Can I Put This Through My Business?

“But I bought it while I was working...” doesn’t automatically make it a business expense.

If I had a dollar for every time a business owner asked me:

“Can I put this through my business?”

Well... I’d probably have another business. 😂

It’s one of the most common questions I get, and honestly, it’s a good question to ask.

Business owners spend money all day long. You’re stopping for gas, ordering supplies, grabbing lunch, buying something at Home Depot, paying for your phone, replacing equipment, ordering from Amazon and occasionally buying something that lands somewhere in that lovely gray area between business and personal.

Here’s the important part:

Paying for something with your business account doesn’t automatically make it a business expense.

And buying something while you’re working doesn’t necessarily make it one either.

Start With One Simple Question

When you’re unsure about a purchase, start here:

Why did my business need this?

That sounds almost too simple, but it usually gets us headed in the right direction.

If you’re a contractor buying lumber for a customer’s project, the business purpose is pretty obvious.

Accounting software for the business? Pretty obvious.

Tools you use in your trade? We’re getting somewhere.

But what if you stop for lunch while you’re working?

Buy clothing you also wear outside of work?

Purchase something for your house while you’re already at Home Depot buying job materials?

Fill up a vehicle that’s used for both business and personal driving?

Maybe. Maybe not. The circumstances matter.

That’s when I need more information.

The receipt alone doesn’t always tell me the whole story.

“I Used My Business Card” Isn’t the Test

Your business debit or credit card tells me how you paid for something.

It doesn’t necessarily tell me what you bought or why you bought it.

If you accidentally use the company card to buy groceries, QuickBooks doesn’t magically turn groceries into Office Supplies. 😂

And please don’t pick a random expense category just because QuickBooks wants you to choose something.

Tell me what happened.

Personal purchases paid with business funds can generally be identified and recorded as owner-related transactions rather than simply being treated as ordinary business expenses. Exactly how they should be handled can depend on the business structure and circumstances.

That’s another reason I need to know what a transaction actually was.

Bookkeeping and Tax Deductibility Aren’t the Same Question

This is an important distinction:

Something can belong in your bookkeeping without necessarily being deductible on your tax return. Those are two different questions.

My job as your bookkeeper is to understand what happened, document it appropriately and make sure your books accurately reflect the activity of your business.

Whether something is deductible, partially deductible or subject to special tax treatment is a different question.

That’s where your qualified tax professional may need to come in.

Good bookkeeping gives your tax professional good information to work with.

The Opposite Can Be True Too

Here’s something business owners don’t always realize:

Using your personal money doesn’t necessarily mean a legitimate business purchase should be left out of the books.

Maybe you were at the store and accidentally used your personal card.

Maybe you paid for a business subscription personally.

Maybe you bought materials before your business bank account was open.

Don’t automatically leave those purchases out of your bookkeeping.

Tell your bookkeeper.

There may be an appropriate way to record a business purchase you paid for personally.

Again, how it’s handled can depend on the business structure and circumstances. But if you never tell me it happened, I can’t account for it.

Some Purchases Need More Than a Yes or No

Not every transaction fits neatly into:

BUSINESS ✓

or

PERSONAL ✗

Vehicles are a great example.

So are cell phones, internet service, travel, meals, home-office costs and purchases with both business and personal use.

There can be specific rules about whether and how these expenses are treated for tax purposes.

That’s where I draw a line between bookkeeping and tax advice.

I’m your bookkeeper. I’m not going to invent a tax rule because we’d really like something to be deductible. 😂

I’ll help figure out what the transaction was, make sure we have the information we need and record it appropriately in your books.

When the question becomes whether it’s deductible, how much is deductible or what tax treatment applies, that’s when we may need to confirm it with your qualified tax professional.

Please Give Me More Than “Amazon”

Here’s another favorite:

AMAZON: $287.43

Okay.

What did we buy? 😂

Amazon could be:

Office supplies.

Tools.

A computer monitor.

Cleaning supplies.

Materials for a job.

Birthday presents for your kids.

Dog food.

Or somehow all of the above on the same order.

The merchant name isn’t always enough for me to determine what belongs where.

