IRS Will Target QuickBooks Users

Filed in Accounting, Business, Intuit QuickBooks by on July 28, 2010

When IRS selects tax returns to examine, it does not know who uses QuickBooks. However, soon IRS will target QuickBooks users for more intense exams.

Most economists say small businesses create almost 100% of net new jobs. Despite this, 25,000 new IRS agents will soon target only small business S corporations, low or non-existent officer salaries, and their 1099s. The plan is to triple these IRS audits. This will be especially bad for QuickBooks users, since IRS will target QuickBooks users for more intense exams.

Amazingly, for a Healthcare law, by 2012 the Healthcare law will swamp business with 4+ billion new 1099s a year. As a CPA, I calculated the extra hidden accounting and filing costs, of these 1099s, at more than $1.29+ Trillion in 10 years. These 1099 costs apply to all businesses, not simply those with Healthcare involvement. An IRS credit card payment exemption will add complexity and costs for many. It will particularly devastate small businesses, adding perhaps 20+ million unemployed (see The Great Depression of 2012). Many already expect a Great Depression in 2012 for other reasons.

IRS only expects to add $17 billion in tax in 10 years. That means businesses should waste more than $76 for each extra tax dollar received. This is before we learn why IRS will target QuickBooks users for more intense exams. QuickBooks has about a 95% monopoly in small business accounting programs. Quicken has many more users, but does not do 1099s. Quicken also is ineffective beyond its intended home checkbook – unincorporated business market. That means the 2012 1099s probably will make many Quicken users consider QuickBooks, but here are some of the many ways that IRS will target QuickBooks users for more intense exams.

Due the dominance of QuickBooks, IRS recently bought thousands of copies of QuickBooks. Each IRS unit should soon have a QuickBooks specialist to help other agents. IRS already plans to ask business examined for copies of QuickBooks files. They will let agents do more intense exams.

QuickBooks has long had an always-on audit trail. It lets IRS agents quickly locate all entries someone changed. Agents will naturally feel such entries likely targets for more intense exams.

IRS agents usually sample expenses to verify deductibility. QuickBooks lets them work faster, examine more, disallow more, and produce better reports, with more intense exams. Due to this, we need fewer agents, not many more.

QuickBooks files often have many years of prior entries. QuickBooks also easily provides comparative reports, which make it especially easy for IRS to decide what to examine intensely.

It takes discipline and skill to start a new QuickBooks file each January 1, with all current payees, customers, employees, and other names. It is time consuming and expensive (about $400 a year minimum) to separate QuickBooks files into separate years, unless you do that at the time. Splitting QuickBooks files by year also makes users lose the management benefits of comparative reports. They also may fear that such splits will make IRS more suspicious.

Due to this, the top business priorities should be to stop using QuickBooks, repeal these laws, vote against those who supported them, and tell politicians to fire the extra IRS agents and their anti-small business plans. Remember, Democratic House Leader Nancy Pelosi said, “We must pass Healthcare to know what is in it. Remember that every November, for the rest of your likely Healthcare shortened life.”

 

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Fastest, easiest, accurate, low-cost QuickBooks! Intuit - QuickBooks CEO, "You're fantastic Mike! Absolutely fantastic!" Tax fighting CPA.

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