Myth: Customers Can Write Checks in My Personal Name

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Are you telling your customers to write checks in your name instead of your company's name? Then, you are in for a surprise.

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How does it happen?

It may seem like an honest process. 
  1. You accept a check from your customer written to your personal name instead of your company name,
  2. You deposit the personal check into the business bank account.
However, the customer is likely to issue a 1099 in your personal name because that's who they made the check out to — and for a good reason.

What's the big deal? You're racking up income under your personal name and social security number rather than inside the company which could undo the tax savings you were trying to accomplish.

TIP:  You cannot expect a customer to help you avert IRS attention to the payment transaction by helping you forge the IRS reporting form in another name.

Why does it happen?

Most small business owners believe they have the choice of using their personal name or the company name since they're an owner of the business (and listed on the signature card). Even though the bank may technically allow you to deposit these personal checks into your business bank account (especially if you're using a mobile app reader), it doesn't ease the tax problem.

In other scenarios, taxpayers try to avoid having a hold placed on a company check, or the bank does not allow them to cash a business check. So, they tell the customer to write the check in their personal name, then deposit it into their personal account.

How to stay out of trouble

Do not accept a check that doesn't display your company's name. If your customer mistakenly uses your personal name, return the check and have them issue a new one. Better yet, send electronic invoices with online payment options to avoid the issues of getting old-fashioned paper checks.

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DISCLAIMER: Please consult with your accountant, attorney and financial advisor before implementing any information displayed on this website. DIY research does not replace the advice of a licensed professional who has thoroughly reviewed your file.