Why you should never mix personal and business expenses in your corporation?
Audit Tip: Do you know what one of the major reasons not to mix personal and business expenses? Has nothing to do with accounting, any bookkeeper in a second and allocate efficiently? It has to do with audits:
The main reason you want to keep your personal and business accounts separate, is so that during an audit you do not want to give the auditor any indication of mixing personal and business expenses.
They then have the power to request personal statements and bank accounts of the taxpayer, but also from all individuals connected in the house hold.
Everyone’s personal bank accounts and analyze them for anything that may look like income but may not be and thus not taxable.
The onus of proof becomes on you to prove otherwise and long after the transactions have taken place, proof is usually not available or misplaced. Be wary.
Should you go to tax court, judges do not look upon with favor fishing expeditions of CRA. Therefore , CRA has to prove why outside connections and bank accounts of third parties were requested. Explain that to your clients and they may think twice about co mingling receipts.