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Important Update!
NY SUPREME COURT ORDERS CPA TO PROVIDE QUICKBOOKS FILE
Kutsak v. Slivko
I personally worked on this case, including prepping the attorneys for cross examinations of witnesses, and preparing certifications and analysis presented to the judge.
He agreed with my positions and we were victorious. The CPA was forced to provide the full Quickbooks (.QBW) file.
Honorable Reginald A. Boddie, Justice, NY Supreme Court denied the “Proprietary Information Argument” which so many CPAs and bookkeepers attempt to use.
Quote: “Here, Vaiman (the CPA) fails to demonstrate that the requested file is proprietary or should be kept confidential.”
To read the official Judge’s Order CLICK HERE
For centuries, business owners have used accountants / bookkeepers to maintain their accounting records.
The most popular program used is Quickbooks. There is a desktop version, and online versions.
It is important that business owners realize those electronic accounting records are their property, and not the property of their accountant.
Your Quickbooks files are part of your “books and records” and must be provided to you on demand.
If your bookkeeping is kept in Quickbooks Online, make sure that YOU own that online company. If your accountant or bookkeeper created that company, it is still your property. Do you have the master login information, user name and password, to your online Quickbooks company? If not, get that today. It may be necessary to change ownership with Quickbooks.
Even if your accountant uses a rare, or non-mainstream program to keep your books, that source data is still your property and cannot be withheld from you.
Many accountants do not know the law, so sometimes they need to be educated. Even if there are still fees due to the accountant, this cannot be used as an excuse to withhold your property.
Here is the common wording you will find within many State Boards of Accountancy Regulations as well as direction from the AICPA (American Institute of Certified Public Accountants)
Retention of Client’s Records. A licensee (accountant or bookkeeper), after demand by or on behalf of a client, for books, records or other data, whether in written or machine sensible form (electronic format used on a computer), that are the client’s records shall not retain such records. Unpaid fees do not constitute justification for retention of client records. Although, in general the accountant’s working papers are the property of the licensee, if such working papers include records which would ordinarily constitute part of the client’s books and records and are not otherwise available to the client, then the information on those working papers must be treated the same as if it were part of the client’s books and records.
This wording clearly shows that electronic (machine sensible) records, not otherwise available to the client … must be treated the same as if it were part of the client’s books and records … and cannot be retained by the licensee (accountant or bookkeeper).
Do not accept print outs of reports! They must provide you with the full electronic Quickbooks file. The extension of that computer file is .QBW.
I have seen many instances in my 30 year career of accountant’s attempting to withhold these accounting records when client’s fire them. This can put you at severe risk in case you are audited.
What would you do if the IRS needs the details of your accounting and you don’t have your books and records?
If you have an accountant or bookkeeper maintaining your books, and you are not sure about their integrity, I recommend the following:
- Request a full copy of your electronic accounting files be sent to you after every monthly close. This includes Quickbooks files, spreadsheets and any other documents they use to prepare your work.
- At year end, along with your tax returns, be sure to get copies of your accountant’s workpapers and supporting documents that were used to prepare them.
Below is the logical explanation and analogy that clearly shows a Quickbooks file is your property and your vital books and records.
Let’s say, for many years, your bookkeeper / CPA kept your books in paper checkbooks and ledgers, and not on the computer in Quickbooks, like the one below. This would include any important notes they created regarding your bookkeeping.
Any notes created, either on paper or electronically, by a bookkeeper / CPA, that are included in your bookkeeping and accounting records are proprietary to your company, not theirs. Why would they put proprietary information that relates to their company in your accounting records? They would not. So ignore the claim that a Quickbooks file cannot be provided to you because it contains the bookkeeper / CPA’s proprietary information. This is not true.
And over those many years he had completed many of these.
When you fired them, do you think they would or could claim these paper records were their property?
Of course not. Under no circumstances could the bookkeeper / CPA withhold what is clearly your property. These are your most important books and records and have to be returned to you.
Let’s change our example and say that a spreadsheet was used, and not manual paper checkbooks.
The same ownership applies of course. The data is exactly the same.
Let’s say Quickbooks was used. Here is what the checkbook register looks like in Quickbooks.
Amazing how it is almost identical to the manual checkbooks and spreadsheet bank registers!
That’s because it is.
The same ownership applies of course. The data is exactly the same.
Upon termination, the bookkeeper / CPA would have to give you the electronic copy and not just paper reports.
Just because your bookkeeping was moved to an electronic format, DOES NOT CHANGE the underlying ownership and nature of those records.
These records solely exist to support the accounting for your business, whether paper or electronic. The bookkeeper / CPA has no data within it that supports their business. How can they claim to own it?
All of the data relates 100% to only your company.
Two of the most popular smokescreens / disinformation you will hear.
Ignore these.
- There is “proprietary” information in the Quickbooks file that is the property of the bookkeeper / CPA and
- “I created this file in my licensed version of Quickbooks.” The fact that a bookkeeper / CPA is created or is editing your company’s Quickbooks file on their licensed version of the Quickbooks software has no bearing on the ownership of the underlying accounting data.
Please call me on 732-673-0510 to discuss your specific situation.
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Tax Laws are complex.
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Do you have a Tax, Accounting or Business Question?
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Remember,
“If We Aren’t Working For You, Then You Aren’t Working At Your Best”
Chris Whalen, CPA
(732) 673-0510
81 Oak Hill Road
Red Bank, NJ 07701
www.chriswhalencpa.com
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