Your CPA doesn’t want your QuickBooks file? Time for a new CPA.

By Patrick Bonnaure, founder of ProLedge Bookkeeping Services.

If at the end of the year, you offer to your CPA to send him your QuickBooks file to prepare your taxes and he replies “No, just send me reports”, this is a huge red flag. You need to expect more from your CPA.

Luckily, most CPAs are comfortable with QuickBooks, but there is still a good percentage of CPAs out there who simply don’t want to touch QuickBooks and this is very alarming. Without having your QuickBooks file in front of them, how can they drill down on some components of your P&L and balance sheet? How can they see if you categorized your asset purchases correctly? How can they verify that you split your payroll taxes into the proper buckets? If all your CPA is doing is copying data from your P&L and balance sheet into their tax software, are you really getting the value that you expected from your CPA? Shouldn’t you be getting a bit more guidance? You might as well use TurboTax for Business then, because TurboTax is likely to ask you a lot more detailed questions about your business.

From a “legal” stand-point, CPAs who don’t drill into your QuickBooks file are perfectly fine, because they have disclaimers everywhere saying that a tax preparation is not a review, compilation or audit. Essentially, they are using the very valid argument of “garbage in, garbage out”. They are not accountable for the quality of the data that you give to them. Their job is to prepare the tax returns based on the data that you provided to them. As long as they did that part correctly, they are safe. If the IRS comes after you for incorrect returns, you’re on your own. It was your problem for having provided your CPA with incorrect data in the first place.

The only way to make your CPA accountable is to have him/her to perform a formal audit of your books which can be quite expensive and usually wildly overkill for a small business. So the goal here is not to hold your CPA accountable. You simply can’t, unless you want to pay a hefty price for it. Your goal is for your CPA to help you identify potential errors or opportunities in your books at a reasonably high level. That should be part of the basic tax return preparation service and it is very difficult for a CPA to do this without having access to your QuickBooks file.

I have heard some CPAs make the following argument: “If I get into my client’s QuickBooks file, I need to get peer-review and this adds a lot of cost.” I don’t buy this argument, but let me first explain what this argument means. “Peer-review” is a process required in the accounting profession to ensure quality. If a CPA wants to perform compilations, reviews and audits (essentially put his/her stamp of approval on your financials), the CPA needs to be regularly audited by another accounting firm (hence “peer-review”). Typically, all accounting firms will go through peer-review, but many sole practioners will take a pass on this, because of cost and because they don’t want to be in the business of compilation, reviews and audits. They bread and butter is tax preparation. Not going through peer-review is perfectly fine, but using this argument to say that they can’t go into your QuickBooks file is not accurate. True, their hands are tied when it comes to doing both your bookkeeping and tax preparation, but nothing prevents them from looking at the data and going several layers deeper than just reading your P&L and Balance Sheet.

If your CPA doesn’t want to look at your QuickBooks file, it might be time to look for a new CPA.

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