thanks everyone for your advice and thoughts
Just a note to anyone wondering about the personal bank account:
I did mention that it was a sole trading business. Not sure about america, but in Australia there is nothing illegal about having an account where personal and business expenses are both withdrawn, as long as the business expenses are kept track of and the reciepts are kept for 5 years. The ATO find nothing unusual about this, there are plenty of busineses that operate in this way. Auditing takes a bit longer if we require an audit, but there is nothing wrong or illegal about this practice.
My parents pay their taxes and do not owe any, they are always paid on time. So there are no problems in that regard.
I could be responsible if there was 'funny' stuff as I am the book-keeper, but there is none of that. The books are as clean as clean can be (I am responsible for the books, I would not do something that was illegal), it is just their money management skills that are lacking. So I am sorry if anyone got the wrong idea on the book keeping front, there is nothing happening there.
The main content of my post was aimed at the poor money management, nothing to do with the legalities of what they are doing.
update: financial family mess
August 25th, 2009 at 09:49 pm
August 26th, 2009 at 12:13 am 1251245633
That being said, we have the luxury not to take on any clients with bad money management skills. Mediocre bad is okay. Bad bad is just asking for trouble. I didn't read your last post, but I can understand why some would be concerned. Where there is poor money management, there are poor decisions made. & since that is more likely where fraud does occur, we don't touch it with a 10 foot pole.
Your situation is certainly a little different though. You know, it's family.
August 26th, 2009 at 01:16 am 1251249400
August 26th, 2009 at 02:03 am 1251252186
I assumed that if he had paid income taxes on all the money he withdrew for personal needs from the business account he would be acutely aware of how much he was paid (he would have to set aside taxes for that and it would be an important part of his tax situation).
We often make assumptions based on just the information we have. And I know, blogs are not meant to provide detailed picture, yet this is how human mind works - we just fill in the blanks with most probable scenario, which can sometimes be wrong.
August 26th, 2009 at 02:29 am 1251253778
i set the taxes aside as each job is paid for, otherwise there would be nothing left when it comes time to pay for them
he prefers to stick his head in the sand when it comes to his earnings, which are calculated on the profit of the business.
he doesnt think he is being 'paid' because he doesn't get a set amount each week, he refuses to realise that his 'income' (what the business makes) is his earnings, and that IS his wage. he just thinks he doesnt have any money ever. it's hard to describe that mindset to someone i know would never think like that