WASHINGTON – In response to concerns raised by U.S. Sen. Mark R. Warner (D-VA), the Internal Revenue Service (IRS) announced that the IRS will revise its website and publications to provide more clarity to taxpayers about the permissible use of electronic records. On February 3, 2016, Sen. Warner sent a  letter to Commissioner John Koskinen, calling for the IRS to streamline its guidance, particularly for on-demand workers who face unique challenges when filing their individual income taxes.

“The rapid increase in the use of mobile devices to manage an on-demand job means that some individuals are moving away from the traditional home office and the use of printed, paper records,” Sen. Warner wrote. “However, for workers in this economy who identify as sole-proprietors and therefore must file a Form 1040 Schedule C to report their profit or loss, there is uncertainty over what constitutes an adequate record of expense.”

In response to Sen. Warner’s letter, Commissioner Koskinen wrote that the IRS has accepted electronic records for some time, but conceded that taxpayer instructions could be clearer. “We agree that our publications and guidance would be more useful if they contained examples of electronic records that satisfy the substantiation requirements,” Commissioner Koskinen wrote.  

In order to address the unique challenges facing on-demand workers, Commissioner Koskinen wrote:  

• The IRS intends to update Publication 583, Starting a Business and Keeping Records, to provide modern examples of electronic recordkeeping, particularly for taxpayers performing on-demand work in the gig economy.
• The IRS is also developing an Internal Revenue Manual (IRM) chapter devoted to auditing electronic records to provide additional guidance to its examiners. The IRS will review the information contained on its intranet webpage and consider adding information and examples to more directly address electronic recordkeeping requirements where needed.
• The IRS intends to add information and examples to IRS.gov and the relevant publications to more directly address modern electronic recordkeeping, especially for taxpayers performing on-demand work in the gig economy.

“I applaud the IRS for taking these commonsense steps to help taxpayers, especially those working in the gig economy, to better organize and store their income and expense records,” Sen. Warner said. “Electronic receipts still must be backed-up and accessible in the event the IRS has legitimate questions, but this is a positive step forward toward the ‘paperless’ office used by many on-demand economy workers and small business owners.”

Full text of Sen. Warner’s letter is available here. Full text of Commissioner Koskinen’s response is available here. Full text of Commissioner Koskinen’s answers to Sen. Warner’s questions are available here.