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Organize Your Tax Records for the IRS

Posted Mar 24 2011 8:00pm


The IRS doesn’t care how you keep your records . . . as long as the numbers add up and match your records if you’re ever audited. Always think “prove” when keeping paperwork, hardcopy or electronic. If audited, you have to “prove” - have “proof” - of what you say you lost (expenses) or gained (income). 

Here are quick tips straight from the horses, er, IRS’s mouth!  

1. Use your checkbook to keep a record of your income and expenses: record amounts, sources of deposits, and types of expenses.

2. Keep documents such as receipts and sales slips, that can help prove a deduction.

3. Keep your records in an orderly fashion for easy access to questions.

4. Keep them in a safe place.

5. Store/file by year and type of income or expense in a labeled box or envelope.


All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law.

An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. The electronic storage system must index, store, preserve, retrieve, and reproduce the electronically stored books and records in a legible, readable format. All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS.

Home tax software like QuickBooks should be fine.

Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records.

The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to save and store them effectively.

You still have the responsibility of retaining any other books and records that are required to be retained.


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