Question

Even though the IRS tries to minimize occurrences, small business owners often intermingle business and personal expenses in order to minimize taxable income.

True

False

Answer 1

It is a true statement.

Yes small businesses often commingle business and personal expenses in order to evade taxes. In this way they often themselves the target of a IRS audit.

If we purchase personal item through the business accounts , these expenses are subject to taxes. For example, we cannot add an haircut, purchasing new clothes or a leisure trip in the business account. If we do this to evade taxes it is wrong, we can only do this if we add this as fringe benefits in the payroll and pay taxes on it accordingly.