Missing Receipts Which Prove Deductions
Perhaps you find yourself in the unenviable position of being audited by the IRS and many of the deductions you claimed are being challenged. If you are unable to claim your legitimate deductions through lack of receipts or documentation you may find that you owe substantially more in taxes and may even owe penalties and interest. Even though you may have lost receipts you are allowed to use an affidavit in order to prove the deductions—even though the IRS may not tell you this. While the IRS wants people to think they are not allowed to claim a deduction without the paper to back it up, in most cases this is just wrong. In some cases taxpayers may even have a canceled check but are still told it is simply not good enough.
It is critical that taxpayers know that oral testimony—your word of honor—can be legally sufficient to prove a deduction. You will be required to back up your word with a written statement, signed under penalty of perjury, that the deductions you took were correct and accurate. Such an affidavit—so long as it is plausible and uncontested must be accepted by the IRS thus allowing you to claim your original deductions. Now that you know you can survive an audit even if you are missing receipts, here are some additional tips for getting through the trauma of an IRS audit.
Tips for Sailing Through an Audit
Even if your tax return was all on the up and up, you may still be targeted for an audit. The primary way to sail through an audit with flying colors is to above all, be prepared. In other words, simply assume you will be audited every time you file a tax return. Keep receipts religiously and make notes of your deductions throughout the year rather than trying to remember it all on April 14th. If you receive a notice for audit respond as quickly as you can. You generally have thirty days in which to respond, but doing it more quickly can help you turn the auditor into an ally.
The audit notice should tell you which items on your tax return are being looked at, so prepare copies of all necessary documentation to bring to your first meeting. Never, ever give the auditor originals as you may never see them again. Don’t bring more than you have been asked to bring, however, or you could be opening the door for further questions. Answer the questions you are asked and produce the documents requested—beyond that exercise your right to remain silent as much as possible. This is not because you have anything to hide, rather simply to keep this time consuming task down to a minimum. If you have received a CP2000 letter this is the very simplest type of audit, sometimes known as a mail-order audit because no in-person meeting is necessary and you are only required to send in requested documentation.
The Auditor is Not Your Friend
Any time you are notified of an audit remember that while you should always be polite and friendly to the auditor, they are not your friend. At the end of the day their job is to ferret out tax fraud and they may have already identified you as a potential tax cheat. Remember, however that you do have rights and they may not be violated even by the IRS. The IRS is not allowed to intimidate you and if you have a deduction that is legitimate and rightfully yours, don’t let the auditor disallow it simply through lack of a receipt. In some cases it can be a good idea to consult a tax attorney prior to your audit to discuss any concerns you might have regarding deductions or what you should expect and what you should say to the auditor.