Will the IRS want your Accounting Software File?!!!
In a recent Florida Federal District Court Case, the IRS was granted the right to summon the accounting software file of a small business. This case did not involve a farm, however, the IRS has gotten very aggressive in demanding the actual accounting software file, especially Quickbooks and other common software accounting programs. Before the advent of these software programs, providing a print out of the actual accounting data was usually sufficient for the IRS during an exam.
Now, with most agents being able to utilize these accounting software packages on their computers, they are demanding a backup of the whole accounting software, even if there are years in the accounting software that are not under exam. Also, any comments in the comments, memo or notes section of your software would be available for review by the IRS.
This case decision is limited to this small district court jurisdiction, but you can be sure that the IRS will be very aggressive in taking this to the next level.
Just be careful what you write in your accounting software comments section. Remember, an IRS agent may be reading it in the future.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Just be careful what you write in your accounting software comments section.