Abstract: Traditional bookkeeping may be dying in the micro business market, but alternate procedures and new technologies may be available to meet our government-imposed requirements.
I saw a Facebook tax group discussion derailed over this topic. The mess is likely confusing the word “compilation”, as used in the phrase, with the term as used by the rest of the accounting profession outside of a tax return preparation engagement. A simple conclusion here would be that we probably should not use a word that causes so much confusion.
The discussion thread I read was likely focused on a different concept than what the original source, a tax preparer, intended. I don’t know, of course, but I suspect that the original discussion stemmed from a business owner’s requirement to file a tax return in the absence of typical bookkeeping records. In that case, one alternate tax accounting procedure that may be proposed is compiling a report for tax filing purposes only that does not meet any other accounting standards but is intended to fulfill the business owner’s legal requirement to file a tax return.
I have found this to be the fastest growing service request in the post-pandemic economy. In this context, a person may use the same generic word (probably not a best practice) but is not related to the term “compilation” as used by the AICPA and others. It is also not inherently related to QB but QBO can be a valuable tool especially when the engagement covers not only the prior period tax return but also tackles the deficiency in bookkeeping moving forward. Otherwise these would be separate issues, separate engagements, and in most cases performed by separate accountants (bookkeeper vs. tax preparer).
If you or your client lacks bookkeeping records and you don’t have a clear path to filing a tax return, then I am happy to discuss the options available, including alternate accounting procedures, to reach an acceptable end result. However, I strongly encourage a process that ensures that the problem does not recur. This process often requires ongoing coaching and training with built-in accountability to reach business and personal financial goals.