Quickbooks File Should Mirror Your Tax Return Filed

Is your QuickBooks file a mirror image of your tax return?

Have you ever thought about your QuickBooks file and the importance of it needing to match your tax return filed?  I have noticed quite often when I go to meet with a new potential client that their QuickBooks file does not match their tax return filed.  It’s not their fault; they just have not been told why this is important from their prior CPA or tax return preparer.  Often the client is keying in their QuickBooks file throughout the year and at the end of the year they send the file to their accountant.  The accountant will make small changes such as a few year-end adjusting entries or as major as changing a lot of things in the Quickbooks file.  Then what usually happens is the adjustments in QuickBooks are never given back to the client.  This results in a QuickBooks file that does not match the tax return.  A few year-end adjustments is ok and can be spotted quickly, but what if there were a lot of changes made to your QuickBooks file?  The file can be matched with an adjusting entry, but to get down to specific transactions that tie to it such as a check or deposit can be a little tougher.  So why is this important?

1. IRS – You recieve an IRS notice and in the notice you discover that you are under audit.  The IRS can legally ask you for your QuickBooks file as part of their audit.  If your file doesn’t match the tax return the process is going to take longer and you will have to answer why.  Well this shouldn’t be a problem if you are using the same CPA or tax return preparer right?  Yes, but if the file is already matching the process will flow smoother.
2. Change CPA or Tax Return Preparer – If for some reason something happens to your CPA or Tax Return Preparer getting the QuickBooks file that was used to file your tax return could be a nightmare.  Also, if you switch professionals and the new one you go to does not make it a standard practice of matching as well then your problem could snowball.
3. Other Agencies – Other agencies such as the Georgia Department of Revenue can do audits as well.  Such as a sales tax audit.  If they ask you for a print out of your sales in QuickBooks and a copy of your tax return.  They may have some questions if those do not match.
4. Bank – If a company is not trying to stay out of debt, but wanting to either take out a loan or refinance, the bank may request to see a set of financials and a copy of the tax return.

It is just good practices to make sure that all of your financial records (even if not using QuickBooks) are mirror images of each other. This helps keep things organized and keeps you out of trouble.  We make it a standard practice in our firm to make sure the QuickBooks matches the tax return.  Should you need any help with QuickBooks or have any questions feel free to contact us.

If you have any nightmares of your QuickBooks file not matching or if you have any great stories to tell of how your QuickBooks file matching helped you out please leave a comment.  We would love to hear about it.