Co-Mingling Rental And Personal Income
REM #F650
By Ilyce R. Glink
Summary: A reader deposits the checks collected for rent into their checking account. Is there a problem when co-mingling personal and investment finances? Ilyce explains where the reader may run into trouble.
Q: My husband collects the rent from our rental building and puts it into a
business checking account.
All our bills are paid out of that account. Is that a legal thing to do? Don't
we need to have a separate personal checking account for our bills?
A: It sounds as though you're co-mingling the income from the
rental property with your personal money. That's okay to do unless you've set
up a corporation of some sort to own your rental business.
If you have a separate corporation or business structure, then you'd need a
separate checking account. Otherwise, the income can come in and expenses for
the business can be paid out of your checking account.
What you need to do is keep very clear records about how much rent you're receiving
from the property and the expenses you're paying out. Ddo you give rent receipts
to your tenants and keep a copy for yourself? That's one way to document what
you're receiving. You might also want to think about setting up an electronic
expense program, perhaps QuickBooks, from Intuit, that will help keep your income
and expenses right down to the penny.
If you ever get audited, you'll need to show the flow of money for the property,
and this will help.
If the property is held by a corporation, such as 123 Flower Street, Inc., then
you'd need a separate checking account for the business.
Talk to your husband about the ownership of the property and then spend some
time with your accountant, or tax preparer. If the property is worth some money,
and you plan to leave it to your children someday, you may also want to talk
to an estate attorney about various strategies that can minimize any tax bill
that may come due down the line.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO
Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted,
resyndicated or redistributed without written permission from the publisher.
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