Small business owners risk heavy penalties and professional fees by mixing personal and business records, says CIBC.
In a report released by CIBC, Jamie Golombek says that while business owners often find it easier to deposit business cheques into a personal bank account, or to charge business expenses on a personal credit car, combining personal and business accounts is one of the most costly mistakes many new business owners make – a mistake that can cost thousands in tax penalties and professional fees.
“There is a lot to learn when starting your own business and there is plenty of room to make mistakes but one of the worst mistakes and simplest to avoid is not mixing business and personal expenses together,” said Golombek in a statement. “Having a separate bank account and credit card for a business will make tax time a lot easier and can also come in handy in the case of a Canada Revenue Agency business expense audit down the road.
“If you own a business you are required by law to keep adequate records,” he added. “Failing to do so can cause extra hours of paper work at tax time instead of focusing on your business and you could end up having to pay tax penalties.”
To make sure this does not happen, Golombek suggests the following tips.
“Taxation rules for businesses are quite complex and can change regularly,” Golombek said. “It is important to understand what the tax rules are, or better yet have an expert to look after your taxes for you.”