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IRS Is Now Requesting Copies of QuickBooks Data Files During Audit.

In the past an IRS agent would request printed reports and back up paper documents during an audit.  There is now the possibility that they will request an actually copy of your QuickBooks file not just your printed general ledger.  Here are some things you need to keep in mind.

1. In the newer versions of QuickBooks you CANNOT turn off the audit trail.  Therefore once you enter it in QuickBooks it is NEVER gone.  Like that picture from a presidential candidates “experimental” days it will resurface.  You can’t undo it.  So use caution as you enter things and forget about delete.

2. When you need to void a transaction make sure you memo why you voided it.  Did the client refuse to pay the invoice, did you give away the product, did the bookkeeper double enter something.  Put a memo because you won’t remember in three years why you did it.

3. DO NOT MAKE CHANGES TO TRANSACTIONS IN A CLOSED FISCAL PERIOD. If your taxes for last year have been prepared don’t make changes to that information.  If you do it won’t match what was filed with the state and federal government and come audit will be a problem.  Prevent changes by setting the closing date password under Edit>Preferences>Accounting>Company Preferences.  Check your closing date exception report (on accountant versions of QuickBooks only) or have your bookkeeper and/or accountant pull that report for you.

4. Just because someone sold the IRS agent a user license doesn’t mean they know how to use the software.  You may still need the advice of an accounting professional during an audit. The IRS auditors do make mistakes but not ones that most business owners or citizens would catch.  An accounting professional can help you through this process.

If you need help contact a qualified professional bookkeeper or accountant familiar with Quickbooks.

Best of Luck as Always

Meghan Blair Valero

Fogged In Bookkeeping, Nantucket

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3 Comments

  1. LisaErtman
    July 14, 2010

    Yes, I've heard this from multiple sources. This was requested of a client from my firm. On the lookout for a tool or tools to shrink a QuickBooks file into one year only for this purpose. There are services available to do this, but I would prefer software we could use in-house as needed.

  2. Lindsey (modchik)
    July 18, 2010

    So good to know as I am a 15 yr QB user and first time IRS audit recipient – ugh…so far I have only been asked for the paper trail. We'll see.

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