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Can Treasurer link his bank account to HOA's?

Started by GaryU • 9 replies • 2306 views

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GaryU (California)
Posts: 1
Posted:
It has been discovered that our last HOA Treasurer linked his bank account to that of the HOA so that he
could get "free" checking for both accounts. This is in California. Savings to the HOA was approx. $15 per month.
New Treasurer feels this is unethical and may even be illegal. Appreciate any info. Thanks.
TimB4 (Tennessee)
Posts: 21,059
Posted:
I would certainly consider it unethical. At the very least, it would have been a conflict of interest (since the Treasurer benefited financially from the linked accounts).

Questions:

Did the linking occur because the Treasurer could get free checking or so the Association could get free checking?

Was the linking approved by the Board (check the minutes)?

You posted the HOA benefited by this action, would it have qualified if they weren't linked?

Has the new Treasurer has unlinked the accounts?

Since your in CA, I would suggest reviewing the ethics section of Davis-Stirling.com's Board Members web page.

BruceF1 (Connecticut)
Posts: 2,535
Posted:
Quote:
Posted By GaryU on 09/27/2012 3:42 AM
It has been discovered that our last HOA Treasurer linked his bank account to that of the HOA so that he
could get "free" checking for both accounts. This is in California. Savings to the HOA was approx. $15 per month.
New Treasurer feels this is unethical and may even be illegal. Appreciate any info. Thanks.

I'll have to admit, this is a new one in my experience, but my guess is the IRS would consider it illegal activity and the benefit each received (the treasurer and the HOA) would be taxable income for both (and likely was never reported as such on their returns). Sorry, as a professional tax preparer, I tend to think that way.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
I am curious how the linking occurred? Define the link. I know that after I refinanced my house at a new bank, I was able to open an account there with similar benefits. Although the money for the mortgage does NOT come out of that account. So I get to enjoy a free checking but the two accounts aren't tied together. It's just a sales option to get more customers at that bank. I am thinking that the bank offered an option of if you bring more accounts to their bank, then you get free checking. They probably then setup the HOA account as this "new" account/customer to get that perk. It's NOT that they are using the same account. Just tell a friend/bring a friend and we will give you this...
Former HOA President
SteveM9 (Massachusetts)
Posts: 3,699
Posted:
Depends..... is the HOA bank account in his name and social security number? Or is the bank account under the HOA and EIN number with him as a signatory designee?

If he put the account in his name & SSN#, yes, this is very wrong, illegal, etc, because all the money belongs to him, not the HOA.
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By GaryU on 09/27/2012 3:42 AM
It has been discovered that our last HOA Treasurer linked his bank account to that of the HOA so that he could get "free" checking for both accounts. This is in California. Savings to the HOA was approx. $15 per month.
New Treasurer feels this is unethical and may even be illegal. Appreciate any info. Thanks.

I lived in California for a time and had both personal and corporate accounts at the same bank. I do not recall asking for this, but Wells Fargo linked my corporate accounts to my personal accounts. That is, when I logged in to their site with my user name, I had access to all my personal and corporate accounts. There was no separate login for the corporate account. Are you certain that the former treasurer caused this to happen or did the bank do this on their own because he was the authorized signer?

BruceF1 (Connecticut)
Posts: 2,535
Posted:
A person has to be very careful not to mix business and personal funds or accounts. I had a client this year who had his social security and veteran's disability payments automatically deposited into his business account. Guess what? The IRS considered those payments to be business income!
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By BruceF1 on 09/27/2012 2:17 PM
A person has to be very careful not to mix business and personal funds or accounts. I had a client this year who had his social security and veteran's disability payments automatically deposited into his business account. Guess what? The IRS considered those payments to be business income!

Did he at least get free checking?

I find the IRS' conclusion hard to believe, especially if the guy is a sole proprietor. Business income is based on where it came from and not what checking account it was put into. Social security and veteran's disability are personal income no matter which bank account they went into. If your client had been paid in cash for doing a job, it would still be business income even though the money never went into his business checking account. Bank statements are not a substitute for a general ledger. I am not endorsing the idea of putting non-business items into a business account, but in this case I think the IRS was as wrong as your client.

BruceF1 (Connecticut)
Posts: 2,535
Posted:
Quote:
Posted By LarryB13 on 09/27/2012 6:58 PM
Posted By BruceF1 on 09/27/2012 2:17 PM
A person has to be very careful not to mix business and personal funds or accounts. I had a client this year who had his social security and veteran's disability payments automatically deposited into his business account. Guess what? The IRS considered those payments to be business income!


Did he at least get free checking?

I find the IRS' conclusion hard to believe, especially if the guy is a sole proprietor. Business income is based on where it came from and not what checking account it was put into. Social security and veteran's disability are personal income no matter which bank account they went into. If your client had been paid in cash for doing a job, it would still be business income even though the money never went into his business checking account. Bank statements are not a substitute for a general ledger. I am not endorsing the idea of putting non-business items into a business account, but in this case I think the IRS was as wrong as your client.


I agree. The problem was, this client never kept any books (general ledger). He simply relied on bank statements, cancelled checks, merchant account statements, etc. He would also deposit business income into his personal account and frequently made transfers back and forth between the two accounts whenever he needed funds in one account or another to keep them from being overdrawn (which didn't always work because sometimes he would be too late in making a transfer). Simply put, he had extremely poor business practices. Trying to do his schedule C was a nightmare! I think it also depends a lot on the mind-set of the IRS examiner.
KellyM3 (North Carolina)
Posts: 2,239
Posted:
Gary,

Simply, keep the accounts separate and far apart. It's not worth $15 per month.

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