Getting audited or being caught in the wrong is the nightmare of many business owners, especially if they are not intentionally filing their sales tax incorrectly. However, while accidents do happen, there is a simple step you can take to greatly reduce the likelihood of making a major error. By separating personal and business finances, you streamline your money management processes and lessen your risk of misplacing sales tax money. Plus, it saves you from wondering if that transaction was for business or not at the end of the month. Consequences Of Poor Money Management.
Recently, a North Carolina businesswoman admitted to embezzling $44,276.88 dollars from state and county sales tax. She was, at first, sentenced to 16 months minimum in prison but has since been released with 60 months of supervised probation and a record that will follow her forever. Not only that, but she must complete 100 hours of community service and repay the money she stole over the next 60 months plus an additional $5,000 fine. While her transgressions may have been intentional, even accidental failure to properly separate business and personal finances can have serious legal repercussions.
If you do not take the steps to identify where your money is coming from and where it should be going it can easily end up in the wrong place. In such a situation, it can be difficult to determine where accidents end and purposefully mismanaged books begin, you are unlikely to get the benefit of the doubt. Still not convinced? The following are four additional reasons it is a good idea to separate personal and business finances when it comes to sales tax. Why Separate, Easily Identify Business Expenses and Purchases: If you use a personal account for business expenses, it becomes difficult to track which is which. Having a separate account reduces the likelihood of costs being misidentified. Credibility and Professionalism: It just makes your business come across as more professional. A business name on checks sends a better message to your employees and can save you time at the bank when a customer writes a check made out to the business instead of you personally.
Track Taxes Easier: You can deposit the tax money you collect in a separate account that you touch only to pay the sales taxes due giving you a clear trail if you are audited. Reduce The Complexity Of Accounting Services: Whether you are doing your taxes yourself with tax software or outsourcing the job it will take much less time to file with a dedicated business account than one that has to be accessed and separated into personal and business expenses.
Sales Tax DataLink offers multiple sales tax software programs to help our customers keep track of their sales tax responsibilities. If you have questions about where to start or if your business needs help, contact us and consider a free evaluation to help identify problem areas.
