Here’s something most people don’t find out until it’s too late: when you claim a deduction on your taxes, the government doesn’t have to prove you made it up. YOU have to prove you didn’t.
That’s called the burden of proof, and according to the IRS, it sits entirely on you — the taxpayer. You made the claim, so you back it up. Simple as that.
So what happens if you get audited and can’t find the receipt? Best case, the deduction gets denied and you owe back taxes on that amount, plus interest. Worst case, if it looks intentional, you’re looking at penalties on top of that.
Now, there is a small lifeline. There’s something called the Cohan Rule — a legal principle that allows the IRS to accept a reasonable estimate of an expense even without a receipt, under certain conditions. But it’s not a get-out-of-jail-free card. To use it, you still have to prove you actually had the right to the deduction in the first place, and you have to provide some credible way to estimate the amount. It’s a narrow exception, not a loophole you can lean on.
The smarter play is just keeping records. That means receipts, bank statements, invoices — whatever shows that the expense was real, what it was for, and how much it cost. The IRS wants documentation that proves both the amount AND the nature of each deduction you’re claiming.
Some deductions get extra scrutiny no matter what. Home office deductions, large charitable donations, business losses on a Schedule C, hobby-loss write-offs — these are areas where past abuse by other taxpayers has made IRS examiners automatically suspicious. If you’re claiming any of these legitimately, great. Keep claiming them. Just make sure your paperwork is airtight, because those line items are more likely to get tested if you’re ever selected for an audit.
The practical takeaway is pretty simple. Snap a photo of every business receipt. Keep a folder — digital or physical — organized by year. If you’re self-employed or have any kind of side income, treat this like it matters. Because when it counts, it really does.