IRS is in
the process of using a copy of your Quickbooks file in a Small
Bussines/Self
Employed field audits.
The National
Association of Enrolled Agents reported the following in their
newsletter of
7/16/10.
The QuickBooks
2010 Premier Accountant edition is to be distributed to roughly 1,100
general
program revenue agents and specialty tax revenue agents for use in field
examinations. The distribution period began in May and will continue
through
September. Revenue Agants As are to attend a three-day training course
on how
to use the software, which should include instruction on how to use data
files
and how to create various reports. Not all Revenue Agents will have the
software.
It appears that
the agency's view is that the way audits are being conducted is not
changing,
but the tools are (i.e., no IRM changes and the agency may assert
general authority under § 6001, Rev. Rul. 71-20, and Rev. Proc. 98-25).
RAs
will still be required to set the scope of an audit and request books
and
records.
On the upside,
the agency suggested that one of the reasons for the approach is because
of requests
from a variety of taxpayers and practitioners. Further, using the files
could
lead to fewer, less comprehensive requests for information. Finally, it
is
possible that some audits (e.g., one very limited in scope) may
not ask
for a QuickBooks backup file.
The concerns of
the NAEA are the following:
- QuickBooks
backup files include all data, usually for multiple years, not
merely data
responsive to the scope of the audit. How is a taxpayer assured a
revenue
agent will remain within the scope of a particular audit?
- Because
the information in a QuickBooks backup file covers multiple years
and
audits often are on a single year only, how does an enrolled agent
manage
PoA issues (he or she wouldn't as a matter of course have a PoA for
all
the years on the QuickBooks backup file).
- Will
the RA subpoena QuickBooks backup files?
- What
happens if prior year information has been condensed?
- The
QuickBooks file contains a wide range of information for which the
Service
should have no use, including lists of clients and vendors along
with
addresses, telephone numbers, TINs, and credit card numbers.
Turning over
the QuickBooks backup file necessarily turns over this information.
In
certain businesses, a client list is extremely valuable and its
disclosure
to others would be damaging. Is this an acceptable state of
affairs?
- Should
the audit expand to additional years, will IRS issue another
Information
Document Request (IDR) and ask the taxpayer/EA to turn over another
complete QuickBooks backup file? What, if anything, prevents the RA
from
reviewing the prior year data before expanding the audit?
- What
procedures are in place to guard data integrity?
The NAEA is
asking whether:
- SB/SE
exam would consider refraining from requesting the QuickBooks
software
until the rules of engagement (FAQs, etc.) have been promulgated;
- IRS
would compel a taxpayer to turn over his QuickBooks backup file and
whether IRS counsel has issued an opinion on the issue;
- An
enrolled agent could produce specific QuickBooks reports for a
revenue
agent rather than producing a full QuickBooks backup file.
I am an Enrolled
Agent and a member of the National Association of Enrolled Agents.
