Accounting Articles > Ethics:
Tax fraud and commingling of funds
If a taxpayer has more than one taxpaying entity, the entities must be kept completely separate.
Please understand that a corporation, for example, is a living, breathing “person” under the law. It has its own social security number, more commonly known as its Federal Employer identification Number. It does its own business. If the Corporation has a problem paying its bills, then the owner cannot be held responsible for those bills, unless they can “pierce the corporate veil.” But its income and expenses must be kept separate from other entities.
If you commingle funds, you are committing tax fraud. You cannot deduct one company’s expenses, on another one’s income tax return.
What if one company is tremendously profitable, paying income taxes at the 39% federal income tax level and another is showing a loss? It is illegal to put some of the expenses of the loosing corporation through the profitable one, reducing the tax that would have legally been due.
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