QuickBooks is probably the most widely-used bookkeeping software among small business owners. It’s fairly simple to use and understand, and it does a decent job at what it’s designed to do. But what if you’re audited? Using QuickBooks may help you or hurt you, as Forbes recently pointed out.
Although some audits are conducted on the field or in the office, most are done through correspondence. And you don’t get unlimited opportunities to prove your expenses and justify what you’ve claimed. You’ll need to provide quick responses with accurate information. QuickBooks helps you do that by keeping everything organized and easily accessible.
That accessibility is also QuickBooks’ weak point. The IRS sometimes requests a copy of your accounting software so they can examine your records. And unlike custom software used by larger companies, QuickBooks doesn’t give business owners a way to limit the amount of data able to be mined from files. If you give the IRS a copy of your QuickBooks, you’ll be providing them with a lot more information that they’re requesting — information that may inadvertently cause problems if you’ve made mistakes in your bookkeeping.
One way to ease this problem is to back up your data at the end of each year so that only one year of data is in your QuickBooks at any given time. The IRS can still request data from previous years, but then you’re only required to provide the data requested. Usually the benefits of using QuickBooks will outweigh the hazards, but it’s something you should be aware of.