A guest post by accountant, bassoonist, and piano teacher, Tairsa Mathews
To make your accountant VERY happy and your life easier at tax season, I would highly recommend having a bank account that is 100% for your business. You can have an actual business account and write checks from your business name if you choose to do so. Each bank functions a little differently, but most will ask for your business license and articles of incorporation (assuming you have an LLC) in order to open a business bank account.
When you keep a separate bank account just for your business income and expenses, your account can look at your bank statements for your account and know exactly what needs to go on your taxes. They don’t have to separate out what was personal use. There are certain expenses you can write-off as legitimate business expenses that lower your gross income and allow you to pay less in taxes. (I will give some ideas of what these are, but again, discuss with your accountant for specific issues).
When all business and personal bank activities are mixed together, someone gets to spend the time separating things at the end of the year. Depending on how much activity your business has, this could be quite the extensive process and provides a lot of opportunity for error. You will most likely end up paying more taxes than you need to if you let all of your personal and business expenses mix.