Proving your expenses for an IRS audit when you’re missing receipts may not be easy, but it can be done. They key lies in knowing where to start. You may need to collect affidavits from vendors you’ve purchased things from, and there’s some other legwork you’ll need to know about.
If you haven’t kept up your business records, there are still ways to prove expenses for an IRS audit when missing receipts. It will cost you time and in some cases pain, but you can show the IRS that you legally and correctly applied deductions to your tax returns. If you don't, you may subject to penalties in addition to a tax bill. Here’s what you need to do in lieu of receipts:
Image Credit: (Matt Aiello)
You can get signed affidavits from the vendors, suppliers or others that you received receipts from. Affidavits are available in many legal software programs, as well as free online. The affiant, the person signing the affidavit, will have to get it notarized. It can be a hassle for them and for you to get the affidavits that you need, but it is one of the best ways to prove expenses to solve an IRS audit missing receipts problem.
Statement about Work
The IRS may also accept a statement about the work that resulted in expenses. You’ll need to detail the nature of the work, when it was carried out, how it was carried out, and the ordinary and reasonable expenses related to the business activity. The purpose of the statement is to show that any person carrying out the work would have to incur expenses. You’ll want to show that the expenses that someone else would incur are comparable to yours, and that they are reasonable. For example, if you’re an event planner and you don’t have receipts to show that you ordered party supplies, you’ll have to show that you would need to do that in order to organize an event.
It’s easy to recreate some of the expenses for the IRS by using your calendar. For example, if you need to prove expenses for an IRS audit when you’re missing receipts in connection to travel, you can provide a copy of your calendar. You can show the mileage to get to and from each appointment if you’re claiming mileage deductions. The calendar alone may not be sufficient, depending on the type of expense you want to recreate to resolve your IRS audit missing receipts dilemma. It may be a great supplement to an affidavit or statement about the work carried out.
The need to prove expenses for an IRS audit when missing receipts can be challenging, but you can do it. Gather as much information and as much help as possible from everyone you got receipts from. Recreating your expenses can be a hassle, but it’s easier than the unfavorable consequences that can result from an IRS audit.
Howard Levy IRS Lawyer: IRS audits – how can you prove expenses without receipts?
Tax Help Now! Audit Problems