Sunday, June 27, 2010

QuickBooks Helping IRS Audit Your Books?

The IRS and Intuit are joining forces to make it easier to audit your small businesses. This information was provided from a recent liaison meeting. Does this allow auditors the ability to review QB data that is NOT within the audit scope allowing the audit to be expanded? Let me know your thoughts.


I was informed yesterday by a Revenue Agent that a national directive has been issued to all Revenue Agents to obtain a copy of the QuickBooks file for any taxpayer being audited who uses QuickBooks. Apparently each audit group has one license from Intuit.

What I plan to do is to use the utility feature to condense prior years so that no detail can be accessed. My audit is for 2008, but obviously other periods can be opened if they want. Hopefully this is not their intention....I have asked for a copy of the directive.

My main concern is the cost of audit representation for our clients if the IRS goes crazy with this. I would love to get your thoughts on this.


There have been some substantial changes in the last six to twelve months regarding the issues raised. The IRS has purchased 1500 to 2000 licenses from Intuit and will have one agent trained and licensed per group to assist others in the examination of taxpayers who use QuickBooks. Agents are instructed to obtain a copy of the taxpayer's data base for the year under examination only when it is necessary. This examination tool will not be used in all cases - it is the judgment of the examiner.

IRS has found that many taxpayers do not save hard copies of their records or the copies they have are incomplete. The Service also found that taxpayers reuse an old version and over write the prior year. The examiner may request the data base to verify the integrity of the internal controls. A definite problem could arise where a client thinks they have turned off the internal audit feature to avoid  tracking of adjusting entries but the program does not totally delete these items.

If the qualified representative (power of attorney) considers the Revenue Agent's request for the data base as totally unnecessary, he/she should speak to the agent's group manager. If the taxpayer/representative refuses to provide the data base and the revenue agent/manager determines it necessary, a Summons to obtain the information would be issued.

I spoke with our SB/SE national Technical Advisor for electronic records in our Exam Special Processes unit regarding the issue stated below. The Revenue Agent referenced in the question may have been referring to a memo issued by Monica Baker, the Examination Director, in late April announcing the implementation of the QuickBooks software availability to Revenue Agents. However, there is no written directive that has been issued instructing Revenue Agents to request the electronic data file in every instance where the taxpayer uses QuickBooks or other electronic records.

While Rev Proc 98-25 provides the authority for the IRS to request electronic records, in most cases (with exceptions), the Service will generally request the data file if some sort of electronic system was used. It is indeed up to the agent's and manager's judgment at the group level to make the request.

Although the data file generally retains information from the date of initial input to the date of backup which could obviously include multiple years in addition to the actual audit year, agents are instructed to look at the information only for the year under exam. If there is a decision to expand the examination to prior/subsequent years, then information for those years could be reviewed. As mentioned, using the cleanup utility condenses prior year information into a summary, rather than a detailed, format.

As the software finds its way into RA groups and more agents are trained in its use, we could definitely be seeing a trend in the way exams are conducted since so many small businesses use QuickBooks.

Gerry Kelly-Brenner
ID #94-06950
Senior Stakeholder Liaison Specialist
SBSE Communications, Liaison & Disclosure

Internal Revenue Service
1301 Clay Street, Suite 1090S
Oakland, CA 94612

The Tech Accountant

Wednesday, June 23, 2010

Just Checking

I came across a pretty interesting article today regarding making payments with checks versus using a new technology called "Peer-to-Peer" payments. Feel free to check out the article here.

Then take our poll (on the left) and let me know your thoughts.

The Tech Accountant

Monday, June 21, 2010

Using your “INTUITion”

Well one of the worst weeks for Intuit the makers of QuickBooks software is behind them (not without another “outage” on Saturday)and although I did get a chance to read all the comments from various media and social media outlets I will not provide an opinion regarding what happen. I will only provide questions/comments on how Intuit can possibly use their Intuition in the future to create better transparency and show that they actually care about their customers.

According to Brad Smith, CEO of Intuit in a statement from their website:

“I want to share with you what we know at this time about what happened. The disruption occurred during a routine maintenance procedure. An accidental but severe power failure during that procedure affected our primary and backup systems, taking a number of Intuit’s websites and services offline.”

Question Mr. Smith, would your intuition tell you not to setup redundant servers in the same location as your primary server? This is still the main question that is on everyone’s mind.

Some also feel that Intuit did not handle the outage in a manner befitting a large corporation. Specifically many individuals felt that they were left to find out information on their own since calls and e-mails to Intuit only provided canned statements that they were “working on” the problem. Personally from what I saw on social media, there was more “support” there than via taking the corporate route. Again intuition would tell one to handle P/R in a more efficient manner.

