Monday, December 13, 2010

Electronic Accounting Records Becoming the IRS's Perfected Method for Audits and Inquires

If a business is audited, the IRS now accepts tax records and booking records in electronic format rather than requiring traditional paper books and records. In fact the IRS is obviously moving toward a goal of making this the "preferred" method of receiving such records. And so you should be moving to electronic methods of records keeping before it's required if that is not how you are keeping records now.

Currently for this tax year the IRS already has trained about 1,100 agents on QuickBooks (and also an unknown number on Peachtree accounting software) so it's clear that they are moving very quickly towards this goal.

Any such records requested must be provided on a CD, DVD, or flash drive and the files should not be e-mailed nor will the IRS EVER request them to be. So be aware that any request you receive asking you to email any electronic files or records are scams and you should never reply to such requests.

Also be sure that you have any electronic records you are providing to the IRS examined by someone who's knowledgeable in QuickBooks (or PeachTree) as electronic records have their own pitfalls. And if you provide records that contain mistakes, inaccuracies, or accounting procedure errors it will make it very hard to fight IRS rulings based on those mistakes later. So be sure that everything is in order BEFORE you send it rather than work to correct mistakes later when the IRS will be using the information YOU supplied to support their findings. And with this information being electronic the IRS will have it readability for future use and comparison unlike the current paper records they have on file.

So a word to the wise. Things are changing to all electronic IRS system in the very near future and thus it's time to prepare or face possible problems in your rush to change when it becomes mandatory and that day is fast approaching.

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