It seems I have, unintentionally, acquired a new enemy in the blogosphere because I have disagreed with the advice they have offered in a public blog post.
The new enemy is June Walker, whose advice I strongly disagreed with in my post “You Do Need A Business Checking Account”. First check out her response in the post “There’s No Shortage of Bad Advice Out There”.
Here is the comment I submitted to her blog this morning:
Ah, another debate among tax professionals!
Why can’t we learn to just get along?
I agree with your post’s title – “There’s no shortage of bad advice out there” – however we disagree on who is actually providing the bad advice.
First of all, sorry for not being perfectly “PC”. This is a legitimate complaint. I do try to use “he/she” etc instead of he in my posts.
Secondly I take exception to being compared to “the tax pro who totally misunderstands indie life” simply because I disagree with you on one issue. I have been preparing 1040s for “indies” since 1972, a bit longer than you, and have been an “indie” myself most of the past 38 years.
Now on to your comments on my comments (the highlights are hers) -
You say - “Well, he says, “loan” money to the business account from your personal account and then return it later. If you have attended my seminars or read my book you know: That leaves a very wiggly audit trail for the IRS to follow.”
It would seem to me that using one’s personal checking account for both business and personal expenses is more wiggly an audit trail for an IRS auditor to deal with.
You then quote your original post - “The very next example from the IRS in the publication is the mixed use – personal and business – of your automobile. So, let’s see how efficient two checking accounts would be in this situation – hmm … guess you are expected to pay for each gas purchase with two checks – one for the personal use amount of gas and a business check for the business use portion.”
What a silly example. What fool would give a gas station attendant his/her check to pay for a gas purchase? Do you know of any gas station that would accept a check? If the business person uses the Standard Mileage Allowance he/she would just reimburse himself/herself from the business checking account for the appropriate business mileage. If the actual expense method were chosen the business portion of total auto expenses would be reimbursed.
One would expect you to use the usual courtesy of “Mr” in front of Flach when discussing me. You mention that I “took respectful disagreement” to your post. One would expect you to provide the same respect.
Rather than merely “pooh-poohing” me as one who does not understand “indies” just because we disagree I would prefer a serious discussion on the issue. You could, perhaps, explain why if you do not agree with my statement that an indie should “do as much as possible to give your self-employment activity the appearance of a real business entity so that the IRS does not come back and say that it is really a ‘hobby.’”
Regarding your other opponent - I am not a fan of Mr Pappas, and have myself felt his wrath, similar to your wrath, when I dared to disagree with him. I would agree with your reference to him as “Attila the Tax Lawyer”. It appears that he does not know how to express “respectful disagreement”.
To be fair I do not believe you advised corporate officers to pay business expenses with a personal check. I took your post to be concerned with self-employed individuals, LLCs or not, who file a Schedule C.
I totally disagree with his statement – “If you have a serious business, it’s unwise to operate as a sole proprietorship and probably malpractice for a lawyer not to point that out to his clients.” Lawyers in general like to tout corporations because of the additional legal fees involved in forming and maintaining a corporation.
Let me know when you want to conduct a serious and respectful discussion on this topic.
As of the time of this posting (4:00 PM EST) the above comment had not been published on Ms Walker’s blog, and therefore no response was provided. I will let you know if my comment ever does appear and what, if anything, Ms Walker has to say in rebuttal.
I would appreciate hearing from other tax professionals out there on the issue of using a business checking account. Who is right – Ms Walker or I?
FYI, Joe Kristan of the ROTH AND COMPANY TAX UPDATE BLOG has already weighed in on my side in his post “If You Have a Home Business, Should You Have a Business-Only Checking Account?” Joe says – “Mr. Flach gets it right. You will save yourself a lot of time at tax time, and a lot of grief in an IRS exam, if personal is personal, business is business, and that's that. Run your business like a business.”