Did you know the Internal Revenue Service can ask to see your bank statements?   It is important for you to understand why.  … Having a business is a little like having a child. Both the child and the business are a part of you, but they are also separate from you. … Are you a business owner? No matter how small a business, if you are in business, your business needs its own bank account. … You will deposit every penny, EVERY penny your business earns into that business bank account. You may want to have both a business checking account and a business savings account. When you have more money than you need to cover expenses, you can transfer that beautiful excess into your savings account. … When you deposit your business proceeds into your bank account, it should be easy to match those deposits to your sales records. In the accounting world, that is known as “tying” the deposits to the sales records. … When you transfer money from one account to the other, it is important to make a note to remind you that this is not new money being deposited. It is a TRANSFER from checking to savings or vice-versa.  … In the beginning of your business you may “seed” your account with your personal money. This is not business income. This is your investment in your own business. You may have other people invest in your business. If you give them shares of your business stock in return for their money, they are now a stockholder in your business. You want to be sure to record (make a note of) that transaction.  … There may come a time when you need to borrow money. When you take out a business loan to help fund your operations, the money you owe becomes a liability on your balance sheet.  This blog post is not about accounting, it is about your bank statements. The loan you receive is not income from the sale of your products or services. The loan is not taxable income. You want to make sure you are protecting yourself by making adequate notes about what money is going into your bank accounts. … When the IRS examines a business tax return, they often ask to see the bank statements. They want to know how much money is going into your bank accounts. They will examine your income records and match them to your bank activity. If you cannot prove that extra $10,000 was a loan from Aunt Mary, then that $10,000 could become taxable income in the eyes of the IRS Agent. And if you are in the 15% tax bracket, a $10,000 adjustment to your return could cost you $1500! You don’t owe tax on the loan.  Documentation is your protection.  … Remember, as an American, you are taxed on your WORLDWIDE income. Wages, business profits, interest income and dividends from stocks and bonds are just some of the types of taxable income. Transfers between accounts, loans, and gifts are generally not taxable. … I just want you to have the information you need to protect yourself when it comes to your taxes.