How do you keep receipts for IRS auditing?

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I am trying to scan all the receipts to store in the computer for IRS auditing purpose. There are many advantages to do so. The paper receipts are messy and hard to keep. Some of them can fade away in 2 years. And the advantage of able to search any receipt is huge (need OCR capability).

My question is if it is sufficient to keep them in electronic copy only? Will they come back asking for the original copy after submitting a print-out? I want to shred the receipts right after scanning it.  

Do you have any scanner to recommend? I would need OCR function and integrated search function. Thanks a lot!

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I bought a Fujitsu ScanSnap S1300 in 2010 - there are definitely newer versions now. It continues to scan just fine although I only use it for receipt and periodic document scanning (think mortgage docs etc.). It came with OCR software which does a good job of converting to text in the saved PDF files - it isn't perfect, but as long as the receipt is legible it is fairly accurate.

For the physical receipts, after I scan them I store them in envelopes and at the end of the year I put the tax docs and receipts together. The scans are far more legible after a year or two, but I figure I've covered all of my bases by holding onto them. Plus I have plenty of space for the storage.

+1 for a ScanSnap.  I scan all receipts as I get them and periodically shred them (every few months or so).  I then turn them into a single multi-page PDF (for each account) that's stored with my PDF statements at the end of each year.  The old NeatReceipts software (version 4) is good for this.

As far as the IRS, NeatReceipts claims that PDF exports are acceptable for the IRS:

http://www.neat.com/helpcenter/irs-electronic-document-requireme... 

My understanding is that if you regularly image and archive your documents, the images "become" the original copy of record.

IRS Agent: I've personally accepted scans just as a means to get it to me electronically rather than meeting or mailing originals. If there was some reason that I was especially suspicious of you/ how the particular scan looked I might ask for originals, but if the receipt looked normal it would be accepted by me. I've never heard anything about an official agency stance on scans vs. originals.

Thanks vranaco to clarify this. Sounds like we still need to keep the originals.

Anyway, anybody have experience with Neat Desk? It looks similar to ScanSnap? Where can I find a deal for that?

Paper. But it works because I don't have very many and typically take the standard deduction..

I do have a scansnap. Best scanner I've ever had. Just put the paper in and push the button. I use it for disaster recovery stuff. Scanning insurance policies, etc.

If if I were starting over now- I'd probably just use an iOS scanning app that uses the camera.

I use camscanner on android to scan receipts and other documents for expense reports. It takes the corners of the document and deskews it so the final product is rectangular.

Smartphone with a decent camera and Google Drive.
I can search for any text in the Google Drive website and it'll find it any of the PDFs I've scanned with my phone. I presume this also applies to PDFs uploaded from a flatbed scanner or the like since Google loves inspecting your data.

It's a waste of time. Shoe box by year. Only scan statements or anything the size of a piece of paper.

I've been using an app called TinyScan Pro that lets me quickly take a picture, crop it, and upload the PDF to google drive.

Chargum85 said:   It's a waste of time. Shoe box by year. Only scan statements or anything the size of a piece of paper.
  Boom. I do the same thing- shoebox full of receipts by year. Why go through all the trouble scanning for something that is likely not to happen? If you get audited then you can spend that time digging through for receipts, but I don't see any benefit in doing that proactively (except for some receipts fading).

To the OP's question though, I don't see why it wouldn't be accepted, especially for credit card charges where you can also show the matching amounts on a credit card statement if you need to.

Wow, people must be saving a whole lot more receipts than I am to need a shoebox. I just save charitable receipts plus the property tax statement in a manila folder. I am also saving medical receipts in a separate folder, in case I want to take money out of my HSA.

Chargum85 said:   It's a waste of time. Shoe box by year. Only scan statements or anything the size of a piece of paper.
  This. Something you only have a small risk of needing should easily available but without expending much effort. Then just throw away the box as the SOL passes. Disregard if you live in a tiny apartment ur something.

Anybody ever try to use something that doesn't itemize sales tax on receipts for the sales tax deduction (like a credit card statement)? I've seen conflicting answers on this, but I've got nearly 900 receipts already and it's July.

