IRS Using Quickbooks to Audit Businesses
The IRS has purchased over 1,500 copies of QuickBooks and is training its agents how to use the software during tax audits. Revenue agents have started to request electronic copies of QuickBooks files during audits of businesses that use that software.
The Problems:
- A QuickBooks data file can contain years of information. While revenue agents have been instructed only to look at information related to the year under audit, there is no guarantee they will not look at prior years.
- Newer versions of QuickBooks keep a record (called an audit trail) of deleted and changed entries that is available to anyone with access to the electronic files.
- QuickBooks files may contain confidential customer, employee, and/or vendor information that would be open to IRS scrutiny.
The Solutions:
- Set up your business's accounting records in a clear and concise manner.
- Enter transactions in a timely and systematic fashion.
- Instead of deleting a transaction entered incorrectly, void the transaction and make a "memo" entry describing the reason for the correction.
- Do not post transactions to a "closed" fiscal period; doing so will change information previously filed with the IRS, resulting in an issue during an audit.
- There are third-party software programs available that can create new QuickBooks data files that contain only records for the period under audit.
We can help - Wouch Maloney has CPAs on staff who are also Certified QuickBooks Advisors. They provide the tax and accounting expertise of a CPA and the in-depth knowledge of a QuickBooks expert. We can help with software issues and prepare the business for an audit.
We will continue to keep you updated on the latest developments which may impact you and your business and would be happy to answer any questions you may have concerning the above. Please contact our Manager and Certified QuickBooks Advisor: Julie Shennard, CPA or you can call 215-675-8364.
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