How Business Credit Cards Keep the Auditors Away

Do you know what you would do if the IRS came knocking at your door to do an audit? If you are like most people you would likely panic and hope there was nothing out of order in your tax returns that would cause problems. But are you sure? You may be afraid some of those 'guesses' you made about some of your billing and purchases that were on your personal credit cards could get you in trouble now.

This is one reason you should have business cards for your business instead of using your personal cards for this purpose. While it may seem easier to just use one card for everything, it could cause you a lot of problems in the long run.

Getting the Auditor's Attention

You may be thinking the last thing you want to do is to get an auditor's attention, but that is exactly what you may be doing if you are combining your personal and business expenses on one credit card. When the IRS sees this kind of activity it serves as a red flag for them that things may not be as organized or cut and dry as they seem. This could end up with you getting an audit notice so you can prove to them that the charges on your personal card that you claim are for business really are what you say.

Lower Your Liability

One thing to keep in mind when the IRS comes to look at the spending of your business is that if you have your personal and business expenses on the same card, you are going to have to let them see your personal spending as well. This could lead to them finding not only problems with your business filings, but also your personal IRS returns. Next thing you know, you could be in the midst of two audits. Instead, if you are using business credit cards, they can only look at your business accounts and you can keep them out of your personal spending.

Professional Credibility

Having business credit cards instead of using your personal credit card for your expenses allows you a new level of credibility in the eyes of everyone, including the IRS. While you may not think this is very important, it is. You want the IRS to see you as a business. If they don't, they may think you are just a hobbyist and they can decide you can't deduct any of your business expenses.

Keeping the Books

The final reason it's smart to have business credit cards is that these will afford you the ability to make record keeping easier. You also will likely be able to save some money on those accounting fees you pay. If all of your expenses are on one statement at the end of the month, they are much easier to sort out.

About the Author

Stephen Sikes is the owner of the credit card comparison site <a href="http://www.creditcardwave.com">www.CreditCardWave.com</a>. Visit the site to read articles and reviews on the best ways to utilize credit cards. You can compare and apply online for top personal and business credit cards.