I have a case where t/p with return under examination may have to incur $400 to pay their bank to get copies of checks, @ $3 a copy. Is a bank required to provide copies of checks, free, for an IRS audit/ examination? or is there some other way to reduce or eliminate the bank expense for required copies? If t/p cannot afford to pay for copies of checks, and a petition is filed to tax court, can the copies then be subpoenaed at no per-check cost? Is there an applicable IRC section?
Banks are not required to provide copies free of charge.
Ask the auditor if the mini-copies will suffice (if those are available), and see if the bank can get those (10 - 12 per page) at a lower cost. Talk to the bank about the final bill - in advance. They might be willing to work the cost down due to the facts and circumstances. That would depend on the client's relationship with the bank of course. If you have any pull there, see if that will help. If all else fails, see what specific copies they want (front and back of) and get only the minimum necessary.
I doubt it. Then again, is going to court worth the possibility of "saving" $400 or so?
The bank fees are not covered in the Code or Regs.
Does the bank provide absolutely nothing in the monthly statements? Not even a facsimili of the face of the check? Come to think of it, I did hear this past year of one bank which only lists amounts on statement and no photocopies of checks or deposit slips. ChEAr$, Harlan Lunsford, EA n LA
Stanford Federal Credit Union: No copies of checks themselves on paper statements, or on online statements, except by clicking each check number individually and opening up a window which you can view or download, and which shows front and back of that individual check. Not sure how far back this goes -- but some number of months for sure, probably indefinitely.
Generally speaking, it is the responsibility of the taxpayer to provide documentation on an audit. It is the taxpayer's obligation to provide the cancelled checks etc. I would see the bank taking the position that the bank returned the checks (or facsmilie copies) with the bank statements when originally sent. If the taxpayer lost them, its not the bank's problem & the bank should probably be entitled to charge for retreiving those images again. With changes in banking laws in recent years, I think the IRS should accecpt a facsmilie copy of a check as legal proof of payment. If the taxpayer's bookeeping is in good shape, a bank statement showing the amount should suffice. Even if the IRS were to subpeona, I think the bank would still have an argument to make to charge for retreiving copies of checks that are off line. ___________________________________
In an environment of increasingly aggressive ACH/ARC check conversion (leaving no cancelled check or image thereof) and banks that steadfastly refuse to block the associated unauthorized EFT dips (while providing virtually no data to the customer showing where the money went), how specifically is a taxpayer to fulfill that obligation?
I can see them taking that position as well (in spite of the fact that they did not indeed return the checks or copies thereof). Banks take some pretty wild positions. My bank constantly tells me that their check archiving "service" is for my benefit (as opposed to being for their cost savings) and that I should be ecstatic to be free from the burden of having instant access to my cancelled checks in my own files when they can provide copies of any checks I might need (as long as they aren't too old) on demand for only a small fee.
With Regulation E making it easy for payees to entirely eliminate the cancelled check from the picture, the IRS should be prohibited from requiring such checks at all. As I recently discovered, third-party agents can cause a check to be converted to a TEL transaction (without imposing any burden of proof/verification on the payee) rather than an ARC transaction, thus making it impossible even to show that you started with a check.
N.B. None of the above has anything to do with Check21 (the relatively recent change in banking law) except to the extent that banks lie and claim that Check21 forces them to allow unauthorized EFT dips to your account.
Ah so! a credit union. That the one case I mentioned above which only lists amounts with no copies furnished. Seems you're at the credit union's mercy in this case as regards charges for backup paper. Lesson to be learned: use a regular bank from now on. ChEAr$, Harlan Lunsford, EA n LA
Today my bank returned a client check due to insufficient funds. Client was contacted, and he wanted me to run the check through again. I explained that due to this new Check21 system, I didn't have the check, so I couldn't run it through again. Not that I was previously obligated too, anyway. So maybe there's a benefit. A small one, though.
