A business question for accountants

[manlymatt83]

Normally, I keep personal and business completely separate. As in, all business transactions go on the business credit card under a business account, and personal transactions go on the personal card. Makes sense and works well.

I have an interesting situation though. I recently bought a kindle, which I will use to read both personal and business content. The kindle can only be registered to one Amazon account, and worst yet, unlike normal items where I can choose which credit card to charge the item to, I must pick one credit card to charge all kindle transactions to.

So at this point, unless I want to buy two kindle devices (one for business, one for personal), I need to charge everything to the personal card, and then "re-imburse" myself for the amount of the purchase from the business bank account when the transaction is business related (such as purchasing a book to study a technology I need for a client project).

Is this allowed and would this be IRS approved? Does the IRS care that transactions be purchased under different amazon.com accounts, or do they just care about the receipt and the fact that the money came out of the business account in the end? Like I said, I can easily show them the receipt and the check that I cut myself for reimbursement clearly has the Amazon order # in it.

 

[Ns1]

kindle is a business expense and any ebooks are books/publishing expense. Put everything on your business card.

done.


when/if IRS has a problem with this arrangement they will audit you (they won't)

 

[Mike Gayner]

I'm an accountant in NZ. This would definitely be allowed here. But you have weird tax laws over there.

I would just use a journal entry rather than a cash reimbursement.

 

[olds]

Ask Eaglekeeper.
(He knows everything)

 

[DaveSimmons]

Back when I was consulting I used the same bank account and credit cards for both business and personal expenses. If you're still filing schedule C and not incorporated you just need to keep good records, not separate accounts.

Just keep a spreadsheet of kindle books bought with the personal card, along with the personal check numbers used to pay off the bills. Maybe a column for the the Amazon order number.

 

[JS80]

kindle is a business expense and any ebooks are books/publishing expense. Put everything on your business card.

done.


when/if IRS has a problem with this arrangement they will audit you (they won't)

^this. Just charge all through business expense.

 

[Fern]

Normally, I keep personal and business completely separate. As in, all business transactions go on the business credit card under a business account, and personal transactions go on the personal card. Makes sense and works well.

I have an interesting situation though. I recently bought a kindle, which I will use to read both personal and business content. The kindle can only be registered to one Amazon account, and worst yet, unlike normal items where I can choose which credit card to charge the item to, I must pick one credit card to charge all kindle transactions to.

So at this point, unless I want to buy two kindle devices (one for business, one for personal), I need to charge everything to the personal card, and then "re-imburse" myself for the amount of the purchase from the business bank account when the transaction is business related (such as purchasing a book to study a technology I need for a client project).

Is this allowed and would this be IRS approved? Does the IRS care that transactions be purchased under different amazon.com accounts, or do they just care about the receipt and the fact that the money came out of the business account in the end? Like I said, I can easily show them the receipt and the check that I cut myself for reimbursement clearly has the Amazon order # in it.

It's fine.

No, the IRS doesn't care about a different Amazon account.

Yes, they want you to have the receipt verifying the amount and the fact it's for business.

The real problem is using your biz card for personal reasons, not your personal card for biz purposes. If you use your biz card often for personal reasons they'll be inclined to loo at ALL purchases closely to make sure you didn't 'forget' to back out any personal expenses.

When you use your personal card for biz purposes they'll just want to see those receipts. They won't bother looking at all your personal transactions to help you make sure you didn't forget any deductible ones. They don't care if you forgot to deduct some, that's your problem and they aren't generally there to help you lower your tax.

Edit: If you want to claim the kindle is 100% business use, which would be necessary to claim 100% of it's cost, you've got a problem. If you put the Kindle under your biz card all your non-business purchases will show up too. If the IRS sees them they'll know immediately it's all used for non-business purposes.

Fern

 

[dquan97]

Just keep receipts and appropriately label them "business" for business expense.

 

[Ns1]

Edit: If you want to claim the kindle is 100% business use, which would be necessary to claim 100% of it's cost, you've got a problem. If you put the Kindle under your biz card all your non-business purchases will show up too. If the IRS sees them they'll know immediately it's all used for non-business purposes.

Fern

and how will they see this?

...

they won't, unless he gets audited.

(I'm aware that you are instructing him on the IRS way of doing things, and I would like to make it abundantly clear that I'm telling him the real world way of doing things)

 

[Mike Gayner]

and how will they see this?

...

they won't, unless he gets audited.

