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Check Clearing for the 21st Century

The Check Clearing for the 21st Century Act (Check 21) became effective on October 28, 2004.  This means that your bank won’t be returning your canceled checks.  Check 21 allows your bank to pare down each of your checks and create a new electronic substitute check.  After doing this, your bank destroys your original check.


How does Check 21 change the way you’re able to prove an expense that may entitle you to a tax deduction or credit?  The short answer is that you’ll need to keep your past bank statements in good order.  The IRS says that it will accept bank statements that contain images of canceled checks and/or substitute checks.  To be used as proof, an account statement must show the check number, amount, payee’s name, and the date the check was posted.


In order to keep track of your payments more easily for tax purposes, you should also maintain a careful check register.  That way, you’ll know on which bank statement to look if the IRS ever audits you.