Updated: Aug 2, 2019
For many years now the banks no longer sending out the “Cancelled Checks” (with your monthly statement), you will not have proof that a check written was a legal tax deduction.
This is very important due the following Tax Audit:
In a recent Orlando small business IRS Tax Audit a local business owner was asked for proof of payments (for over 23 items that were paid by check, back in 2014), and his small “Credit Union” only kept copies for 3 years and so the taxpayer “Did Not have Proof of Payment”, and thus they were denied these deductions of 23 check payments (until they were able to get Certified Letters from “Whom” the check was issued).
The IRS Examiner only gave the business owner 10 days to contact out of state businesses and obtain this “Notarized Signed Assurance Letters. If they were unsuccessful then the checks would be removed from the Tax Returns and the client would have to amend each return and pay the additional tax, penalty and interest.
Please contact your bank today as ask for the copies of the checks to be included in your Monthly Bank Statement as per example below (taken from my business checking account). Most all banks now have the ability to include this with your statement, all you only need to request this service. Please do this now!
This will also speed up the processing of your financials, plus save us a lot time, additional emails (about questions) on check payments (which will allow us to keep your accounting fee lower). In the memo line please note additional information which you might need years from now. Most all banks offer this free service (or small charge), if you bank does not provide this service, you might need to move your business account (to a bank that offers this free of charge)…..this is very important!
Most small business are not audited
up to 6 years after the filing of the return.
All businesses are require to keep all “Accounting Records” (debit slips, receipts and bank statements) and proof of check cashed for a period of 7 years from the date of filing any Business Return or lose the deduction!