Well those are some of the issues that Intuit has to deal with at the present time. All in all their products work for most small businesses owners but as for recommending their cloud based offerings at the present time would require more research. Bottom line….cloud computing is here to stay. Small business owners interested in moving to the clouds should do their due diligence before selecting a cloud vendor.

Be sure to voice your opinion or check out the comments on Intuit’s website.

The Tech Accountant

Wednesday, June 16, 2010

Intuit and Sage not ready for SaaS?

I was initially going to post a video today about ways to use Sage’s Peachtree small business accounting software for your small business, but their rival Intuit and their problems will put that post to the back burner for awhile. Now back to Intuit’s problems. Today I received an e-mail from Intuit that stated the following:

“I wanted to make you aware that there is currently a large outage in the San Diego Data Center and as a result many of our sites such as,,,, Payments, TurboTax, etc. are down. Intuit is actively working the problem. I'll send out an update when I hear about a resolution.”

The outage is surely affecting millions of small business owners (since QB has the largest share of the small biz market) who can’t have their businesses grind to a halt. The question is when will Intuit have the problem resolved and is this something we can expect from Intuit in the future?

Earlier in the month Sage (the makers of Peachtree) also had an outage of their online systems that affected their e-mail, order entry system and customer relationship management (CRM) software. The outage lasted 22hrs and according to the e-mail that I received they isolated the issue and are working to fix the problem. You can find more information here.

With a vast majority of small business vendors taking their products/services to the clouds (online) via software as a service (SaaS) will these “outages” make small businesses push away from using cloud based solutions?

Feel free to let us know if you are losing time and money due to the Intuit's or Sage's outages.

The Tech Accountant

Monday, June 14, 2010

S-Corp’s…a change may be a coming

Those professional small business owners that have organized their businesses as S-Corporations may want to take a look at the American Jobs and Closing Tax Loopholes Act of 2010. Contained within that bill is a little provision that will have a big consequence for professional corporations that are organized as S-Corps. Professional corporations consist of doctors, lawyers, architects, engineers and the like and if the new law is passed, the profits for these small business professional corporations will be taxed (currently proposed to be 15%).

Why Professional S-Corps should care?

Currently S-Corps owner/shareholders can minimize their tax liability by taking part of their earnings from “reasonable compensation” and the rest from distributions from profits. Reasonable compensation is taxed thru payroll and distributions are not subject to payroll taxes. With the passage of this bill, distributions will now be taxed. There are tests that must be tried to see if your S-Corp will be deemed a disqualified S-Corp so be sure to speak with your tax advisor to see if your S-Corp is considered disqualified.

What’s a Professional S-Corp to do?

Now is the time to contact your senator and tell them your thoughts about the proposed changes for professional S-Corps. If the bill is finally passed, there may be a chance that some professional S-Corps will close down in the coming years.

The Tech Accountant

Friday, June 11, 2010

Save the Paper...IRS does not want it

The IRS does not want your paper anymore. Attached is an audio file below that outlines how the IRS is moving toward a paperless processing environment. By embracing less paper the IRS can save millions. If it save them millions just think how much it can save you and your small business. Enjoy.


The Tech Accountant

Tuesday, June 08, 2010

Mixing Business with Pleasure

Most of the time accountants are advising their clients to be careful when mixing business expenses with personal expenses. Whether it is comingling business and personal funds or paying for personal expenses with business funds mixing of business and personal is a sure fire way to get a visit from your friendly IRS auditor.

When may you ask is it ok to mix business and personal? Typically it is ok to mix the two when the expense has a valid business purpose. Take for example summer travel. If your travel is necessary to the operation of your business entity and the destination is a typical vacation spot, you will technically be mixing business with pleasure (so that’s way most my accounting conferences are in Vegas).

Below is a brief audio on mixing travel business trips with pleasure. Enjoy.

The Tech Accountant


Thursday, June 03, 2010

The IRS is Open this Saturday

For many taxpayers that are having problems with the IRS, speaking with them is one of the last things they want to do. However this may be the best course of action to resolve one’s tax problems. If you fall into one of the following categories, the IRS will be available to help you this weekend. If you:

• received a notice seeking additional information
• cannot pay a tax balance due
• need assistance with offers-in-compromise
• are struggling to complete a certain IRS form or schedule

Be sure to stop by the IRS website to locate which tax office in your state will be open this coming Saturday to assist you.

The Tech Accountant