So, are scanned versions of your receipts and business records acceptable to the IRS?
In 1997, the IRS started accepting digitized or scanned versions of paper documents in lieu of paper documents. In order to be adequate for audit purposes, the business must ensure an “accurate and complete transfer of original computerized books and records to an electronic storage media. The electronic storage system must also index, store, preserve, retrieve, and reproduce the electronically stored books and records.” (see IRS Rev. Proc. 97-22)
So, from a practical perspective, what does this mean?
- Save your documents … and make multiple backups.
- Make sure that any given document can be found easily, with a helpful file name and a logical folder hierarchy. An index should be established, as well.
- The storage format needs to be indefinitely acceptable. If you save your documents in Adobe PDF format, you’ll be reasonably sure that the file can still be opened five years from now. If you save your files in another format, can you say the same thing?
Deb Howard Greenleaf, EA, CEO and Principal, of Greenleaf Accounting Services provides virtual accounting and bookkeeping services and specializes in financial management to consultants, coaches, solo professionals, and other small business owners across the US. Deb is an Enrolled Agent (EA)—an IRS-licensed tax professional—and specializes in small businesses and entrepreneurs filing Schedule C or as an LLC. As an Advanced Certified QuickBooks ProAdvisor, Deb spends her day in QuickBooks Online and specializes in providing QBO support.