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we have a party supply store & report our income on the cash basis giving our accountant monthly bank statements & check stubs is this ok. our sales are approx.400,000 gross annually

Submitted: 1363 days and 11 hours ago.
Category: Tax
Value: $2
Status: AWAITING CUSTOMER ACTION
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Posted by Ed Johnson 1363 days and 9 hours ago.

Info Request

Dear XXXXXXXXXXXXX,

Can you tell me more about what you are wanting to know?

1363 days and 1 hours ago.

Reply

Reply to Ed Johnson's Post: WE DO NOT KEEP ANY REGISTER TAPES, SINCE WE DEPOSIT ALL FUNDS INTO OUR BANK ACCOUNT. WE ARE A C CORP. CASH BASIS TAXPAYER. WILL WE HAVE ANY PROBLEMS IF WE GET AUDITED? WILL THE BANK STATEMENTS BE USED TO SHOW OUR INCOME. WHAT IS THE CHANCE OF BEING AUDITED. APPROX GROSS OF BUSINESS IS 375,000.00 PER YR.IF WE ARE AUDITED WHAT SHOULD WE SAY ABOUT RECEIPTS REPORTED. PLEASE ADVISE!

Posted by LEV 1362 days and 1 hours ago.

Answer

You need to keep the register tapes as a prove of gross sales. I would advise you to start saving tapes right away. Bank statements may be used to prove gross proceeds, but they are not substitute of register tapes. If you have consistence sales and some tapes are missing - you may reestablish gross sales using bank statements.

In case of auditing you would need to give an explanation why some register tapes are missing.

Please see the example of audit expectation - http://www.borough.kenai.ak.us/financedept/SalesTaxInfo/Audit/Audit.htm

1362 days and 1 hours ago.

Reply

Reply to Lev's Post: WE HAVE SOME TAPES BUT THEY ARE MORE THAN BANK DEPOSITS & WE OPERATE AS A C CORP. WE CAN'T USE THESE IN AN AUDIT

Answer

In this case (register tapes amount is more than bank deposit statement) bank statements could't be used as a prove of gross sales. You would need to re-establish register tapes or at least amounts that were of these tapes. You would need to have End-Of-Day sales reports and/or acconting sales journals/summary.

Missing documentation should be re-established. You may need to hire local CPA familiar with retail sale business.

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Expert: LEV
Pos. Feedback: 99.4 %
Accepts: 7899
Answered: 6/25/2006

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