Updated July 8, 2015
Is commingling funds illegal? Yes. If you have more than one taxpaying entity, the entities must be kept completely separate. A corporation, for example, is a living, breathing entity under the law. It has its own social security number, more commonly known as your 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 the creditors can pierce the corporate veil. But its income and expenses must be kept separate from all other entities.
You cannot deduct one company’s expenses, on another one’s income tax return. You cannot deduct your personal expenses off of the corporation. If you commingle funds, you are committing tax fraud. In doing so, you will pay additional tax, interest, penalties, and in extreme cases face jail time. Is commingling funds illegal? Should it be avoided at all costs? Absolutely yes.
If you are having problems with your the commingling of funds or have issues with your accounting in general, we would love to help. I love hearing from my readers, and can be contacted at
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Chris Amundson is the President of Accounting Solutions Ltd., a full service public accounting firm of Certified Public Accountants and Enrolled Agents handling the bookkeeping, accounting, tax preparation, and audit representation needs of Businesses, Estates, Trusts, and Upper Income Individuals.