What Happens If You Get Audited and Don’t Have Receipts?
If you go to the Internal Revenue Service (IRS) website, their wording about not having receipt backups to accompany your tax filing to prove your deductions. The IRS emphatically state that you must keep all your receipts. They state that if you don’t have them, simply put, they accept tax software records, but not much more than that.
It is common knowledge that you should save all receipts to back up any deductions you show on your tax return. The IRS will audit individuals sometimes as much as 3 – 6 years after their filing. You just don’t know when it will happen. But when your time has come – what happens if you’re getting audited and don’t have receipts?
When you are notified by the IRS that you will be audited, their representative or auditor naturally will ask for receipts to prove any deductions you have claimed. If you don’t have any receipts, the IRS auditor is willing to accept other types of documentation associated with your deduction.The IRS would much rather have a physical paper or the picture of an online receipt, but if you just can’t produce receipts, then consider a credit card statement which is a great paper trail to verify the tax deduction expenses. They will accept a bill or a canceled check to verify your expense.
You can produce canceled checks but the IRS will usually require corroborating proof to go along with the checks. This can include some type of business or personal accounting journal entry. Also, if you can produce any other receipts from that time and area that helps to prove that you were physically in that place and time. No, the IRS will not accept a selfie.
When we talk about a journal entry, the IRS will be looking for a deduction claim of at least $75. If your journal entries or other identification documentation can’t bear fruit, then it is almost a given that the IRS auditor probably will not allow you to keep the deduction as ‘disallowing the deduction.’ Whatever your amount is for that deduction, the auditor will dismiss it as a legitimate deduction.
The auditor will then add that amount to your taxable income, immediately placing you into a higher tax bracket for that year. Unfortunately, when your supposed deduction is placed back into your taxable income you must now pay taxes on your new income and at a much higher tax rate.
In summary, when you can’t produce receipts to prove that you really did spend money on one of your deductions, it could result in a tax penalty. This penalty amount will be based on when you originally filed during your tax deadline.
This also leads to a penalty which is based on the amount that you still owe, plus interest. This penalty amount will have to be paid at the end of the audit, as well paying the extra amount of taxes that you owe. Uncle Sam is not totally heartless, the IRS auditor and you can talk about time to repay all that you owe.