August 10, 1992
New Guidelines Cut Recordkeeping Burden
WASHINGTON - Millions of taxpayers could find recordkeeping
easier under new procedures issued by the Internal Revenue Service.
IRS will now accept certain financial account statements as proof
that payments were made by check, credit card or electronic funds
transfer (EFT). Taxpayers with such statements will no longer have
to keep their original checks or charge slips.
Most credit card and EFT statements already have the required
information -- transaction date, amount and payee's name. A few
banks have started to put this data on account statements when they
do not return canceled checks to customers. All banks keep microfilm
or electronic records of the canceled checks, from which copies can
be made if needed.
Revenue Procedure 92-71 describes the information needed to be
shown on account statements for them to be treated as proof of
payment of an expense. This information should help financial
institutions enhance their account statements.
Even without such enhanced statements, customers do not always
have to obtain check copies to prove payment. The IRS accepts other
payment evidence, such as the combination of an invoice marked
"paid," a check register or carbon copy of the check, and an account
statement with the check number, date and amount.
However, proof of payment alone does not necessarily establish
the tax treatment of an expense. Taxpayers should also keep other
documents -- such as receipts listing the items purchased -- to show
the relationship between their expenses and the deductions they
claim. For example, a payment to a drugstore would not support a
medical deduction without a receipt verifying the purchase of
prescriptions or other allowable items.
The new procedures do not change the circumstances under which
IRS might ask taxpayers for proof of payment. They only clarify the
various forms that such proof may take.
The IRS may also request copies of canceled checks or written
records of credit card charges or EFTs for purposes other than
establishing proof of payment. The IRS might need to review the
endorsements, date stamps, or other data on the records. Individuals
seldom encounter such requests, which usually occur during
investigations of employment taxes, fraud, or money laundering.
Revenue Procedure 92-71 will be published in Internal Revenue
Bulletin 1992-35, dated August 31, 1992.
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