Maximum Deductions for Work Expenses Without Receipts

by Fraser Sherman Google

    The Internal Revenue Service isn't big on "trust me!" as an explanation for tax deductions. If you're self-employed, you can write off business expenses. As an employee, you can itemize unreimbursed work expenses, after subtracting 2 percent of your adjusted gross income from the total. There's no absolute maximum for how much you can write off if you don't have receipts to prove your deductions. The IRS decides that on a case-by-case basis.

    Showing a Pattern

    If you have enough receipts to show a pattern of spending, you can probably skate over a few gaps. Take business driving, for instance: If you drive the same sales route consistently, you don't need to record mileage for every trip. Track it for the first week of each month. If your sales and invoices show you're dealing with the same customers the rest of the time, one week's travel log is probably enough.

    The Cohan Rule

    In a landmark 1930 tax case, then-famous entertainer George M. Cohan took the IRS to court to defend his largely receipt-free deductions. In court, he recounted his memory of specific business dinners, entertainment events and other spending, with the approximate amounts. The judge found for the entertainer, giving the world the Cohan Rule: If your evidence is your personal testimony and it's convincing, you're off the hook. This is obviously riskier than having the paperwork, as the IRS may not be convinced.

    Circumstantial Evidence

    For some deductions, it's impossible to get absolute proof. If you go out for a business lunch, the IRS doesn't expect you to tape-record the conversation to prove it was all business. Your personal account probably suffices. If you don't have any receipts, though, you may have a hard time employing the Cohan Rule; food and entertainment expenses are so easy to abuse that the IRS is more skeptical. If it's a regularly weekly business lunch, you have a better shot.

    Record Keeping

    The IRS has three years after you file a return to look back and audit you. If the agency suspects you've concealed at least 25 percent of your income, the statute of limitations is six years. Keep receipts for six years, and after that you can shred them. If you don't have receipts, keep a written record of what your business expense was for. Otherwise, by the time the IRS audits you, you may not remember, and then you'll really be in trouble.

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    About the Author

    Fraser Sherman is a former reporter with the "Destin Log" newspaper and now freelances full-time. His work has been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life," and he's the author of three film reference books, including "Screen Enemies of the American Way." He specializes in finance and tech articles.

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