10 January 2012

IRS audits of small business software files

I’ve wanted to comment on this story IRS audits of small business software files for a while. I’ve seen similar stories over the last several months.

In a nutshell the IRS can ask for electronic records of your transactions meaning your database. In the case of Quickbooks and Peachtree users they are asking for a full backup copy of the company’s database and then using tools to evaluate transactions that might be inappropriate. For example, in Quickbooks you can delete transactions and that could be used to ask broader questions.

If you need a reason to switch from Quickbooks this is a big one in my mind. With Dynamics GP, especially with customizations and ISV solutions it makes it really hard to replicate a companies installation from just a backup. There are also practical problems with the IRS asking for a massive GP.database. It’s also easier to separate out the information the IRS asks for without giving them the whole database to troll through. Then there are tools from companies like FastPath that can provide a complete audit trail for transactions in GP.

If you’re looking to move up from Quickbooks, now may be the time.