I’ve spent a good bit of time digitizing paperwork over the past couple of years. My primary weapon in this battle has been a sheet-fed scanner, though I sometimes snap pics with my iPhone and turn them into “scanned” pdfs using JotNot.
While it feels to good to be working toward a paperless financial world, however, the issue of whether or not these scanned documents would be acceptable has always bothered me. Having a store refuse a return because I didn’t have the original receipt would be annoying; having the IRS reject my documents could be a disaster.
So… Does the IRS actually accept scanned documents?
As it turns out, yes… They’ve actually accepted electronic documentation since at least 1997, when they issued IRS Revenue Procedure 97-22, which states:
This revenue procedure provides guidance to taxpayers that maintain books and records by using an electronic storage system that either images their hardcopy (paper) books and records, or transfers their computerized books and records, to an electronic storage media, such as an optical disk. Records maintained in an electronic storage system that complies with the requirements of this revenue procedure will constitute records within the meaning of § 6001 of the Internal Revenue Code.
Section 6001 of the IRC essentially requires you to keep and make available sufficient records to show whether or not you’re liable for taxes. It further states that such records must be retained “so long as the contents thereof may become material in the administration of any internal revenue law.”
The general requirements of the “electronic storage system” referenced in the quote above are that it:
…must ensure an accurate and complete transfer of the hardcopy or 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.
There are some additional requirements, but the essence is that you can digitize your documents as long as they’re clearly legible (both on-screen and in hard copy) and easily retrievable. Just be sure to keep your data safe. In our case, we maintain both local and online backups of our data, so our digital documents are probably safer than hard copies.
Of course, I’m not a tax pro, so I suggest that you check out the details and decide for yourself. The relevant guidelines can be found in this document from the IRS. The pertinent section (Rev. Proc. 97-22) starts on page nine.