What Happens if You Have an Audit but No Receipts?
A notice of an IRS audit is the very last thing any small business owner wants. Yet, having documentation to support your returns and knowing they are accurate can be consoling. So, you can be sure that your defense will be effective. So, what would happen if you were audited but lacked the receipts?
It’s not a situation you want to find yourself in. This is because the repercussions of not having verifiable documentation during an audit can vary.
How Do I Find Out Whether the IRS Is Auditing Me?
The United States Postal Service is the only method used by the IRS to convey notices and official communications. You will never receive calls, texts, or emails from the IRS. Scammers will use these communications to try to obtain your personal information; delete any such messages.
Yet, as soon as you get a formal audit notification from the IRS, you must respond quickly. This entails devising an action plan, coming up with a communication plan, and putting together the required financial accounts and accounting records.
During an Audit, Does the IRS Check Receipts?
One major cause of a small business audit is underreported income. The IRS compares your industry and region to its average deduction amounts for businesses in your area when deciding whether to audit you or not.
The accuracy of copies of receipts will be checked by the IRS during the audit to look for underreported income or other problems. The IRS will ask for additional papers from you if the materials you provided don’t meet the standards for IRS receipts for the things included in your return.
What if an IRS Audit Requires You to Present Receipts?
What if you misplaced your audit audits? It’s not a surefire way to jail if you don’t have any receipts or paperwork! If your receipts are lost or stolen, the IRS can accept substitutes.
You may substitute an expense report for your supporting documents with the IRS. Yet the costs must match what the IRS considers reasonable for small firms in your state and sector.
How to Recover Receipts for Your Upcoming IRS Audit
You can take certain actions to produce the IRS expenditure report they will require in place of your receipts. While creating this report, there are three reliable areas to look at:
- Credit card statements and business calendars.
- The companies you’ve worked with should be able to produce new receipts.
- It will be easier to put together an accurate picture of permissible business spending with the help of pertinent bank statements.
If I Can’t Get My Receipts Back, Are There Any Fees or Fines?
You won’t incur a fine if the IRS accepts the report you produced outlining your business spending, which brings an audit to an end. Yet there is a danger that the IRS will reject some or all of your deductions, which is called a “disallowed deduction.”
Refusing to allow deductions have financial repercussions. Your taxable income will rise as a result of every deduction the IRS rejects, increasing your tax obligation. The increases may place you in a higher tax bracket, which would result in a greater tax bill for the related calendar year’s taxable income. Not only that, but you will also be liable for any fees and interest connected to your denied deductions. The IRS may impose further penalties on you if these fines are not paid right away following the audit.
You should take care of every part of your audit right away, from collecting documentation to making late payments.
Use a Professional Audit Defense to Safeguard Yourself
A strong audit defense has many advantages. This also aids in your future accident prevention. It’s best to be ready because audits do happen!
Finding the right person to ask for assistance can be challenging, but Your Part Time Accountant is here to make it simpler. We’ll put you in touch with a tax expert who is knowledgeable about your industry and regional state tax regulations in addition to providing services like small business taxes and tax consulting.
We’ll work with you to maximize your yearly tax savings and maintain your records compliant with audits.