how can i record a personal expenses in quickbooks

Where this can get tricky: Making personal purchases (like a haircut) on a business account is not a problem as long as you include the spending in your payroll as a fringe benefit. Suggested Reading: 7 Accounting Tips for New Small Businesses

In this scenario, once the IRS caught this kind of spending, they would treat this as disguised compensation, which would be subject to payroll taxes and potential interest and penalties owed down the road. You cannot deduct items like a haircut, a trip to the salon, or new clothes as a business expense, even if it is to look fresh for an upcoming business meeting. (For more on fringe benefits, be sure to check out The Ins and Outs of Fringe Benefits – What Is Non-Taxable?on HR and payroll provider, Justworks’ blog.) The IRS’s Employer’s Tax Guide to Fringe Benefits defines a fringe benefit as “a form of pay for the performance of services.” In their eyes, this personal expense is just as much a form of compensation as their salary. Instead, if you were to purchase personal items through a company account, they should be fringe benefits that are subject to payroll taxes. This is known as “commingling your books” and is a huge no-no as well as one of the most common ways businesses find themselves on the barrel end of an IRS or state audit.Īccording to the IRS, personal expenses are not eligible business expenses deductible against taxable income. One of the most common problems we see from startup founders who are first moving away from DIY accounting is a wide range of “personal transactions” being made with the business accounts.

How can i record a personal expenses in quickbooks