you are an independent professional.
The IRS classifies you as an independent contractor.
I call you an indie.”
You Do Not Need A Business Checking Account I advise indies, both as clients and as readers, that it isn’t necessary to have a separate business checking account – that it’s simpler, easier, and because of the nature of an indie venture, it works better just using a personal checking account for both personal and business needs.
Well, I know all you indies are smart enough to know that I am talking to you, advising you, teaching you. I am not addressing my advice to corporations. Pretty straightforward, one might think.
Many of you also know that my 30-years’ experience has shown me that most attorneys blatantly advise indies to incorporate for no good reason. And that incorporation often makes an indie’s life unnecessarily complicated and costs money in corporation set-up fees and tax preparation fees.
Also pretty straightforward, one might think.
In my post,
I have examined some of the reaction to that post in There’s no shortage of bad advice out there.
Much of the reaction, especially from lawyers, has been hot-air-ballooned into warnings about how the only safe business structure for indies is incorporation. We can talk more about that at a later date.
For now I want to address something else. As you, my indie readers know, I pressure you to present your questions carefully. Whether you’re a massage therapist, sculptor, IT consultant, psychologist, carpenter, writer, cruise ship entertainer, furniture refinisher, or astrologer when asking a question you will get an accurate, appropriate answer only if you provide the right information. Sometimes I’m pretty harsh about that. That’s because words mean something and accuracy is important. If careless with words not only will you likely get a wrong answer but carelessness with words makes for sloppy thinking.
That said, I can’t let Attila Attorney respond to my posts by being inaccurate in his quotes of what I said.
In his post here, Attila Attorney, Esq. wrote, and this is a direct, accurate quote:
“I recently wrote in a post titled Tax Advice, Legal Advice & Piercing the Corporate Veil that it would be legal malpractice for an attorney to advise his corporate and business clients to commingle their personal and business funds.
“I wrote the post in response to June Walker who had written a blog post titled You Do Not Need a Business Checking Account in which she proceeded to give that very advice to her clients and readers.”
The problem with Attila’s premise: My readers are indies, not corporations. None of my clients is a corporation unless I am in the process of dissolving the corporation for him or her. I never mentioned corporations in that post. And, with 30 years of accounting experience [He’d know that because my blog header says “since 1979”] I’d be pretty silly were I to say that corporations don’t need to keep completely separate business and personal records. That’s one of the reasons I advise my wedding photographer clients not to incorporate. Just ask Billy Bridesnapper. He’ll tell you.
Attila continued: “Ms. Walker responded with a post titled There’s No Shortage of Bad Advice Out There. In it, she reiterated her advice to commingle, corrected my grammar and called me ‘Atilla the lawyer.’”
No, Mr. Attorney, I did not advise "to commingle funds.” I said a business checking account was not needed for indies. Big difference.
This is similar to the faulty logic of many accountants and attorneys who tell indies you must have a profit in 3 out of 5 years in order to be a business. No way. The IRS says that if you have a profit in 3 out of 5 years you are a business. Think of it this way: If it’s your birthday you will get a gift does not mean that if you receive a gift it must be your birthday.
And one more thing about Attila. In his attempt at quoting me he said I called him “Atilla the lawyer.” The gods invented quotation marks to mean that the words in between them are exactly what the person said. What I said exactly is: “Attila Attorney.”
In my book Lily Legal wants to know if, because she writes her briefs at the dining room table, she can deduct the dining room as a home office. [She can not because she also has dinner parties there.] Maybe in my next book Lax Lawyer will be asking if his reading glasses are a business deduction because he keeps misreading quotes. [He can deduct them if he uses them only for business and has another pair for reading the funnies.]
Accuracy is important. Not just for indies, but equally for accountants and attorneys.
I have received many emails from indies and tax professionals. All the indies say how much easier it is to keep accurate records using one checking account. Most of the tax pros say it's wrong. One pro said I was engaging in "chick think." Wow! More about that some other time.
Please do read The Tax Lawyer’s Blog and the comments. You need to know the kind of advice that is out there so that you can make the right choices in choosing a tax or legal professional.