IRS Audit – No Records, Receipts, Proof, Evidence, or Verification!

This is a very popular topic asked by taxpayers. They have many of the following questions and concerns:

• What if I am audited and I am missing receipts?
• What if I don’t have backup information?
• What if don’t have…
  
  • …medical receipts?
  • …auto receipts?
  • …travel and entertainment receipts?
  • …office in-home receipts?
  • …living in home two years of five?
  • …contribution proof?
  • …good will receipts?
  • …sales tax receipts?
• What if the IRS requests receipts you don’t have?
• What proof does the IRS require for an audit?
• I don’t have payment verification with another company.
• I can’t find receipts for a tax aduit.
• I have a gross receipts audit.

Help Passing an Audit Without Receipts!

This is where our years of professional experience comes in. We have prepared returns when taxpayers didn’t have receipts. We have represented audited taxpayers who did not have receipts. We can help you provide alternate proof. We can help you “pass” the economic living expense test that the IRS uses. “Pass” means that we can help you shave off the extra income the IRS may claim you have. Sometimes, they want to charge you even if there is no evidence! If they think you are showing too little income based on their living expense tables then they may accuse you of hiding income. It’s best to call us before you are in this situation. Don’t wait until after you contact the IRS, call us now!

Another List of Audit Questions/Concerns You May Have

• What documents are required for an IRS audit?
• What should I present as receipts to the IRS?
• What happens in an audit if I don’t have receipts?
• Does an IRS audit require original receipts?
• What is no evidence in writing?
• I don’t have the papers the IRS is requesting.
• What if I’m audited and can’t prove deductions?
• What can be used for verification of expenses?
• What if I don’t have documents for an audit?
• What if I can’t prove what the IRS wants?
• What if I’m audited and can’t find receipts?
• I can’t find receipts and I’m being audited.
• I need receipts for the IRS.
• The IRS asks for receipts.

All of the above questions pretty much amount to the same thing. You don’t have the documentation to support your claims on your tax return! Let’s examine this in more detail…

Proving Income In an Audit

In general, you report your W2 income. You report your net income from form 1040 Schedule C if you are self-employed. You report your net income from form 1040 Schedule E if you have rental property. You report all 1099 income and income from any K-1 distributions from corporations and partnerships. Pretty straight forward for experienced tax preparers. The IRS, however, wants to know if your calculations are accurate. Often, they are missing third-party payer documents to match against what you report (or don’t report) on your return. Auditors now look at all the deposits in your bank account and require that you prove what is not income. Otherwise, they will charge those deposits to you as income. You may wind up paying taxes on transfers, gifts, deposits already report as income, etc.

Proving Expense In an Audit

Without receipts, this will be very tough. The following is a list of methods we have used to help our clients support their expenses when they did not have receipts:

1. We sent them to ask for receipts and invoices from everyone they paid. If it was deducted on their return then they need to look it up.
2. If they couldn’t get receipts, then signed affidavits from their recipients are needed.
3. Recreating workpapers showing the timing of receipts and payments. Showing how money was combined and transferred helps.
4. Showing proof that it would be impossible to complete the work without incurring the expenses on the return based on the nature of the business.

There are other ways to prove your income and expenses when you don’t have receipts. We think we can get you through an audit without receipts better than most people. Contact us now!