Audited with no receipts: what to do

What happens if you get audited and don’t have receipts depends on what else you have. For most small businesses that is more than they think: every card swipe, transfer and check is on a bank statement, most vendors can resend an invoice, and software, ad and utility accounts keep their own billing history. The IRS asks for records that prove an expense. A receipt is one kind of record, not the only one.

This page covers what the IRS accepts in place of a receipt, the expenses where a bank statement is not enough, and the order to rebuild the records in. It describes records, not representation. If you have an open audit, work through the CPA, enrolled agent or attorney representing you, and let them decide what goes to the examiner. Ledgerbrook keeps books and does not represent anyone before the IRS.

What the IRS accepts in place of a receipt

The IRS standard for business expenses is that “your supporting documents should show the amount paid and that the amount was for a business expense” (IRS Publication 583, revised December 2024). The documents it lists are canceled checks, cash register tapes, account statements, credit card sales slips, invoices and petty cash slips. A receipt is on that list alongside the others.

Bank and card statements count as proof of payment if they are legible and show these details:

Paid by	The statement must show
Check	Check number, amount, payee’s name, and the date the bank posted the check
Electronic transfer	Amount transferred, payee’s name, and the date the transfer posted
Credit card	Amount charged, payee’s name, and the transaction date

The same publication adds the limit: “Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction.” A statement line that reads “AMZN Mktp US $412.37” proves you paid Amazon. It does not prove you bought printer toner for the office rather than a gift for your sister. For that you need a second record showing what was bought: the order history, the invoice, or a written note of the business purpose made from those.

So every expense needs two things, and the work of a reconstruction is finding the second one:

1. Proof that you paid, which the bank statement usually supplies.
2. Proof of what it was for, which has to come from somewhere else.

Where the second record usually comes from

Expense	Substitute record	What it adds to the statement
Supplies and inventory	Vendor invoice or order history (Amazon, Home Depot Pro, suppliers)	The items bought
Contractor payments	The contractor’s invoice, the W-9, the 1099-NEC you filed	The work done and who did it
Rent	The lease	That the payment is rent for business space
Software and subscriptions	Billing history in the vendor account	The plan and the billing period
Advertising	Billing history in Google Ads, Meta or the platform used	The campaign or account charged
Utilities and phone	Online account statements from the provider	The service address and the period
Payroll	Payroll provider reports, Forms 941 and W-2	Gross wages, withholding and employer taxes
Equipment and vehicles	Purchase invoice, financing agreement, title	The asset, its cost and the date in service
Cash purchases	Petty cash slips, a written statement, the vendor’s records	Everything, because the bank shows only a withdrawal

Cash is the hard case. An ATM withdrawal shows money leaving the account and nothing else, so a cash expense with no receipt and no vendor record is the one most likely to stay unproven.

Expenses that need more than a bank statement

Three kinds of expense have a stricter standard written into the tax code. Under IRC §274(d), no deduction is allowed for travel away from home (meals and lodging included), gifts, or listed property such as passenger cars unless the taxpayer substantiates each of these, by adequate records or by sufficient evidence corroborating their own statement:

• The amount of each expense or use.
• The time and place of the travel or use, or the date and description of a gift.
• The business purpose.
• The business relationship to you of anyone who received the benefit, such as the recipient of a gift.

For these, IRS Publication 463 adds that you “must generally have documentary evidence such as receipts, canceled checks, or bills.” It is not needed for an expense, other than lodging, under $75, or for transportation where a receipt is not readily available. That is the “$75 rule”, and it is narrower than it sounds: below $75 you still need the record of amount, date, place and purpose, just not the receipt itself (IRS Publication 463, for 2025 returns).

What this means in a reconstruction:

• Vehicle use needs a mileage log. One rebuilt afterward from calendars, invoices and map history is evidence, but the regulation says a record made at or near the time “has a high degree of credibility not present with respect to a statement prepared subsequent thereto” (Treas. Reg. §1.274-5T(c)(1)). Expect a log written in the week before the audit to carry less weight.
• Travel can usually be rebuilt from airline and hotel confirmation emails, card statements and the calendar entry for the client meeting. The business purpose has to be stated, not left to be inferred.
• Cell phones are not on the list. The Small Business Jobs Act of 2010 removed them from listed property, so phone bills follow the ordinary standard above, not §274(d). Some summaries online, AI answers included, still list them.

When the records were destroyed by fire, flood or another casualty beyond your control, the regulation gives you the right to substantiate these expenses “by reasonable reconstruction” (Treas. Reg. §1.274-5T(c)(5)). Lost in a move or never kept is not the same thing.

The Cohan rule, and why not to rely on it

In Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930), the court held that when the evidence shows a deductible expense was paid but not exactly how much, the amount can be estimated rather than disallowed, bearing heavily against the taxpayer whose lack of records caused the problem. The Tax Court has since required some basis for the estimate (Vanicek v. Commissioner, 85 T.C. 731 (1985)): with no evidence at all, there is nothing to estimate from.

Two limits matter more than the rule itself:

• It does not apply to travel, gifts or listed property. The §274(d) regulation says that limitation “supersedes the doctrine found in Cohan” (Treas. Reg. §1.274-5T(a)).
• It is a doctrine a court or examiner may apply, not a deduction you can claim. Because the estimate bears heavily against the taxpayer, it can come in well below what was claimed. A reconstruction that ties each expense to a statement line and a second record is worth far more than an argument for an estimate.

