Here's What Happens If You Get Audited and Don't Have Receipts

Sometimes people get audited during tax season, but no worries, it happens. But what happens if you don’t have receipts? Here's what we know.


Apr. 14 2023, Published 4:28 p.m. ET

A woman looking at receipts for a tax audit
Source: Getty Images

An audit is defined as an official inspection of one's accounts, typically led by an authoritative and independent body that has the qualifications to monitor account activity. The IRS conducts audits — a financial examination that has the ability to detect any fraudulent or suspicious behaviors. Through these audits, auditors overview financial records to ensure that all transactions made by the account holder are fair and accurate to their own reporting. However, audits aren't always profit-orientated.

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When a person or company is audited, they may be required to present documentation of financial activity to the auditor. The audited person or company can't always present a complete transactional history for the time period they're being audited for. When this may occur, what happens if you get audited and don’t have receipts?

What happens if you get audited and you don’t have receipts?

If you don't have the required receipts that show proof of purchase or can accurately depict the exchange of money, the first plan of action would be to retrace your steps. Where could you have possibly put the documentation that needs to be provided? If it's reasonable, consider going back to the place of purchase or vendor to see if you're able to recover any missing receipts. Is there an email or confirmation form that displays the payment?

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You can try presenting bank statements that demonstrate that your purchases are legitimate. However, it isn't entirely possible to recreate proof of expenses on things like tangible donations, travel, gambling losses, or mileage paid for during travel. If you can't provide receipts during an audit, the IRS will disallow any deductions claimed. However, you may be able to reconstruct records and present them to the IRS. This can be an explanation of the expenses instead of physical receipts.

You can create a report of expenses as a way to verify your expenses if you can't find the original receipt or a copy that displays the same information. However, the Cohan Rule justifies that business owners are able to claim expenses without having to issue a receipt if the expenses are deemed reasonable for your business. If you choose to invoke the Cohan v Commissioner of Internal Revenue rule, you're fairly in the clear. This is an alternative to recreating your spending history records.

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Take these steps to avoid an audit.

In order to avoid having to dig up your old receipts for an auditor, it's important to know how to avoid being audited in the first place. There are a few easy steps that you can follow to be sure that you aren't accidentally committing some form of monetary fraud when self-reporting your expenses. Report 100 percent of your income and avoid reporting any excessive expenses or claims. The more you claim, the greater the likelihood that the IRS will investigate.

By itemizing your tax deductions, you're showing transparency to the IRS through your business expenses. Staying as clear and consistent as possible eliminates any gray areas about the information you provide. Provide the appropriate details that the auditor may be looking for that can justify your expenses and complete any documentation that can support your claim. By filing your taxes on time, you'll be in better standing with the IRS, which decreases the chances of an audit.

Avoid amending any returns because if you go back and edit them, it will signal to the IRS that there was a mistake. Report the original return, net change, and the correct amount that you've filed. Avoid rounding up any numbers and make sure that your math is accurate to the best of your ability. The IRS looks for exact numbers when reviewing tax returns, and deems rounded numbers to be unacceptable. Finally, sign your returns, and don't leave any questions blank.

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