With the onset of hurricane season the IRS posted this blurb about safekeeping of your important records (note the paragraph with the heading "Paperless Recordkeeping." Here is what the IRS says:
"Many people now receive bank statements and documents by e-mail or over the Web. Paper records such as W-2s, tax returns and other documents can be scanned into an electronic format. With documents in electronic form, taxpayers can copy them onto a USB drive as a backup, which can be sent to a relative in another city for safe-keeping in case the taxpayer’s computer and paper files are destroyed.
Other options include copying files onto a CD or DVD. Many retail stores also sell computer software packages that can be used for recordkeeping."
The IRS generally does not require records to be kept in a particular manner, so scanned records will usually be acceptable (as will information kept in financial programs such as Quicken). For more detailed information about IRS requirements, see Publication 552 - Recordingkeeping for Individuals and Publication 583 - Starting a Business and Keeping Records.
And what about attorneys? Can they keep their client records in paperless format? Well, it depends. For the most part, the answer is yes (with the exception of original wills, promissory notes or other things that a lawyer may reasonably be expected to preserve in its original form). For more overview check out this ABA article that was written about 2 years ago. Obviously, more attorneys are going to want to keep their old client files in digital form, and my guess is that it will be permitted (with some obvious exceptions). After all, keeping paper files has proven to be very problematic in disasters such as 9/11 and Hurricane Katrina.
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