Being Audited By The IRS But Don’t Have Any Receipts?

Venar Ayar - Records For A Tax Audit
IRS Record Keeping Guidelines

The Internal Revenue Service generally advises taxpayers to retain copies of all tax returns and any relevant supporting documentation for at least the previous three tax years. The IRS also provides an extensive list of the types of records they may request if you are audited. These include:

  • Receipts
  • Bills
  • Checks
  • Legal paperwork and documentation
  • Loan agreements
  • Tickets
  • Medical or Dental Records
  • Employment documents

The IRS accepts electronic records in some instances, namely if the electronic records were produced by tax software. If you have any questions about whether your electronic documents and files are acceptable to the IRS, you should contact an experienced tax attorney right away.

Can Lack Of Receipts Derail Your Audit?

While it is imperative that you maintain all your records relating to your tax returns, especially for the last three tax years, if, for some reason, you do not have all the necessary documentation before an audit, you aren’t out of luck completely.

Owing to something known as the Cohan Rule, named after  George Cohan, a popular Broadway star in the early twentieth century, the IRS must accept what is known as “other reasonable evidence.” This rule allows a taxpayer to dispute the IRS’s determination of a tax liability through judicial review. Simply put, the IRS must allow you to deduct some of your expenses, even if you cannot provide the proper documentation if you can provide evidence which is credible.

Some examples of credible evidence for expenses may include:

  • Canceled checks
  • Calendar notices. From you or colleagues
  • Letters

It’s worth noting that in the 134 cases identified by the IRS under IRC Statute 162, the judicial courts affirmed the IRS position 74 percent of the time. This means that while other credible evidence is permissible, it carries a much higher burden of proof on the taxpayer. In addition, as there is rarely any definitive proof of the total amount of deductions, the courts will estimate a reasonable amount to be deducted from the individual’s tax burden.

Have a tax audit question? Contact Venar Ayar.



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