How to rebuild the records, step by step

1. Read the letter and scope the work

The IRS starts an audit by mail, never by phone, and sends “a written request for the specific documents we want to see” (IRS audits). Rebuild what the letter asks for: the tax year and the line items named, not every account back to the formation date. Note the response date. For a mail audit the IRS can ordinarily grant a one-time 30-day extension, and your representative can ask for it.

2. Download every statement for the year under audit

Every business checking, savings and card account, all 12 months, as PDFs from the bank. If an account was closed, the bank can still produce the statements on request. Include any personal card that paid business expenses, because those charges are part of the same year.

3. Rebuild the ledger to match the statements

Enter the year in QuickBooks Online from the statements, then reconcile each month to its ending balance. If the bank connection no longer reaches back far enough, upload the transactions from a file: QuickBooks Online takes CSV, QBO and QFX files of up to 1,000 lines and 350 KB each, through Bank transactions, then Link account, then Upload from file (Intuit: manually upload transactions). A reconciled month is the frame everything else is attached to. The order to work through a broken file is in the bookkeeping cleanup checklist.

4. Attach a second record to each expense, largest first

Sort the expenses under audit by amount and work down, so the first hours go to the items that carry the most dollars:

• Ask vendors for duplicate invoices or a statement of account for the year.
• Download billing history from software, advertising, utility and phone accounts.
• Search the business inbox for “invoice”, “receipt”, “order confirmation” and the vendor’s name.
• Upload each record to the transaction it supports. In QuickBooks Online, Receipts under Accounting takes PDF, JPEG, GIF and PNG files and suggests matching transactions (Intuit: upload receipts and bills).

Scanned and electronic copies are acceptable records. Publication 583 says the same requirements apply to electronic storage as to paper, provided the system can reproduce the records in legible form.

5. Write down the business purpose where it is not obvious

For a meal, a trip or a purchase that could be personal, write one line: who, what, why, and which record supports it. Label it as written now. Never create a document that looks like an original receipt, and never backdate a log; a reconstruction is useful because it is honest about being one.

6. Separate the personal charges

Business expenses paid from a personal account, and personal expenses paid from the business account, both have to be identified before anything goes to the examiner. The fix, and how to stop it recurring, is in commingling funds.

7. List what is still missing

The end product is the reconciled ledger, the supporting records attached to each expense, and a short list of the items that have no second record. That list goes to your representative, who decides how to present it.

How far back an audit can go

“Generally, the IRS can include returns filed within the last three years in an audit,” and it usually does not go back more than six (IRS audits). The record-keeping periods in Publication 583 follow the same limits:

Situation	Keep records for
Ordinary case	3 years from filing
Income underreported by more than 25% of gross income	6 years
Claim for a bad debt or worthless securities	7 years
No return filed, or a fraudulent return	No limit
Employment tax records	At least 4 years after the tax is due or paid
Assets	Until the limit runs for the year you dispose of the asset

What happens if an expense cannot be proven

The examiner disallows it, which raises taxable income and the tax owed, with interest from the original due date. If the underpayment came from negligence or a substantial understatement, a 20% accuracy-related penalty can apply on top (IRC §6662), unless there was reasonable cause and good faith (IRC §6664(c)). If you disagree with the result, the examiner explains your appeal rights, and most cases can go to the IRS Independent Office of Appeals and then to court (IRS Publication 556). Whether to agree, appeal or ask for penalty relief is your representative’s call.

Common questions about audits without receipts

How much can I write off without receipts?

There is no dollar amount the IRS allows without records. Every deduction needs evidence of the amount and the business purpose; the receipt can be replaced by other records, but the evidence cannot be skipped. The “$300 without receipts” figure that circulates online comes from Australia’s rules for employee work expenses, not from the IRS.

What is the IRS $75 receipt rule?

For travel, gifts and vehicle expenses, a receipt or similar document is not required for an expense under $75, other than lodging. You still need a record of the amount, date, place and business purpose. The threshold comes from Treas. Reg. §1.274-5(c)(2)(iii) and applies only to those expenses.

Can bank statements replace receipts?

As proof of payment, yes, if they show the payee, amount and date. They do not show what was bought, so pair each one with an invoice, order history or written business purpose.

What does the IRS ask for during an audit?

The audit letter lists the specific documents for the year and items under review. For a small business that is usually bank statements, the general ledger, and support for the expenses named. If there are too many records to mail, you can ask for an in-person audit instead.

Does the IRS forgive honest mistakes?

The tax on a disallowed expense is still owed. Penalties are different: the accuracy-related penalty does not apply where there was reasonable cause and the taxpayer acted in good faith. Whether that fits your case is a question for your representative.

When the books were never kept

A reconstruction is a catch-up with a deadline on it. The statements are entered month by month, reconciled, and each expense is matched to a second record, which is exactly how catch-up bookkeeping is done, and the reconciled ledger is what your CPA or enrolled agent works from. The cost depends on how many months are missing; catch-up bookkeeping cost by months behind sets out the ranges.

$99per month of backlog20% off 6+ months

When to hand this off: if the year under audit was never entered in QuickBooks, or more than a few months were never reconciled, rebuild the ledger before anyone starts collecting receipts. A free file review counts the months first, and catch-up bookkeeping has the full scope, including deadlines set by your representative.