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

Most taxpayers, if not all, dread a tax audit. The IRS conducts an audit to ensure that the information on your tax return matches your actual financial records. But what happens if you get audited and don’t have receipts?

While missing receipts creates challenges, it doesn’t always translate to voided deductions or guaranteed penalties. The IRS accepts other types of proof as long as they’re reasonable and consistent with your reported income and expenses.

If you received an audit letter, but worry about a lack of receipts, this guide is for you. We’ll walk you through the audit process, outline alternative documentation you can present, and discuss other available options.

Why the IRS Audits Taxpayers

The IRS doesn’t issue an audit because it assumes fraud. In most cases, an audit is simply a review to confirm that your return is accurate. It’s true that the odds of an individual taxpayer being audited are less than 1%, but they’re never zero.

You may be selected at random, but more often the IRS reviews returns that show patterns raising questions. Common triggers include:

• Deductions that seem unusually high compared to your income
• Schedule C losses year after year
• Missing or mismatched income forms like 1099s or W-2s
• Large cash transactions or unusual write-offs
• Earning a higher-than-average income

During the audit, the IRS may ask for receipts to verify the accuracy of numbers reported and the legitimacy of the deductions claimed on your tax return. If you don’t have receipts, the agency still gives you the chance to present other documentation before reaching a conclusion.

What If You Don’t Have Receipts for an IRS Audit?

If you’re facing an IRS audit without receipts, you’re not out of options. Sometimes, records are lost due to accidents, technology failures, or poor recordkeeping habits, and the IRS understands that. What matters is that you can reasonably show that the expenses you claimed were real and legitimate.

For example, if you deducted business travel costs but lost receipts for meals or lodging, you may still be able to prove the trips took place using calendars, emails, or mileage logs. Bank statements, canceled checks, or invoices can also help establish that payments were made.

The key here is consistency. Your records should make sense together and align with what you reported on your return.

Capital Improvements and Missing Records

One of the trickiest areas involves property improvements. If you claimed costs for a new roof, an addition, or other major upgrades, you’ll need stronger documentation. Unlike routine business expenses, capital improvements affect your property’s tax basis. Without receipts, the IRS may refuse to adjust your basis. This can result in a higher taxable gain when you sell the property.

That said, you can often reconstruct proof. Contractors may provide invoices, and local authorities may have permits or inspection reports. Photographs or bank transfers can also support your claim. While not as straightforward as a receipt, this type of evidence still helps preserve deductions associated with property improvements.

The Cohan Rule and Estimated Expenses

In some cases, the IRS allows estimates. Thanks to the Cohan Rule. It allows taxpayers to approximate certain expenses if they can show that the expenses were real and business-related. For example, if you frequently travel for client work but lose your receipts. You may provide mileage logs or bank records to support the estimated costs.

However, there are exceptions. Travel, meals, and entertainment expenses have strict rules regarding proof and require actual receipts. If you don’t have them, you might lose those deductions completely.

Risks of an IRS Audit Without Receipts

Going through an audit without receipts carries risks. The most common include:

• Deductions that are denied may raise your taxable income
• Additional taxes, plus interest and penalties
• The possibility of being flagged for future audits
• Greater scrutiny if the IRS suspects fabricated or altered documents

The biggest mistake taxpayers make is trying to create false receipts. Doing so can turn a routine audit into a full-blown fraud investigation, which carries severe consequences. Always provide honest documentation, even if incomplete.

Possible Outcomes of an IRS Audit

An audit usually ends in one of three ways:

• The IRS accepts your explanation and makes no changes to your return.
• The IRS adjusts your return, which may increase your tax bill or, in some cases, result in a refund.
• You disagree with the IRS findings and challenge the outcome through the appeals process or in tax court.

Missing receipts raise the odds that the IRS will reduce or deny deductions, but that doesn’t leave you without options. The strength of your alternative documentation often determines the result.

How Far Back the IRS Can Look

Typically, the IRS examines returns from the previous three years. However, the statute of limitations may last up to six years if you underreport your income by more than 25%. There is no deadline if they suspect fraud or if you never filed your return. This is why recordkeeping is important, since the IRS may ask you to explain expenses from years ago.

Preparing for Future Audits

The best way to prepare for and prevent issues with future audits is to maintain accurate records of your income and expenses at all times. The IRS accepts digital copies of receipts, so scan your documents and store them electronically. You can also utilize accounting software and apps to automate this process and organize your records. To improve traceability, avoid doing cash transactions if possible.

For major expenses, such as capital improvements, it is important to keep copies of contracts, permits, and photographs, along with the corresponding invoices. Keep them in one location to avoid having to fumble with them years later if the IRS has any questions.

Get Help With an IRS Audit

An IRS audit can be scary, especially if you’re missing receipts. But you don’t have to handle it alone. At Tax Samaritan, we help U.S. taxpayers defend their deductions, respond to audit requests, and resolve disputes so you can move forward with peace of mind.

Call 775-305-1040 or request a free 30-minute consultation today. We’ll review your situation, explain your options, and guide you every step of the way.