What happens if you get audited with no receipts?

What happens if you get audited with no receipts?

What happens if you get audited with no receipts?

An IRS tax audit is one of the things taxpayers dread the most.

If you get a tax audit notice from the IRS and you are not sure what it means, here’s a brief description of what a tax audit is.

 

A tax audit is the scrutiny or analysis of your tax history and account by the IRS to check for any accuracies and to ensure compliance with the necessary laws. The IRS selects tax accounts from time to time for audits.

An audit is conducted to search for discrepancies between your documents and the information that you filled in your tax returns.

Although many times, the IRS randomly selects the accounts to be audited, many other times, suspicious activities in a person’s tax account attract an audit.

A few activities that may attract the attention of the IRS and cause an audit include:

  • Claiming many deductions
  • Making maths errors in your returns
  • Failing to report some sources of income
  • Claiming a home office deduction, and other suspicious activities.

 

When you get an audit notice from the IRS, the first thing that you are likely to feel is a surge of panic, nevertheless, you do not have to worry.  Do not allow yourself to get overwhelmed by the notice of an impending tax audit that you have received. A tax audit is not necessarily bad news unless you have intentionally involved yourself in fraudulent activities.

All you need to do is prepare ahead, keep your documents handy, and be ready for the IRS. You may choose to go through the process of a tax audit by yourself, however, you are much better off hiring a professional to handle it on your behalf. We are always ready to help you. Contact us today.

 

One way to prepare for a tax audit is by getting all the relevant documents ready. You need to provide receipts that prove the claims that you have entered on your return.

Every professional will advise you to keep your documents and receipts handy to avoid a strenuous audit session and a potentially catastrophic outcome. However, what happens when you innocently lose important receipts and you are about to be audited?

Sometimes, when people get notified that they will be audited, they are unable to collate the necessary documents and receipts for different reasons.

Here are a few things you can do if you’re about to go through an audit without receipts

  1. Theft or Loss of Documents

If you lost your receipts as a result of a fire outbreak or some kind of theft, you can use proof like an insurance report, police report, photos, or videos of the event as proof. That will get you through an audit without receipts.

 

  1. Get alternative documents

In cases such as medical expenses, you can reach the doctors or pharmacists for another receipt or a different document that could suffice. Logs, diaries, and places where you have kept records of your expenses will be useful as well.

 

  1. Cohan Rule

The Cohan Rules says the IRS must allow some of your deductions even without proof. Some flexibility will be allowed mostly for expenses that are considered to be ordinary in the sense that they are commonly incurred in the particular line of business, necessary (meaning that it is vital for the expansion and success of the business), and reasonable in amount.

Generally, it is best to keep all your receipts and have them ready ahead of possible audits. However, if for any reason you do not have your receipts anymore, don’t panic. It is still possible to have a seamless audit.

Facing a tax audit? Call us now to get assistance from the best team of tax defense professionals.

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