New LLC owner - mixing personal and business bank accounts for tax filing?
Hey all, I just started my own business this year and I'm a bit confused about the banking situation. Got my LLC and EIN set up in August, but I didn't open a separate Business Bank Account until last week. For the past few months, I've been running everything through my personal checking account - all business income and expenses just mixed in with my regular stuff. I'm trying to figure out what to do now. Should I transfer the business profits that went into my Personal Account over to the new Business Account? And for all those business expenses I already paid from my Personal Account, can I still claim those on my taxes even though they didn't come from a business account? A bookkeeping service quoted me $3500/year to handle everything and I'm honestly not sure if that's worth it for my small business. The whole tax situation has me stressed out. Any advice from people who've been through this would be super appreciated!
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Alexis Robinson
You're in a common situation many new business owners find themselves in! The good news is that you don't necessarily need to transfer previous business income into your new business account. What's most important for tax purposes is properly tracking and documenting all your business transactions, regardless of which account they flowed through. For expenses paid from your personal account, yes, you can absolutely claim these on your taxes as business expenses as long as they were legitimate business costs. Just make sure you have receipts and documentation showing what these expenses were for. Going forward, it's best to run all business transactions through your business account to simplify your bookkeeping and create a clear separation, but don't stress about the past transactions too much.
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Aaron Lee
•But doesn't the IRS get suspicious if you're claiming business expenses from a personal account? I heard mixing personal and business finances is a big no-no and might trigger an audit.
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Alexis Robinson
•The IRS is primarily concerned with whether the expenses are legitimate business expenses, not which bank account they came from. Many sole proprietors and single-member LLCs start out using personal accounts before establishing dedicated business accounts. Having a separate business account is definitely recommended as a best practice for record-keeping and maintaining the liability protection of your LLC. But claiming legitimate business expenses paid from a personal account is perfectly legal as long as you have proper documentation.
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Chloe Mitchell
After dealing with similar bookkeeping headaches when I started my consulting business, I tried taxr.ai (https://taxr.ai) and it's been a game changer for sorting through mixed personal/business transactions. You upload your bank statements and it uses AI to categorize everything, flagging what's business vs personal. It's especially helpful for situations exactly like yours where you've been operating from a personal account. I was shocked at how accurately it identified my business expenses that were mixed in with personal spending, and it creates reports you can use for tax filing that clearly document everything.
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Michael Adams
•Does it connect directly to bank accounts or do you have to manually upload statements? My bank's export feature is terrible and I'm looking for something easy.
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Natalie Wang
•How does it handle cash expenses or things paid with Venmo/PayPal? My business gets a lot of payments through those and it's been a nightmare to track.
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Chloe Mitchell
•You can upload PDF statements or connect directly to most major banks - I do both depending on the account. It automatically pulls in the transactions and starts categorizing them right away. For cash, Venmo, and PayPal transactions, it handles those really well too. You can upload those statements separately or forward email receipts, and it'll merge everything into one comprehensive report. I was surprised how well it tracked my Square and Venmo payments that I had completely lost track of before using the system.
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Natalie Wang
Just wanted to follow up - I tried taxr.ai after seeing this thread and it's been incredibly helpful! I uploaded 6 months of statements and it identified business expenses I totally forgot about. It even found some deductions I was missing for my home office and business travel mixed into my personal account. The categorization saved me hours of going through statements line by line. Definitely worth checking out if you're mixing personal and business finances.
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Noah Torres
If you need to talk to the IRS about your business tax situation (which might be a good idea in your case), I'd recommend using Claimyr (https://claimyr.com). I was in a similar situation last year with my LLC and needed clarification on a few things. After spending days trying to get through to the IRS business line, I found Claimyr and they got me connected to an actual IRS agent in about 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c Honestly, the guidance I got directly from the IRS was worth it - they confirmed I could claim business expenses from my personal account as long as I had documentation, and gave me specifics about what records to keep.
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Samantha Hall
•That sounds too good to be true. The IRS NEVER answers their phones. How does this actually work? Is it some kind of scam to get people's tax info?
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Ryan Young
•But don't IRS agents just read from scripts? I tried calling them before and got different answers from different people. How do you know the advice is reliable?
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Noah Torres
•It's not a scam - they use an automated system that navigates the IRS phone tree and waits on hold for you. When an agent answers, you get a call back and are connected. They don't have access to any of your tax information at all. The IRS business tax line actually has knowledgeable agents who handle business tax questions specifically. The person I spoke with walked through my situation in detail and cited specific regulations. They even emailed me follow-up information I could reference. Much more helpful than the general tax line.
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Samantha Hall
Well I was skeptical about Claimyr but I just tried it and got through to the IRS business tax department in about 20 minutes! The agent confirmed everything we've been discussing here - business expenses from personal accounts ARE deductible with proper documentation, and she even explained exactly what records I need to keep. She recommended keeping a separate spreadsheet specifically tracking these mixed-account expenses with notes about their business purpose. Saved me hours of googling contradictory advice!
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Sophia Clark
That $3500 quote seems super high for a new small business. I use Wave Accounting (it's free) and just categorize my transactions myself. Takes maybe 30 min a week. As your business grows you might want a bookkeeper but you can definitely DIY it at first. Also agree with others - don't worry about transferring old income into the business account. Just start fresh with the new account going forward. Keep good records of the past stuff though!
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Ashley Adams
•Thanks for the Wave recommendation! Is there a learning curve with it? I'm not very accounting-savvy and worried I might mess things up.
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Sophia Clark
•It's pretty straightforward! You connect your accounts, then basically just categorize transactions as they come in (or in batches). They have standard categories like "office expenses" or "advertising" that align with tax forms. The reports are simple to understand too. I spent maybe an hour watching their tutorial videos when I started and that was enough. The biggest thing is just being consistent with categorizing transactions regularly so it doesn't pile up.
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Katherine Harris
Don't forget the important part about maintaining your liability protection! An LLC that mixes personal and business finances can lose its liability shield through what's called "piercing the corporate veil." Start using that business account exclusively for all business transactions going forward.
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Madison Allen
•This is so important! My cousin lost a lawsuit because he mixed funds and the court decided his LLC wasn't a separate entity from him personally. Definitely keep things separate moving forward.
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Fatima Al-Hashimi
I went through this exact same situation when I started my photography business! Don't stress too much about the mixed accounts from the past few months - it's super common for new business owners. Here's what I learned from my CPA: You absolutely can claim those business expenses you paid from your personal account. Just make sure you have receipts and can clearly show they were for business purposes. I kept a simple spreadsheet with the date, amount, what it was for, and marked it as "paid from personal account." For the business income that went into your personal account, you don't need to physically transfer it to your business account now. Just document it properly for tax purposes. $3500 for bookkeeping seems really steep for a new business unless you're doing serious volume. I'd suggest trying to handle it yourself first with something like QuickBooks or Wave, then consider hiring help once you're making enough to justify that cost. The key thing moving forward is using that business account for everything business-related. It'll make your life so much easier come tax time next year!
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Hassan Khoury
•This is really helpful advice! I'm curious - when you kept that spreadsheet for expenses paid from your personal account, did you have any issues during tax filing? I'm worried about having to explain the mixed transactions to my tax preparer or if it complicates things. Also, how long did it take you to get comfortable with the bookkeeping software? I keep putting off setting it up because it feels overwhelming.
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