Are digitized records acceptable when it comes to IRS records retention?

February 11, 2015 2:23 PM

We have way too many filing cabinets taking up space in the home office and we'd like to digitize most of the contents and then shred the original physical items. I've read this document for retention best practices but it doesn't mention anything about digitizing. We're talking receipts, medical records, financial statements, etc. All sorts of goodies. In my mind, worst case scenario is we have to print out any records before submitting them but I could be totally wrong... Thanks!
posted by covercash to Law & Government (3 answers total)

I am not a tax lawyer or an accountant, but my husband and I were audited by the IRS on our 2012 return. (Our itemized medical deduction was quite high, and I guess that triggered an audit alert.) I did have to submit the documentation supporting the deductions in hard copy. But as you said, all I did was print out what I had previously digitized.

I would say it's important to have a good back-up system for your digital files, but I guess that's kind of obvious!

P.S. We passed the audit with flying colors.
posted by merejane at 2:39 PM on February 11, 2015 [2 favorites]

Best answer: I believe this is specified in Revenue Procedure 97-22 (Recordkeeping - Electronic Storage System). It's only three quick pages, so don't be intimidated. It is from 1997 though, so watch out for some dated language. (COLD - computer output to laser disc! There's a useful acronym.)

Relevant section:

SECTION 7. DESTRUCTION AND
DELETION OF ORIGINAL BOOKS
AND RECORDS
This revenue procedure permits the
destruction of the original hardcopy
books and records and the deletion of
the original computerized records (other
than ‘‘machine-sensible’’ records required
to be retained by Rev. Proc.
91–59, 1991–2 C.B. 841), after the
taxpayer:
(1) has completed its own testing
of the electronic storage system that
establishes that hardcopy or computerized
books and records are being reproduced
in compliance with all the provisions
of this revenue procedure; and
(2) has instituted procedures that
ensure its continued compliance with all
the provisions of this revenue procedure.

posted by books for weapons at 3:16 PM on February 11, 2015 [4 favorites]

OMG, but BACKUP your files! Preferably in multiple locations (onsite, offsite, cloud, etc.) Friends of ours scanned all their files/receipts, and were so hosed when they got audited and their files were gonzo (hard drive crash, I think).
posted by mon-ma-tron at 3:39 PM on February 11, 2015 [4 favorites]