Client Advisories The IRS maintains that in conjunction with an audit, it has the authority to require taxpayers to turn over their complete electronic accounting records.  This includes accounting records that are maintained in Quickbooks, Quicken, and Peachtree accounting software.  The IRS says it will ignore irrelevant data and confidential information.  This is not realistic, especially given that the rules of evidence do not protect the taxpayer in this situation. We are concerned about the potential for the IRS to receive private, privileged, and confidential information from prior years that are not under audit.  It is very common for users of these public accounting software packages to maintain client lists, vendor lists, employee lists, and other sensitive information.  One of the major issues with the IRS requesting information this way, is that every tax year stands on its own.  With the IRS auditor having access to the whole file, a small problem in one year, can lead to the IRS opening up other tax years for audit.   To the extent possible, avoid putting confidential information in your electronic accounting records.  Also, with this new IRS requirement, hopefully,  the software companies will create firewalls between each year of data.  Since this is new, it could be a while before the software companies have a firewall in place between each of the years.  Please call us to discuss these new tax laws.  The information contained is general in nature and should not be acted upon in your specific situation without further details and professional consultation.  Check our Website Disclaimer Policy if you have questions.