Do It Yourself QuickBooks is Your Biggest Business Gamble
Having and using QuickBooks does not replace a bookkeeper, accountant, CPA, or tax preparer!
Let’s imagine this; you are a small business owner. It’s tax time, so you decide you are going to go have your taxes prepared. After printing out your papers from QuickBooks, you get in your car and drive to the nearest tax preparation office. Maybe you use one of the national brands like HR Block, Jackson Hewitt, or Liberty. Maybe you use a CPA at a firm in your town. Maybe you go the nearest library to sit with a volunteer. Maybe you attempt to do them yourself! You feel pretty confident; after all your business was able to stay open and you did spend hours punching up numbers in QuickBooks.
Although it is true that QuickBooks is easy to use, flexible, and intuitive, it does not come with an accounting manual to teach you. It does not matter if you have a simple business or a complex one. It does not matter if you sell a service or product. You must at least understand the accounting basics.
I want to tell you about a client I had. She came to me a few years ago with tears in her eyes. You see, she had received a letter from the IRS and they wanted to audit her finances for 3 years back.
She said she had been using QuickBooks for her business for 4 years. She was always careful with her information and felt confident that she had not made any clerical errors. She then told me that her husband would do the family tax return every year online and they always received a refund. This was her normal, but her normal was a misconception.
I collected all of her paperwork and started to do an audit. At first glance of her printouts from QuickBooks, I asked for the electronic copy of the QuickBooks back up file. That’s where the big problem was. She was showing a profit of $326.00 with no inventory, very limited expenses, and no liabilities.
She sold Mary Kay products. I pointed out the $326.00 to her and asked her if that was her income how did she keep her business alive all year? She was astonished and informed me very quickly that she did not make only $326.00, but that her income was closer to $30K and she even had dreams of earning that famous Mary Kay pink Cadillac.
Since she was the type of person who kept all paperwork we were able to reconstruct her QuickBooks file. However, since she had set up her company and ledgers wrong from the beginning we had to go all the way back to the start.
We had to get an extension on the audit date and it took nearly a month of doing nothing else to make sense of her paper and reconstruct her ledgers. After the business ledgers were true and complete, I started looking at the amending the tax returns to reflect her actual income.
When everything was complete we took it to the meeting with the IRS agent. We explained the error and showed how it had been corrected. She was over paid on her refunds and had to make payment arrangements to pay back the IRS.
This client, in trying to do it herself, and believing in the misconception that because she has QuickBooks “all is good”, ended up paying me for 275 hours of work. She had to pay back the money she and her husband received as refunds and the IRS charged her interest and a fee for making payment arrangements. Needless to say, it was expensive for her to fall into the trap of “I can do it myself because I have QuickBooks!”
Because of her story and so many other ones like it is why I always say “Call me now before the IRS is knocking at your door!”. You can hire our corporate tax planning services to avoid such situations.