From TaxAlmanac, A Free Online Resource
From TaxAlmanac
Discussion Forum Index --> Basic Tax Questions --> Bank Statements as only supporting Doc.
Discussion Forum Index --> Tax Questions --> Bank Statements as only supporting Doc.
Markham3 (talk|edits) said:
| 12 February 2008
|
| Hello, this is my first question in this forum, so please be gentle. This is my first year doing corporate tax returns. My problem is I have a client who owns an S-corporation. They failed to do their 2006 return which I am helping them out with, however all the backup they gave me was bank statements. What are the implications to a tax preparer if they prepare the return based on just the bank statements and copies of cleared checks (although statements have a lot of debit trans. without receipts). Excuse me if the question is amateurish. I just want to play it safe. Thank you for your imput.
|
JR1 (talk|edits) said:
| February 12, 2008
|
| Well, if it's not a cash business like a car wash or laundramat, or tavern!, I'd be ok reconstructing from bank info. At least you know that that all happened. Charge a bunch, it's a lot of work that way. And unless they can give solid answers on the cash out, book it as shareholder money.
|
Markham3 (talk|edits) said:
| 12 February 2008
|
| Thank you. What if the cash out, for example $500 - 1500 they claim is for materials they could only pay cash for. Do I just take their word on it, can I use it as a deduction without worrying?
Thanks again.
|
JR1 (talk|edits) said:
| February 12, 2008
|
| Ask for receipts. When they shrug, tell them that's what will happen in an audit, too, and no way can you just take their word for it.
|
Dsiclients (talk|edits) said:
| 12 February 2008
|
| I wouldn't have any problems reconstructing their FS. It is their ass on the line if they get audited and can't substantiate their claims. All you can do is take the info they provide and work with it. You are NOT their auditor, just their preparer.
|
Bottom Line (talk|edits) said:
| 12 February 2008
|
| It's not uncommon for me to do financials & tax returns based only on the bank statements. As above people said, if they don't have receipts for the cash withdrawals, it's a distribution to the owner. They'll fuss but next year they'll have receipts.
|
Natalie (talk|edits) said:
| February 12, 2008
|
| Those DMs could add up to big $ real fast. If it will make you feel better, you could do a reasonableness test on those amounts. If their gross profit is expected to be about 50%, for example, and by including the DMs as distributions the GP is 70%, then I would say they are probably telling the truth. You might also get a feel for how the client operates in general and apply that to this particular situation. For example, if you see some checks made out for things that are obviously personal, then that might lead you to doubt what they say about the cash withdrawals.
|
Plainfacts (talk|edits) said:
| 12 February 2008
|
| Exactly what are "DMs"..sometimes we run the risk of using abreviated terms that only us understands
|
To join in on this discussion, you must first
log in.
