Mistake can cost thousands in tax penalties and professional fees, CIBC report says
TORONTO—Combining personal and business accounts is one of the most costly mistakes many new business owners make—a mistake that can cost thousands in tax penalties and professional fees, according to a new CIBC report.
In a report focused on helping small business owners avoid key taxation mistakes, CIBC’s Jamie Golombek says that while business owners may find it easier to deposit cheques to a personal bank account or to charge business expenses to a personal credit card, these decisions can put them at risk.
“There is a lot to learn when starting your own business and there is plenty of room to make mistakes but one of the worst mistakes and simplest to avoid is not mixing business and personal expenses together,” Golombek said in a statement.
“Having a separate bank account and credit card for a business will make tax time a lot easier and can also come in handy in the case of a Canada Revenue Agency business expense audit down the road.”
To avoid any potential taxation issues, Golombek recommends keeping banking separate, maintaining good records and turning to professionals for advice in cases of confusion.
“Taxation rules for businesses are quite complex and can change regularly,” Golombek said. “It is important to understand what the tax rules are, or better yet have an expert to look after your taxes for you.”