Wednesday, February 14, 2007

Recordkeeping and a Refusing Spouse

June:

I am starting a small business and I have a question regarding recordkeeping. I have a personal checking account, which I rarely use. I also have a joint account with my husband. We use this for all of our bills. My husband will not use the method you describe in your book,
SELF-EMPLOYED TAX SOLUTIONS ,of creating an audit trail. He refuses to deposit his entire paycheck and write a check to himself for cash. And most of "our" joint money will be helping me get on my feet. How do I handle this?

Thanks, Amy


Hmmmmm, Amy. I think this is more a marital relations question rather than a tax question, but I'll try. You said your husband "refuses, " so here are some questions to ask your husband:

  • If his boss told him to punch a time-card at work because it made for easier business recordkeeping, would he refuse?

  • In case of an audit, will he spend his days or weeks dealing with the IRS folks explaining the inflow and outflow of your household money? Or would he expect you to take on this task?

  • If the audit result were bad, does he not mind putting extra dollars in the government coffers rather than having done it the correct, easy, audit-trail way in the first place?

  • Is he not open about other family financial transactions?

  • Is he supportive of you and your business?

  • Does he take your new indie venture seriously? Or does he look at it as something to occupy your time?
Well, whatever he answers, you need to be creative in working with a stubborn husband.

What about this:[I'll make up some #s because I have none from you to work with.] Let's say he gets a $1,000 paycheck and keeps $200 out for spending money. Is there anyway that you could be a week ahead of him [maybe borrow the $200 from someone, if you don't have it]?
You be the banker. When he gets paid, have him deposit the entire check and you hand him the $200 cash. You then write out a check to cash for $200 to have ready for the next week.

I wish you much success in you new venture!

Best regards,
June Walker
PS to others: If you haven't read my book and so don't know why you should deposit the entire paycheck amount. please let me know.

3 comments:

Liz Downey said...

Hi June,
I haven't read your book yet and am wondering why you should deposit your whole check? Just today I made a deposit and withdrew $$ at the same time. Oops.

By the way, I just found your site and have been reading for the last hour. Thanks for the great info!

Liz

June Walker said...

Hi Liz,

Depositing an entire income check and then, if you need cash, writing out a check to yourself serves two purposes.

One, it makes your recordkeeping easier. Two, it leasves a clean, easy-to-follow audit trail for the IRS.

Let's say a client paid you $2000. When reviewing bank deposits or bank statements you'd see the $2000 deposit into your checking account. A $200 check to yourself lets you know that you had $200 cash to spend. Were you to split the check by depositing $1800 you have no bank record of what was actually paid to you and also no record that you had $200 cash to spend.

June Walker said...

PS to Liz:
Reading about taxes for an hour! My hat is off to you.