JimTravel73 said:   Anybody ever try to use something that doesn't itemize sales tax on receipts for the sales tax deduction (like a credit card statement)? I've seen conflicting answers on this, but I've got nearly 900 receipts already and it's July.
  why do you need to separate out sales tax?

Because of the sales tax deduction?

JimTravel73 said:   Because of the sales tax deduction?
  what allows you to deduct sales tax , but not the purchase?

The alternative on Form 1040 to the income tax deduction is the sales tax deduction, and if your sales tax paid is above a chart value, you are supposed to keep the receipts to claim it.

JimTravel73 said:   The alternative on Form 1040 to the income tax deduction is the sales tax deduction, and if your sales tax paid is above a chart value, you are supposed to keep the receipts to claim it.
  MI has both state income tax and sales tax. Should I be checking if my sales tax exceeds income tax?

 

rufflesinc said:   
JimTravel73 said:   The alternative on Form 1040 to the income tax deduction is the sales tax deduction, and if your sales tax paid is above a chart value, you are supposed to keep the receipts to claim it.
  MI has both state income tax and sales tax. Should I be checking if my sales tax exceeds income tax?

 

Sure, have fun.  Knock yourself out.

With a cheap smartphone (even a windows phone), you can easily digitize any paper copy of receipt with CamScanner app.

rufflesinc said:   
JimTravel73 said:   The alternative on Form 1040 to the income tax deduction is the sales tax deduction, and if your sales tax paid is above a chart value, you are supposed to keep the receipts to claim it.
  MI has both state income tax and sales tax. Should I be checking if my sales tax exceeds income tax?

 

  
For those of us in a no-income-tax state, this is a no-brainer, but at least in my world, an 8%+ tax rate results in roughly 2 to 2.5% of spending being actual sales tax (which tends to imply that only about 25% of my overall spending is taxable, which may not be your circumstances).  

vranaco said:   IRS Agent: I've personally accepted scans just as a means to get it to me electronically rather than meeting or mailing originals. If there was some reason that I was especially suspicious of you/ how the particular scan looked I might ask for originals, but if the receipt looked normal it would be accepted by me. I've never heard anything about an official agency stance on scans vs. originals.
  For almost 20 years, the IRS has officially accepted electronic copies of receipts, as long as they are "legible" and "readable."  See Rev. Proc. 97-22 regarding "electronic storage systems."

The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you need to keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out. The amount of limitations is the period of time in which you'll be able to amend your tax return to claim a credit or refund, or the IRS can assess additional tax.

Google Drive is a right and safest way to keep receipts for IRS auditing.

LiveWisely said:   My question is if it is sufficient to keep them in electronic copy only? 
  How hard is it to put the year's receipts in a folder and keep 20 years of folders in a cardboard Bankers Box in your bedroom closet? I'd see more hassle scanning those pesky cash register and tiny POS terminal receipts than any chance you will need to show a copy of them. 

FWIW I keep tax returns and receipts that support them forever since they all fit in one paper folder. (I don't know why i'd need tax returns from 20 years ago but since they all fit into a smallish box, I don't care). The million other receipts I keep in a "shoebox" for 3 years (well really four by the time I get around to doing the next year), more for things like returns or miscellaneous non tax things. For truly major purchases (house, car, major appliances) I have a few dedicated folders that I keep as long as the item is around (plus about a year until I do the next cleanup).

I'd be more concerned about the quality of the receipt for warranty and return purposes than I would be for audit purposes.  A retailer or warranty service center is more likely to be particular about having the "original" receipt than the IRS.  The problem is that retail receipts are very likely to fade or otherwise become illegible over time.  I will usually make a copy or two of the original receipt and put it in the same "warranty" file with the original receipt.  That way I have both - the original AND one I can actually read years later if need be.

dcwilbur said:   The problem is that retail receipts are very likely to fade or otherwise become illegible over time.  
  I'm beginning to think this is deliberate so you can't collect on a warranty. Buy a 6 or 7 year battery and the thermal printer receipt is unreadable after a year or two if kept in the glove compartment where it gets hot.



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