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Separating business and personal funds
Mixed transactions make it harder to explain business income and expenses. Start by identifying each receipt and payment, then establish a repeatable separation process for the accounts.
This guide describes common bookkeeping practice, not a legal or regulatory requirement.
Last reviewed:
General information, not legal or tax advice.
Give business receipts a clear destination
Publication 583 recommends a business checking account separate from personal checking and depositing business receipts there. Record whether a deposit is sales income, personal money or borrowing. The source description matters because the bank feed alone may not identify what the business received.
Sources: IRS Publication 583 (12/2024), Starting a Business and Keeping Records
Flag personal spending during transaction review
The IRS directs separation of personal and business portions of mixed expenses and notes that the personal portion is generally not deductible. Keep the receipt and explanation with the entry. Ask your CPA or bookkeeper about the appropriate owner-account treatment rather than classifying everything charged to the business card as an expense.
Sources: IRS Publication 334 (2025)
Reconstruct a mixed account from documents
Publication 583 identifies invoices, receipts, deposit slips and canceled checks as supporting records. Review the account transaction by transaction and mark unresolved items for the owner. Avoid guessing based on merchant names; a single supplier may sell both personal and business items.
Sources: IRS Publication 583 (12/2024), Starting a Business and Keeping Records
Keep the separation working after cleanup
Publication 334 also recommends proper invoicing and a separate business account. As ongoing practice, reconcile the accounts and request explanations promptly when personal funds enter the business. Discuss legal entity-protection questions with an attorney; this guide addresses the bookkeeping record rather than legal consequences.
Sources: IRS Publication 334 (2025)
Sources: give business receipts a clear destination
Clean up mixed business transactions
Tidwell helps reconcile the books and organize supporting schedules for your business decisions. We work with your CPA on tax questions and the financial records they need.