OPERATIONAL ACCOUNTANT AND VICTOR, THE TALE OF THE COMMINGLER
Victor was a businessman who had an S-Corporation Business. He took his finances to a tax accountant to do his personal and business returns.
Turns out, he used one QuickBooks account to track both his personal and business expenses (cuidado!). Result? The tax accountant could not separate business from the personal costs and could not create Victor’s returns. What is Victor to do??? [melodramatic music in the background]
This is a task for the OPERATIONAL ACCOUNTANT!!
“Faster than cash from an ATM,
“More powerful than a profitable financial statement,
“Able to complete complex transactions in a single journal entry, its….
Jimmy Tolsen from the Daily Planet interviewed OPERATIONAL ACCOUNTANT after he saved the day, no, I mean, after he saved the tax returns:
Jimmy: How did you fix poor Victor’s financial and tax predicament, OPERATIONAL ACCOUNTANT?
OPERATIONAL ACCOUNTANT (OpAcc): I converted 12 months of statements from 6 different accounts…
Jimmy: …you mean, you had to work from 72 statements???
OpAcc: Yes Jimmy, on the face of it, it was intimidating. I was brave. I uploaded thousands of transactions resulting in 2 clean QuickBooks accounts, one for the business account and one for the personal account.
Jimmy: And you were done, right?
OpAcc: No Jimmy, a more menacing problem lurked behind all those numbers. You see, Victor used his business accounts to pay for personal things, and his personal accounts to pay for business things.
Jimmy: Oh…my…. gawd!! Are you saying he comm…?
OpAcc: Yes Jimmy, he commingled his S-Corp business and personal finances!! This could threaten his ability to remain an S-Corporation. I had to figure who paid whom what for what why and how.
OpAcc: He used personal funds to pay business expenses, and business funds for personal expenses. Be fearless Jimmy, because there is a day in every business’s life when the business has to account for intercompany transfers. There were scores of them. Ultimately, between the two accounts, they balanced, and the tax accountant had clean financial statements to create his returns!
Jimmy: Wow, OPERATIONAL ACCOUNTANT!! Who ever said that accounting wasn’t exciting!!!
OpAcc: [mumbling] …. actually, just about everybody….
Jimmy: So, there you have it, citizens of Metropolis. Never commingle your business and personal finances! Do you have any final words for us Operational Accountant?
OpAcc: Yes, Jimmy, and thank you for covering this. Remember:
- If you have more than one business, you must keep a complete and separate set of books and records for each business. Thus, spake the IRS on page 5 of its delightful read called “Publication 583”. (https://www.irs.gov/pub/irs-pdf/p583.pdf)
- This type of accounting rebuilding work can be expensive. It cost Victor a European vacation or 2.
As my friend the Smokey the Firehouse Accountant says:
“Only YOU can prevent commingling of finances:
Use separate accounting software accounts.”
QuickBooks (QB) is a great solution to keeping your finances separated. OPERATIONAL ACCOUNTANT uses QB as his personal and business accounting software and with his clients. He gets no kickbacks from promoting QuickBooks; he just thinks QuickBooks is a great solution for small businesses.
For QuickBooks Online, check out (https://quickbooks.intuit.com/) for subscription prices.
For QuickBooks Desktop, Amazon sells the software (computer resident software).
Add a subscription to QBOX (https://www.qboxplus.com/) for seamless cloud remote access.
Separate, don’t commingle, and stay legal!
Do your business and personal finances need separating or simply cleaning?
Please feel free to email me (firstname.lastname@example.org) to schedule a free initial consultation.
R. Michael O’Hanlan Consulting (RMOHC) is an accounting consulting firm based in the Washington, DC area. Michael O’Hanlan is a Certified Fraud Examiner and an Operational Accountant. RMOHC specializes in accounting cleanup and organization for commercial and government contract clients, fraud prevention, and training services and to keep clients profitable, legal, and compliant.