IRS audit (odd request 1st visit)

[ILLMAS]

Does anyone else see it kind of odd that an IRS auditor is requesting a quickbooks backup for the first visit?  I am wondering what type of fishing expedition they are going to be doing.

[jklcpa]

I wouldn't give the auditor that level of access to the company's books. You should control the access and flow of documentation requested and provide it in hard copy. The auditor wants to drill down into the transactions to see what else is to be found.

[Gail in Virginia]

You might want to read this article in the Journal of accountancy: http://www.journalofaccountancy.com/issues/2012/jan/20114540.html.  I found it by googling IRS and Quickbooks.  While I would prefer not to just hand over the quickbooks, i am not sure there is realistically any choice.

[BulldogTom]

This was mentioned at one of my update seminars.  The auditors realize that they can go back to all prior years and look at the bookkeeping for inconsistencies in the accounting because QB keeps all years in the file.   Limit the information you give them to the years at audit.  Make up any story to not let them have the full file.

Tom
Newark, CA

[jklcpa]

I do remember that from seminars and articles too. The problem is that unless we keep a separate file or backup that ends with each year's transactions, giving a more current file will include more activity for periods more current than just the year being audited. Also, unless years earlier than the audit period have been condensed, that allows the auditor access to that as well.

[Lee B]

What they are also looking for is when JE's were posted.

Some decisions in accrual C Corps cannot be be made and posted retroactvely, for example, profit sharing bonuses

calculated and posted during the Corporate Tax Return Preparation Process.

[Lion EA]

I'm not a QB expert, but starting with about version 2012, QB has an option to carve out one or more years for this very reason, so you can give the IRS auditor the QB file for the year(s) he requested but no more.

The IRS bought a bunch of QB licenses and trained some of their auditors in QB.

[Jack from Ohio]

Restore QB from the end of the year being audited.  No entries for years after.  Then, close out all prior years.  In order for anyone to see the prior years info, they will need the associated password.  The agent will only be able to see the year in question information.

If your client does not have backups for the end of each year in his archives, he is SOL.  If he does not have backups, THAT is not your issue.

After you close all prior years, create an accountant copy.  Then create a .qbm backup file to give to the auditor. This copy will not be able to be modified.

[Abby Normal]

"Oh, we had a computer crash and had to start our QB file over from scratch. No, no backups either. Here's a PDF of my general ledger for that year."

The IRS will also be looking for deleted invoices that might have been paid in cash.

[SFA]

QuickBooks Online version does not backup to a flash drive (from my understanding). So the only way for an IRS agent to access the QB Online file is to ask for the password? Who gives out passwords? Perhaps it may be time to convert files to QB Online and discard the old (and obsolete) backups.

[Abby Normal]

Except QB online is HORRIBLE!

 

[Lion EA]

Limit QB copy for IRS audit

My client is being audited by IRS- The agent wants an electronic version of the books - basically a copy of the QB file.  Is it possible to limit the backup to only include the transactions relevant to the year being audited?  We are trying to avoid a "fishing expedition" but also want to get this audit over with asap.  Any suggestions?

 

 

• Asked byDEjan728
• QuickBooks Accountant 2012
•  3 years ago

Options

 RECOMMENDED ANSWER

1 person found this helpful

Using your accountant's version, you can create a "period copy" including only the year being audited.  

File > Utilities > Condense Data.  Remove transactions before and after the year needed.

Was this answer helpful? Yes No

Memere

 AllStar  3 years ago

 1 comment

Thank you!!

• DEjan728
•  
• 3 years ago

View more

ANSWER

Read in Help on "Period Copy."

Also, look here:

http://longforsuccess.com/2011/09/10/quickbooks-accountant-2012-create-a-period-copy/

[Richcpaman]

You can also transfer your QB Online edition into the Desktop version, and then run it thru the condense process noted above.

Much detail is lost in this translation.  So far, it is the only reason to like the QB Online edition.

Rich