Accounting Articles > Ethics:

Tax fraud, commingling of funds, and potential audit problems

If you have more than one taxpaying entity, the entities must be kept completely separate.

A corporation, for example, is a living, breathing “entity” under the law. It has it's own social security number, more commonly known as your Federal Employer Identification Number. It does it's own business. If the Corporation has a problem paying it's bills, then the owner can not be held responsible for those bills, unless they can pierce the corporate veil. But it's income and expenses must be kept separate from other entities.

You cannot deduct one company's expenses, on another one's income tax return. You cannot deduct your personal expenses off of the corporation. If you commingle funds, you are committing tax fraud. In doing so, you will pay additional tax, interest, penalties, and in extreme cases face jail time.

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