What Happens If You Get Audited and Don’t Have Receipts?

There it is. You’ve just come inside from the mailbox and notice the letter from the Internal Revenue Service (IRS). You anxiously open the letter. It is not an additional refund or a simple adjustment that they have made due to a mistake in the calculation of a credit. Instead, it is a notice of audit for your 2015 tax return. As you start to come to and it hits you that this is not just a dream, Oh My God…. you remember that you lost all of your important papers from that year during your move a few months ago. You are getting audited and don’t have receipts. What in the world do you do now?

Well, if you hired a Certified Public Accountant (CPA), Enrolled Agent (EA), or some other tax professional to prepare those 2015 taxes for you, the first thing that you should do is give that person a call and let them know that you are being audited. They will have dealt with this before and will know exactly what to do. But, If you are one of the minorities that loves to save money and file your taxes yourself, are you destined to live in the penitentiary for the rest of your life? Nah! It’s OK! You can breathe! Check out this hilarious Forbes article.

IRS law dictates over and over that you must have an “adequate record” for expenses claimed on your income taxes. This does not necessarily mean that only a receipt will do. Nowadays, most of us use a debit or credit card to pay for nearly everything that we purchase. A simple copy of a bank or credit card statement will usually completely satisfy any IRS auditor. But, what if you deducted some things that you paid cash for? Well, looks take a look at a few scenarios.


Unhappy couple unable to pay loan on time: stressed female doing paperwork sitting at table with laptop, papers, calculator and cell phone. Man trying to support his wife, patting her on head

What if you had a pocket full of cash that you wanted to use to pay for a pricey business dinner in New York one evening. If you write down the amount spent along with the name of the restaurant and those in attendance at this dinner, this will most likely suffice. However, if you have the auditor from Hades, who is just not satisfied, a signed letter from one of those in attendance with a phone number attached will quiet even the most ferocious of those IRS agents.

Maybe you paid Jenny, the responsible high school girl next door, to watch your rambunctious trio of young boys after school every day until you got home from work? No problem. If you will just have Jenny sign a simple letter stating how much you paid her for the year along with her Social Security number and phone number, once again, this will do the trick.

In a nutshell, the fact that the IRS is auditing you does not mean that they are out to get you. Relax, they just need proof of that “adequate record” that you are just waiting to show them.

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