(I'm aware that you are instructing him on the IRS way of doing things, and I would like to make it abundantly clear that I'm telling him the real world way of doing things)

How would the IRD know if you claimed all of your groceries as a business expense? They wouldn't unless they audited you.

In a tax system which relies on honesty and disclosure of filers, threat of audit is the method that is used to ensure filers are claiming correctly. To advise someone to deliberately evade tax is idiotic.

Maybe it's just because I'm accountant, but I can't stand the idea that it's OK to cheat the system as long as you don't get caught.

 

[manlymatt83]

Back when I was consulting I used the same bank account and credit cards for both business and personal expenses. If you're still filing schedule C and not incorporated you just need to keep good records, not separate accounts.

Just keep a spreadsheet of kindle books bought with the personal card, along with the personal check numbers used to pay off the bills. Maybe a column for the the Amazon order number.

But my business is an LLC, so I file that separately. It has a separate name, bank account, etc.

99% of accounts are separate, but I do use my personal Amazon account to buy business things so I only have to pay for prime once. I just tend to use my business credit card inside the personal account, and forward copies of my receipt(s) to the business accountant.

 

[Ns1]

How would the IRD know if you claimed all of your groceries as a business expense? They wouldn't unless they audited you.

In a tax system which relies on honesty and disclosure of filers, threat of audit is the method that is used to ensure filers are claiming correctly. To advise someone to deliberately evade tax is idiotic.

Maybe it's just because I'm accountant, but I can't stand the idea that it's OK to cheat the system as long as you don't get caught.

I'm a former tax accountant, biz owner, and IDGAF

It is significantly easier to make business explanations for kindle expenses than it is to make business explanations for groceries.

 

[manlymatt83]

It's fine.

No, the IRS doesn't care about a different Amazon account.

Yes, they want you to have the receipt verifying the amount and the fact it's for business.

The real problem is using your biz card for personal reasons, not your personal card for biz purposes. If you use your biz card often for personal reasons they'll be inclined to loo at ALL purchases closely to make sure you didn't 'forget' to back out any personal expenses.

When you use your personal card for biz purposes they'll just want to see those receipts. They won't bother looking at all your personal transactions to help you make sure you didn't forget any deductible ones. They don't care if you forgot to deduct some, that's your problem and they aren't generally there to help you lower your tax.

Edit: If you want to claim the kindle is 100% business use, which would be necessary to claim 100% of it's cost, you've got a problem. If you put the Kindle under your biz card all your non-business purchases will show up too. If the IRS sees them they'll know immediately it's all used for non-business purposes.

Fern

OK that makes sense. Like I said, I rarely put a business expense on my personal card, and when I do, I always cut myself a check (with documentation, receipt image stored, and comments) to re-imburse me. That way, every expense is tracked in the business bank account. Keeps it clean.

As for the deduction, I am using the Kindle for 95% business. Every book I read is always business related - to be honest, I don't have time to read personal books But once in a blue moon, I'd like to be able to read a newspaper or novel on it, and since I can only have one credit card mapped to the account, I decided to default to the personal one since it's my personal amazon account, then simply re-imburse myself for purchases made on the personal card.

 

[Fern]

and how will they see this?

...

they won't, unless he gets audited.

(I'm aware that you are instructing him on the IRS way of doing things, and I would like to make it abundantly clear that I'm telling him the real world way of doing things)

Yeah, I'm a tax CPA.

In the 'real world' I would likely charge the Kindle on my personal card and reimburse myself claiming it 100% biz.

I use my work PC for non-work purposes (like posting here) but still take it as 100% biz. I like to apply common sense. It's really hard in many cases to separate biz & personal 100%. Ever taken a personal call at the office? The heck if I'm not gonna write off my biz phone system just because the school called to tell me my son is sick and I need to come pick him up.

Fern

 

[manlymatt83]

Yeah, I'm a tax CPA.

In the 'real world' I would likely charge the Kindle on my personal card and reimburse myself claiming it 100% biz.

I use my work PC for non-work purposes (like posting here) but still take it as 100% biz. I like to apply common sense. It's really hard in many cases to separate biz & personal 100%. Ever taken a personal call at the office? The heck if I'm not gonna write off my biz phone system just because the school called to tell me my son is sick and I need to come pick him up.

Fern

OK, so for the kindle, I'll buy everything on my personal card and just cut checks to myself from the business account for business purchases. Sounds good to me.

 

[Mike Gayner]

Why reimburse with actual cheques? Just do a journal entry.