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IRS Accepts Electronic Tax Records

Posted by Predovich & Company

IRS has allowed taxpayers to keep electronic tax records since 1997 under Rev. Proc. 97-22 “Recordkeeping Requirements – Electronic Storage System.”

IRS provided guidelines on maintenance of books and records on electronic storage system that either images hardcopy or transfers computerized books and records to electronic storage media. Records kept in compliance with guidelines will be deemed in compliance with Code Sec. 6001; recordkeeping requirements. In general, storage system must reliably transfer, store, index, preserve, retrieve, and reproduce electronically stored books and records, and any records reproduced must have high degree of legibility when displayed or reproduced.

The implementation of records management practices is a business decision that is solely within the discretion of the taxpayer. Records management practices may include the labeling of electronically stored books and records, providing a secure storage environment, creating back-up copies, selecting an off-site storage location, retaining hardcopies of books or records that are illegible or that cannot be accurately or completely transferred to an electronic storage system, and testing to confirm records integrity.

This revenue procedure permits the destruction of the original hardcopy books and records and the deletion of the original computerized records, after the taxpayer 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 has instituted procedures that ensure its continued compliance with all the provisions of this revenue procedure.

Source: IRS Rev. Proc. 97-22: Recordkeeping Requirements – Electronic Storage System

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