Scanned documents won’t hold up in an audit

Written by Briana Cavanaugh

April 24, 2010

Here’s a head’s up a recent IRS ruling about scanned documents. The gist is that you have to keep hard copies.  So if you’re using Neat Receipts or some other software/hardware configuration, you are still responsible for  all those hard copies and can’t just chuck ’em when you’re done.

Q13. Will scanned documents be accepted as substantiation for expenses in an
audit? If not or if there are further requirements, please explain and cite the
reference. Also, please relate to Revenue Procedure 98-25 & 97-22.

A. Scanned documents are not accepted as substantiation for expenses. A record is the
actual document, such as a receipt or invoice that proves an expense was incurred. If an
auditor is presented with only scanned documents, he will be obligated to at least sample
these documents for accuracy and substantiation. This will include tracing back to the
original source document through a third party source such as your distributor/wholesaler.

Revenue Procedure, 98-25 prescribes basic requirements that the Internal Revenue
Service considers essential in cases where your records are maintained within an
Automatic Data Processing system. Rev Proc 98-25 section 11.01, Hardcopy Records,
says, “These procedures do not relieve you of your responsibility to retain hardcopy
records that are created or received in the ordinary course of business as required by
existing law and regulations.”


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