Electronic Receipts for Tax Audit: How Acceptable Are They?
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Electronic Receipts for Tax Audit: How Acceptable Are They?

Electronic Receipts, Electronically Saved Documents, Photographed, Digital or Scanned Receipts can be accepted by IRS for Tax Audit Purposes provided they are stored and electronically saved according to the requirements of IRS. Filing system must be well organized in order to easily retrieve the necessary documents if Tax Audit arises.

Electronic Receipts, Electronically Saved Documents, Photographed, Digital or Scanned Receipts are synonymously associated with each other and may refer to the same meaning as to Electronic Receipts. Electronic Receipts nowadays can be easily managed and organized with the use of technology. That is why; IRS has adapted to the improvement of technology and has accepted the use of Electronic Receipts instead of the Paper Receipts for Tax Audit purposes provided that specific requirements in the Publication 552 of IRS for Electronic Records must be complied with.

Electronic Receipts has been accepted by IRS since 1997. Page 9 of Rev. Proc. 97-22 of IRS Bulletin 1997-13 provides the guidelines for tax payers who use the electronic storage system in maintaining their book of records.

Electronic Storage System for tax purposes refers to any electronic imaging or transfer to an electronic media such as optical disk or any available electronic storage that maintains the electronic or computerized books and records which may include Electronic Receipts. Electronic Receipts may be hard copy of receipts that are scanned and electronically saved. These Electronic Receipts must be kept for a longer period time and should be readily available if Tax Audit may find necessary.

Electronic Receipts may be accepted for Tax Audit purposes provided they are legible and readily available. Electronic Receipts must show as proof of income or expense. The amount, date of payment and the vendor or merchant must be legible in the Electronic Receipt.

Bank Statements and Checkbook can also be reliable as proof of income, sources of deposit and expenses, but in order to provide for the supporting documents for the original source of transactions, receipts and sales slips must be kept for future reference. These receipts and sales slips may be electronically saved to support any Tax Audit.

Electronic Receipts and electronically saving of documents if properly stored are more legible than paper receipts filed for a longer period of time. The original hard copy of books and records including Electronic Receipts may be destroyed provided that Electronic Storage System has been tested in compliance with IRS Requirements.

Electronic Storage System must be tested in terms of the equipment used, indexing methodology, software and retrieval capabilities. If the test is unsuccessful, the tax payer may be subject for penalties for non-compliance unless he must maintain the original hard copy of books and records.

Maintaining Electronic Receipts nowadays is easy with the help of Neat Receipts powered by the Neat Company. Neat Receipts enable to scan copies of paper receipts and store them in an organized Neat Library which identifies Receipts according to categories. Electronic Receipts can also be imported from a different folder to the Neat Library for easy reference and indexing. Neat Receipts provide digital filing system for Electronic Receipts, business cards and documents as well.

Managing an Electronic Filing System can also be maintained in your own computer through the creation of folders by appropriate identification of categories, types of transactions and more importantly organizing them according to transaction dates; whether monthly or yearly. Appropriate indexing must be done to easily match the Electronic Receipts from the computerized accounting books or software. Regular back-up and saving of files through external hard drive are also necessary to easily retrieve documents in case computer problems may occur.

Electronic Receipts can be acceptable therefore if the filing system is in accordance to the guidelines specifically required by the IRS. However, it is at best to consult a tax agent or tax lawyer for a proper advice regarding Electronic Receipts for Tax Audit Purposes.

Sources:

http://www.irs.gov/publications/p552/ar02.html#en_US_publink10008576

http://www.irs.gov/pub/irs-irbs/irb97-13.pdf

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Comments (1)

Interesting to see another source of evidence.

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