Are Scanned Receipts Acceptable to IRS?

Maintaining accurate records is important for individuals and businesses to verify income, expenses, deductions, and credits for tax purposes. These records help ensure compliance with tax laws and provide necessary documentation if the Internal Revenue Service (IRS) has questions. Electronic record-keeping, including scanned receipts, offers a convenient way for taxpayers to manage their financial information.

General Record Keeping Principles

The IRS requires all records to be accurate, complete, and legible. Records must clearly substantiate amounts reported on a tax return. For an expense, key information such as the amount, date, place, and business purpose must be present. Supporting documents like receipts, invoices, and canceled checks are important for verifying these entries.

Taxpayers should retain records for at least three years from the date they filed their original return or two years from the date the tax was paid, whichever is later. A longer retention period is necessary in certain situations. For example, if income was substantially underreported, the IRS can audit up to six years, and for fraudulent returns, there is no statute of limitations. IRS Publication 583 and Publication 17 offer guidance on these requirements.

Acceptability of Electronic Records

The IRS accepts scanned receipts and other electronic records, provided they meet specific criteria. As outlined in Revenue Procedure 98-25, the electronic record must be an accurate and complete representation of the original document. The system used for electronic storage must maintain the integrity of the data, ensuring records cannot be changed without detection.

Electronic records must be clear and readable, allowing all relevant details to be identified. These records must also be readily accessible for IRS review if requested, requiring an organized and retrievable system. The electronic storage system must consistently produce accurate records to satisfy IRS requirements. This ensures digital documentation holds the same weight as traditional paper records.

Maintaining Digital Records

Proper management of scanned receipts and other digital tax records ensures their acceptability by the IRS. Organizing digital files logically, such as by category, date, or tax year, facilitates quick retrieval. A robust backup strategy is important to prevent data loss, using methods like cloud storage or external hard drives.

Protecting digital records from unauthorized access through security measures like strong passwords and encryption is advisable. Consistency in the scanning and storage process helps maintain uniformity and reliability. Review scanned images immediately for clarity and completeness. While not required to keep physical originals if digital records meet IRS standards, some taxpayers choose to retain them for added assurance.

Presenting Records During an Audit

When the IRS conducts an audit, taxpayers must be prepared to present their records effectively. The IRS may request electronic accounting software backup files, often using Form 4564. Digital records must be easily accessible, whether on a computer or by providing specific files. If requested, taxpayers may need to print electronic records for the auditor’s review.

Quickly locating and presenting specific records can streamline the audit process. Auditors may review the electronic record-keeping system to ensure its reliability and integrity. Electronic information management enhances the examination process by reducing the burden of printing and increasing efficiency. The IRS can request electronic data files, including metadata, if relevant to the examination.