It is no secret that banks have been handling checks electronically for years, leaving behind the cost and timeliness it takes to move paper checks.

But electronic copies, which provide only scanned images of the front of the check per the Check Clearing for the 21st Century Act (Check 21 Act), are causing a dilemma for taxpayers as the Internal Revenue Service requires front-and-back copies of canceled checks during audits.

Taxpayers must take extra care to protect the copies of checks that may accompany their bank statements. For further security, taxpayers can request a substitute check from the bank which is legally the same as the original check if it accurately represents the information on the original check. 

Some key points to remember with the Check 21 Act:

• If a taxpayer is receiving canceled checks now, that will continue until the bank sends notification to the contrary.
• If taxpayers have online access to bank statements, they should download and save the electronic copy of the statements and checks as a backup.
• Banks are not required to keep original checks for any specific length of time, and the Check 21 Act does not add any retention requirement.
• Banks are required to to notify customers if they change the way they have been providing canceled checks or copies.
• Banks may provide a substitute check but are not required to do so. Customers need to understand what their bank will provide.
• Even if the bank does not provide a substitute check with the proper language, it may charge for this service.