Academic journal article Journal of Accountancy

IRS Proposes Allowing Imaging Systems to Replace Paper Records

Academic journal article Journal of Accountancy

IRS Proposes Allowing Imaging Systems to Replace Paper Records

Article excerpt

The Internal Revenue Service has proposed letting taxpayers use electronic imaging systems, such as computer diskette and CD-ROM, to comply with its recordkeeping requirements. Notice 96-6 is intended to significantly reduce recordkeeping burdens by allowing companies that comply with the proposal to destroy hard copy documents.

"Taxpayers will soon be able to throw out a lot of paper records," said Patricia Marshall, tax manager of Walpert, Smullian & Blumenthal in Baltimore, Maryland. "If the taxpayer is computer literate and the imaging systems are implemented in a foolproof fashion, then it is conceivable that a room full of paper documents could be stored on a small shelf of CDs."

The proposal pertains to all books and records kept in compliance with Internal Revenue Code section 6001 for all matters under the jurisdiction of the IRS including income, excise, employment and estate and gift taxes, as well as employee plans and exempt organizations. The proposal lists the operational requirements imaging systems would have to meet to qualify as books and records under IRS code, although there are no technical specifications for hardware or software. Among the proposed requirements, imaging systems must

* Create accurate and complete electronic images of hard copy documents.

* Index, store, preserve, retrieve and reproduce imaged documents.

* Include reasonable controls to ensure integrity, accuracy and reliability of the imaging system.

* Include a record of where, when, by whom and on what equipment the image was produced, including the hardware and software used.

* Include controls to prevent unauthorized alteration or deletion.

* Include an inspection and quality assurance program. …

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