s Perspective

The real estate investor and dealer classifications determine how the income earned by an investor will be taxed. The real estate dealer classification is scrutinized by the IRS and the definition is subjective.

Real estate investors purchase real estate with the intention of holding their properties and gaining a financial return.  Real estate dealers buy and sell real estate as part of their everyday business.

The IRS defines a real estate dealer as a company or individual engaged in the business of selling real estate to customers with the purpose of making a profit from those sales. There is no definitive test or specific guideline that offers a final perspectiveon a classification for a taxpayer.

The following factors are among the most commonly weighed by the IRS as noted in past court cases:

·         Purpose of the acquisition

·         Length of ownership

·         Number of transactions by investor

·         Proportion of income from real estate sales

·         Frequency of sales

·         Amount of gain realized

·         Nature of advertising for the properties

If an investor is classified as a dealer, they would be liable for ordinary-income tax on profits from property sales up to a maximum rate of almost 40 percent. Dealers also cannot take advantage the tax benefits of 1031 exchanges.

On the other hand, an if they are classified as an investor they would pay the capital gains tax which has a maximum rate of 20 percent plus the 3.8% net investment income tax.

This is clearly a very large difference – tax planning regarding entity/portfolio structuring and investment strategies is crucial.  There are preliminary measures that investors can take to safeguard their investments from the dealer classification.

For instance, generally your first step when creating your portfolio is forming a partnership or LLC; language in the operating agreement stating that the purpose is holding investments for appreciation is best practice.

Additionally, when filing the partnership’s tax return be sure to list the business activity as investments. The best practice for investors that invests in buy and holds, fix/flips and/or developments is to segregate their accounts into different entities to limit their liability of over taxation due to an incorrect classification.

All investors, agents and business owners should implement best practices regarding their portfolio structuring and tax planning.  Camuso CPA PLLC  offers a series of services to develop and tailor a first-rate advisory system for your real estate investment needs.  Reach out to our team regarding any questions about portfolio planning or establishing a first-rate comprehensive tax strategy. We are the people to call for any CPA tax designation in Charlotte.

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Commingling Funds – A CPA’s Perspective

Commingling funds is a substandard business practice although it is common for small businesses and entrepreneurs to commingle funds. This is something that is especially common for our clients that are in the early stages of business and finances. When you commingle funds, you treat business funds as personal money, whether it is income or expense.

If you commingle funds you create the potential legal liability of “piercing the corporate veil” which eliminates the separate liability between your personal assets and business. Legal troubles can put all the incorporation efforts at risk if the court determines that the veil has been pierced. The financial and time investment of forming a L.L.C. or corporation, such as filling the Articles of Organization or paying attorney and filing fees will be rendered meaningless.

When courts examine if the company has “pierced their veil” the first thing they consider is the commingling of funds. When funds are found to be commingled the courts will then hold your personal assets liable. The IRS does not require that you maintain separate bank accounts for your personal and business activities but it is encouraged. Commingling funds is mainly a legal issue not a tax issue.

Common examples of commingling funds that we have seen with our community:

 

  •          Transferring money between business and personal accounts without documentation
  •          Writing business checks for personal expenses
  •          Having only one bank account for personal and business operations
  •          Depositing business checks into your personal bank account
  •          Withdrawing money from your business account to pay personal expenses without documentation

The first measure to take to avoid commingling funds is to create a separate bank account to document all expenses, withdrawals, and deposits. Adequate documentation allows you to maintain better records for taxes.

Maintaining quality accounting standards by keeping separate bank accounts and only using business funds for business expenses will help you observe how your business is performing which leads to better business decisions. It also enables you to keep personal funds separate and creates a personal budget since you will not be conflating business and personal funds.

Personal tax and business tax are treated differently. Your personal expenses may not qualify as a valid business expenses. Of course, the IRS does not allow you to deduct business expenses that you cannot document. When combine the accounts for personal and business expenses it is hard to substantiate you entitled deductions.

Tracking business income and expenses in a segregated business account is crucial to help minimize taxes and maximize deductions. Establishing a separate business account, you allow you to avoid commingling funds and creates a more organized and efficient way to reduce liability and taxes.

In the event, like many investors, agents, and business owners you do not follow best practices and you commingle funds we can retroactively adjust the books to correct mistakes. This is imperative for tax purposes as we will want the books of the business to reflect what we report on the tax return.

In addition, we can also implement an accountable reimbursement plan for corporations. This will provide flexibility when using personal accounts for business expenses.  This is common practice for corporations and is discussed in greater detail later in the article.

If you are operating as a sole proprietor commingling funds is not a significant liability from a tax or legal perspective. This is because you won’t have an entity’s corporate veil to maintain. The benefit of maintaining separate account for sole proprietors is that the business bank account can serve as your accounting platform allowing you to segregate and track all income and expenses. As you grow, you’ll want to integrate a comprehensive accounting platform but this will be sufficient in the early stages of your business finances.

When you establish a corporation commingling funds and maintaining best practices becomes imperative. If a mistake does occur, we can retroactively fix it. This is common for investors and business owners who are still implementing best practices into the finances side of their business.

C and S Corporation owners face much more serious implications if they commingle funds from a tax, accounting, and legal perspective. If commingling exists and is not dealt with properly and timely, the IRS could disallow deductions.

Many investors and agents use their personal credit cards to pay for expenses because they receive better rewards or because it may be more convenient at the time of purchase. This makes sense an and an occasional purchase generally will not pierce the corporate veil.  When you consistently use your personal credit cards for business expenses and establish a pattern you threaten the integrity of your corporate veil.

It is imperative that a shareholders and employees of corporations establish best practices for segregating personal and business expenses. However, utilizing the personal card for a business expenses is still permitted if an accountable reimbursement plan exists.

An accountable reimbursement plan eliminates the commingling issues for corporations. It allows the owner to use a personal card for business expenses and receive a business write-off for the expense.

The accountable reimbursement plan enables employees of a corporation to be reimbursed for expenses. If a corporation does not implement an accountable reimbursement plan, some business expenses will no longer be deductible by the business. The employee will be required to report the business expenses on Schedule A as an unreimbursed expense. Considering the regulations for Schedule A reporting, the employee will lose the deduction those expenses.

 

All investors, agents and business owners should implement best practices regarding business account segregation and general accounting practices.  Maintaining separate personal and business accounts is the first step to establishing foundational accounting practices for your finances.

Camuso CPA PLLC  offers a series of services to develop and tailor a first-rate accounting system for your business needs.  If you need CPA accounting help commingling funds in Charlotte, we are the people to call. Reach out to our team regarding any questions about commingling funds or establishing a first-rate accounting system.

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