How many of you still receive actual canceled checks from the bank? In today’s modern world, most banks are no longer sending canceled checks. Instead, they’re sending scanned images of the checks in bank statements. Some banks aren’t sending even those.
However, the IRS still requires that you substantiate expenditures with front-and-back copies of canceled checks — and if you are audited, they may request them.
The IRS will usually accept the copy of the scanned check that comes with your bank statement, so be sure to keep those. Occasionally, the IRS will demand more than the scanned image. In these cases, you can request a substitute check from the bank. A substitute check is legally the same as the original check if it accurately represents the information on the original check and includes the following statement: “This is a legal copy of your check. You can use it the same way you would use the original check.” (Check 21 Act, §§4(b)(2), 4(e)).
The IRS has stated that it will accept photocopies of substitute checks as proof of payment, but if the auditor suspects that the copy isn’t genuine, he or she may require you to order the actual substitute check from the bank.
As with most other issues, your best course of action is to keep good records. You will also want to download and save any electronic versions of bank statements in their entirety.
