For IRS compliance, what should a business do regarding vendor payments?

Maintaining accurate records of all payments is essential for IRS compliance for several reasons. First, a business is required by the IRS to keep detailed financial records that substantiate all income and expenses, including vendor payments. Accurate records facilitate the correct reporting of deductible expenses and ensure that a business can provide documentation in the event of an audit.

Additionally, keeping thorough records helps in tracking cash flow and managing budgets effectively. It ensures that all vendors are properly reported in the business's financial statements and tax filings, which helps avoid penalties and reduces the risk of errors in tax reporting.

Tracking only certain payments or notifying vendors of their payment history may not provide the comprehensive documentation needed to fully meet IRS requirements. Processing payments without corresponding records may lead to issues with accountability, transparency, and regulatory compliance.