I have clients that I keep books for. I enter their checks from their register or bank statement informing them that they need receipts to back them up. I took a course on Circular 230 today and learned alot about penalties and due diligence. Was wondering if I should get matching receipts for each check since I use that information to prepare their tax returns? My clients will NOT like that and it will be time consuming, I have no reason to expect fraud, but wonder if I need to do that? Thoughts?
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I do the same thing. I get them to sign a bookkeeping and/or payroll engagement letters. I have included a sentence that you must keep original income and expense receipts for at least seven years. The only time I have asked for a receipt is when check is usually large. I had a client have repairs done to a company owned truck and the total came to nearly $3,000. I asked to see the receipt to confirm that there wasn't something else tacked on. Another client would pay several thousand dollars to have manufacturing equipment moved, I always looked at them.
I go by if it sticks out to me... then it will stick out to the IRS. So I follow up with questions and ask for receipts. Document it and go forward. That is really all you can do.
I suggest getting them to sign a engagement letter that covers all the services you provide them.
Dany -
I have several bookkeeping clients. What I do is review - clients are mostly entering onto to Quickbooks.
Several target areas - look at office or office supplies - could be a purchase of equipment which should be an asset rather than an expense - you can later determine Sect 179 - Bonus Depreciation, etc.
Watch the Vehicle Expense - as it seems, if more than one vehicle - the client never seems to get right! I always have them supply me with some type of Odometer Stmt - which would also include Biz Miles, Commuting- Personal Miles.
As always watch the Travel and Entertainment and Gifts - sometimes there is a lot buried in those figures.
Obviously you have to match your bank deposits, sales tax, etc (income) to bank statements, so watch for "transfers" and "loans"
Had some entries, that were really a loan for 3-5 years on purchase which should be capitalized, and then only the interest as a deduction, but client was recording the payment as an expense.
I have had some on Sales Tax as expenses when the Income never included the Sales Tax - it should be not recorded in income and then recorded as an expense
Dany - also had some good ideas in her post
Good Luck!
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