The same thing happens with Costco, Walmart, Target, Lowe’s and Home Depot.

If the purchase isn’t obvious, save the receipt and give me a little information.

You don’t have to write me a novel.

Something as simple as:

“Materials for Smith job.”

“New drill for work.”

“Personal. Used company card by mistake.”

Perfect.

Now I know what happened.

Please Don’t Hide Things From Your Bookkeeper

Accidentally used the business card at Target?

Tell me.

Paid for something for the business with your personal card?

Tell me.

Don’t remember what that $327 purchase was?

Tell me that too.

I’m not here to judge what you bought, and I promise I’ve probably seen worse. 😂

What I need is accurate information.

I can work with accurate information. I can’t work with information I don’t have.

And please don’t make something fit into Office Supplies just because you don’t know where else to put it.

We can figure it out.

Mixing Business and Personal Creates More Work

Will your books burst into flames because you accidentally bought something personal with your business card?

No.

But when it happens constantly, it creates unnecessary bookkeeping work and makes your financial reports harder to understand.

The cleaner approach is pretty simple:

Use business accounts for business purchases and personal accounts for personal purchases whenever possible.

Keep a separate business bank account.

Use a separate business credit card.

Save your receipts and documentation.

And when you accidentally cross the streams, tell me what happened instead of trying to hide it in Office Supplies.

Again... I promise I’ve seen worse. 😂

Your Financial Reports Should Tell the Truth

This is the bigger reason I care about all of this.

Your financial reports aren’t just something we create for tax time.

They should actually tell you what’s happening in your business.

If personal purchases or incorrectly classified transactions are mixed into your business expenses, your Profit & Loss can give you a distorted picture.

You may think your business costs more to operate than it really does.

Your profit may appear lower.

Certain expense categories may look unusually high.

And eventually, someone may have to untangle everything to figure out what actually happened.

Good bookkeeping isn’t about trying to make every transaction deductible.

It’s about accurately recording what happened.

That gives you better information about your business and gives your tax professional better information when it’s time to prepare your return and make tax decisions.

When You’re Not Sure, Ask

You don’t need to memorize every bookkeeping and tax rule.

That’s why you have people helping you.

If you’re staring at a purchase thinking:

“Is this business or personal?”

Ask me.

Tell me what you bought and why.

Sometimes the answer will be easy.

Sometimes I’ll need a little more information.

And sometimes I’ll tell you:

“That’s one we should confirm with your tax professional.”

That doesn’t mean there’s something wrong with the purchase.

It just means the tax treatment may depend on facts that go beyond simply categorizing a transaction in your bookkeeping.

I’d much rather have you ask than guess.

And please don’t choose “Miscellaneous Expense” just because you don’t know what else to do with it. 😂

The Bottom Line

The question isn’t simply:

“Did my business pay for this?”

A better place to start is:

“What was the business purpose?”

Keep business and personal spending separate whenever you can.

Save documentation for your business purchases.

Give your bookkeeper enough information to understand unusual transactions.

Tell us when you accidentally use the wrong card.

And don’t leave legitimate business purchases out of the conversation just because you happened to pay for them personally.

When you’re not sure?

Just ask.

That’s part of what I’m here for.

Have a Bookkeeping Question You Keep Googling?

You don’t have to figure everything out before you call me.

Whether your books need ongoing attention, you’re trying to clean up a mess, or you simply need someone who will actually answer your questions, let’s talk about what’s going on with your business.

Bookkeeping Stress? Call Jes.

Bookkeeping by Jes
Small Businesses • Construction Trades

Call or Text: (916) 730-7054
Book a FREE Call: CallJes.com/Get-Started

This article is for general bookkeeping and educational purposes only and is not tax, legal or financial advice. Whether an expense is deductible, partially deductible or subject to special tax treatment depends on the facts and circumstances, including your business structure and how the expense is used. Your bookkeeper can help make sure transactions are properly documented and recorded, but questions about tax deductibility or tax treatment should be confirmed with a qualified tax professional. Consult an attorney when legal advice is needed.

Category: Bookkeeping Basics
Secondary Category: Small Business Tips