When you prepare your tax return, you'll need records for deductions, expenses or credits you want to claim. Canceled checks serve as proof of amounts you paid. You won't need to submit canceled checks with your return when you file it, but you do need to keep copies of canceled checks or other items used to calculate your expenses with your personal tax records.
Proof of Payment
A canceled check can be used as proof of payment for a tax-deductible expense. Your check shows the name of the company or person you paid, the date, and the amount paid. These are all important pieces of information you’ll need when you piece together the items to include on your tax return.
If you need an itemized record of specific items or services you received for your payment, your canceled check won’t be sufficient. A physical receipt or invoice lists each item and amount separately, while your canceled check only proves a total amount paid to a merchant or person, as written on the check itself.
Tax Preparation vs. Audit
Using canceled checks to prepare your return is fine – you (or your tax preparer) have all the information you need to enter information for your deductions or credits with a canceled check. However, in the event of an audit, your examiner may request itemized records for your purchase to verify all the money you spent went toward allowable expenses. Exceptions do apply, so use your best judgment when deciding whether your canceled check will be sufficient – or ask a tax professional if you’ll need more support to prove your entries in the event of an audit.
For example, if your canceled check shows a payment to an insurance company and you’re taking a health insurance medical deduction, you probably won’t need an itemized receipt. However, if you’re taking a small-business deduction for office supplies, a canceled check to an office supply store or general merchant won’t give an auditor enough detail about the items you purchased.
Ask the Vendors
Don’t assume you won’t be able to get itemized information about your purchases if you decide you might need it and all you actually have is a canceled check. If you purchase items online or pay for services, many vendors have all your customer order information on file. These companies can issue an extra invoice if you ask for one – you might also already have a copy of your invoice in your email inbox.
You may not be able to get itemized receipts from all large general merchants, such as big-box stores, department stores or grocery stores, but you may be able to get the information by contacting the store.