All of this points out the advantages of paying things online as much as possible. When you do so, you can print out the confirmation number on the web page provided by the payee. We can pay 941/940 taxes online, and now we can even pay our estimated taxes, both federal and state, online. Thirty years ago there was buzz about a cashless and checkless society. As kids in the back seat would ask, "are we there, yet?"
That's not how I understand it is supposed to work. Your bank should have given you a legal substitute check. Check21 was not supposed to change the semantics of checks; just the way they can be transported. (Again, this is unrelated to ACH dips.)
How is it a benefit? You don't have the bad check (or legal substitute) to use to sue and/or request charges be brought.
That doesn't get you a cancelled check to show the IRS, though. Also, in the event of a dispute with the payee you are in the position of asking the payee to back up the evidence that you are correct and the payee is wrong. Of course, if they were willing to do that then you probably wouldn't have a dispute. My experience with trying to use printouts of web transactions as evidence is that the involved party dismisses it ("somebody made a mistake/you changed it/etc.") and third parties (e.g., credit card issuers) ignore it completely in favor of whatever the involved party says. IMHO, paying online by allowing the payee to pull money from your account is the worst possible approach both from a security standpoint (you have authorized them to access your bank account) and from a documentation standpoint (the bank will probably give you the same minimal documentation that they do for any other ACH dip). Pushing a payment from your own bank online is slightly better, but I found that my bank does not stand behind that process either, even when their own records are clearly self-contradictory.
But why would we want to give the IRS access to our bank accounts? Now if they would take credit cards without a surcharge...
For many years we were told to maintain a paper trail, to keep our cancelled checks, etc. Now the banking industry is making it virtually impossible to do this so they can increase their profit margin. That industry, their appologists, and the government (who had to enable the banking industry) say this is all for our own good and that we suddenly don't need the paper. Yet when there is a dispute those same people are quick enough to demand the paper. What are we supposed to do? Dan Lanciani ddl@danlan.*com
Are you suggesting that nobody should use banks and checks anymore? As long as totally paper-trail-less EFT transfers, check-21 scanned checks that are not legable and so forth are possible and happen more and more, then anybody that uses checks can be faced with the impossible task of having to produce a record where none exists. Are you sure that the IRS (or others) will accept a web page printout (which can easly be spoofed) as proof?
Indeed, what ARE we supposed to do? The best we can, that's what. My policy has always been not to run a bad check through again. Client is obligated to bring me cash to redeem it, plus the 5$ fee my bank charges. Sure maybe one can "run that copy" through again, but it's too much bother and besides, I want client on notice that I don't tolerate such behavior. And I've never had any bad experience with online payments. After all, I have a printout (if I even bother to print it out) with a confirmation number on it. And next month's statement, e.g from credit card company confirms receipt of payment also. When you pay a tax online, whether 940,941,1040, etc, that is a one time thing, just like giving IRS your bank account number for direct deposit. They don't just say "hurrah! we got that sucker's bank account number! Let's save it in case we need to levy his account in the future. No reason for them to permanently keep it in your file, since people change banks, some more frequently than others. One state agency actually requires merchants to file all sales tax reports online, and when tax exceeds 750$, the requirement is to actually pay online. So we may not be there yet, but headed in that direction. One other note about cancelled checks. They are not the absolute proof required by IRS. They accept any reasonable proof of a transaction and it's payment. In some cases admittedly, given the demeanor of the one under audit, they may need to take a harder line, esp when it's apparent that he's lying. ChEAr$, Harlan Lunsford, EA n LA
Heck, no. Bank accounts are very necessary, both for my business and personal transactions. However these days, the only business check I have to write is to landlady for monthly rent. Everything else can be paid online, utility bills, office supplies, credit cards, taxes..... Even from personal account, I write very few checks, and consequently use fewer stamps from USPS.
"Spoofing' is another word for forgery, and is in the eye of the beholder. IOW, if IRS or others has some reason to think you're lying to them, of course they'll take a hard line. I dont' think I'll ever have such a problem. ChEAr$, Harlan Lunsford, EA n LA
If the RO/RA seeks corroborating information directly from the bank via summons, validation of the information provided would help root out potential fraudulent efforts.
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