How to Defend Yourself When Your QuickBooks Files Are Part of an Audit

By Alan Olsen

The world of technology has changed just about every aspect of our lives. The tax and accounting world is no different. Thanks to online tax programs and software packages designed for accounting purposes, keeping a solid record of your important financial information has never been easier. However, the IRS is also aware of this and it too is getting its tech-groove on, so to speak.

QuickBooks Audit

According to several reports, the IRS has been busy training many of its agents on how to use QuickBooks, one of the most popular and commonly used accounting software packages. Why have they been doing this, you ask? It appears that the IRS is now including QuickBooks files as part of many of their audits. Can they do that? Unfortunately they can. However, there are some things you can do to protect and defend yourself against an IRS audit that includes your QuickBooks files.

Don’t Give Out Too Much Information

The first thing you need to remember is that you don’t need to hand over all of your information. Be sure to give them only what they ask for. In other words, if you have been using QuickBooks for several years, but the IRS has only asked you to include your records for a single year, then don’t offer up your files from any other year. Only give them exactly what they ask for.

Technical Help

If you have a good handle of QuickBooks then you can probably manage this yourself, but if you need a little help there are some online resources that you can use for a fee. It’s also important to remember to disable any online service connections you may have, like online banking.

Keep Your Files and Records Safe

You should never give the IRS agent the administrator password to your QuickBooks Files. You should create an external account user and give that information to the agent, instead. If the IRS agent asks for a hard copy of the information, never send it via email. Instead, make a copy on a DVD or CD and turn that over to the agent.

Other Tips

There are some other helpful tips to keep in mind in the event of an audit that includes your QuickBooks files. You can attempt to avoid handing over the entire QuickBooks data file and instead provide the requested info in Excel spreadsheets. If you refuse to give them the requested info in an alternate format, like a spreadsheet, the IRS may subpoena the entire data file. Another option is to ask your tax preparer to submit QuickBooks reports to the agent instead of the entire QuickBooks back-up file. One other pre-emptive move to make regarding your QuickBooks Files, in the event of an IRS audit: create regular back-ups so your data is consistently refreshed and saved.

Seek Professional Help

Any kind of IRS audit can be challenging, which is why it’s always a good idea to hire a tax professional to help you get through the process. Whether or not your QuickBooks files have been included in your audit, it’s a good idea to have experienced CPAs and tax advisors in your corner.