Business Owners - Are you aware of the consequences of incorrect bookkeeping?
You as the Business Owner are ultimately responsible for the Books and Taxes (there are caveats here depending on structure of entity).
Just one significant transaction entered incorrectly in QuickBooks by your Bookkeeper can have serious consequences. Your Tax Preparer (hopefully a CPA), might not pick it up, as they spend very little time (most don't spend any time at all) going over a full year's worth of transactions.
You end up underpaying the IRS and get audited 2 years later. Then you have to pay significant penalties and interest, probably more than the original error.
You might then go back to the Bookkeeper, and they may point out that they are not tax experts. Whether it’s their fault might depend on how the transaction was communicated to them. In additition, do they have the proper insurance to cover your losses? Where are the bookkeepers located?
Every Business Owner should be fluent in accounting and tax and hire appropriate personnel to ensure accurate an overall accurate system. Here's how the process should work, at a minimum:
1. A Bookkeeper with appropriate experience and a basic understanding of tax consequences journalizes the entries during the month.
2. A CPA should review the books together with the Business Owner on a monthly basis (for businesses with over $500K in revenue). This has many benefits including operational, which are a topic for a different day.
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