Did you know that the IRS can now require you to produce your QuickBooks file if your business is being audited? Yikes! This started happening in late 2010 and the practice is only going to grow. How to protect yourself in the event of an audit?
- Review your own books! It only makes sense to go through your own books first and see if there are any red flags. Checks to the dog walker? Credit card charges for the day spa? Believe it or not, I’ve seen these and more on the books of businesses. Better for you to go ahead and re-categorize these transactions as “Owner’s Draw” or “Advance to Shareholder” now, rather than waiting for an auditor to find them.
- Back up your QB file at the end of each year so that each year is in its own QB Backup file. Previous years should be “condensed” first so that the only data the auditor can see is the year under audit. This prevents any “fishing expeditions” by your friendly IRS auditor!
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.