Should I Take a Deduction if I Lost the Receipt?
The Internal Revenue Service requires you to keep accurate records of tax deductions, including keeping receipts for deductible purchases. While you should make every effort to be compliant with every letter of the tax law, real-world occurrences may make this difficult, such as when you lose a receipt. But a lost receipt does not automatically spell the end of the deduction, as you can in many cases provide alternate documentation.
A lost receipt on your end does not mean the receipt does not exist somewhere else. While most large retail stores will probably not have copies of their cash-register receipts, other vendors may be better able to help. If you are deducting vehicle repair expenses, the dealership where you had the work done may be able to produce a copy for you. The same goes for medical expenses from your doctor's office. Any information you can provide, such as the date of the service or the approximate time frame, will help with this. A photo that you take of the receipt with a smart phone at the time of purchase is also usable as a receipt.
If you have receipts that show a good average of your expenses, you can use it as documentation for a tax deduction. If you keep accurate records of certain regular expenses for the first month of each quarter, and these expenses are consistent without large variations, you can present this to the IRS in case of an audit as proof of the expenses. The acceptance of these records may depend on the auditor assigned to your case. If you are never audited, you will not have to produce records. Using a certified public accountant or tax attorney to represent you in your audit may help build your case for average expenses.
With any unusual expenses that are not ordinary for your business, the receipt is a must. An example is a major purchase, such as a piece of equipment that you are planning to use for an expansion into a new product line. This is particularly true for large expenses, greater than the average for your business, which could set off a flag with the IRS for a potential audit. If you cannot produce a receipt, see if you have any other documentation, such as a canceled check or credit card statement showing the amount paid. Hold this documentation in case of audit, along with an explanation of the expense and the lack of a receipt. Having this explanation notarized, and providing any other supporting documents, such as job records or statements from colleagues, will help.
In some cases, records of expenses can be reconstructed. This is often true of vehicle-use logs. The IRS requires a mileage log with receipts. You may be able to reconstruct this log from other sources, such as job records or invoicing records showing where you did work. You can make entries to the log based on these records. Once you have this reconstructed mileage log completed, you can claim the actual mileage method for your business vehicle expenses, eliminating the need for receipts. Fuel expenses can be extracted by using the mileage driven and the average fuel mileage for the vehicle. Again, representation by a CPA or tax attorney is helpful in making this case.
Craig Woodman began writing professionally in 2007. Woodman's articles have been published in "Professional Distributor" magazine and in various online publications. He has written extensively on automotive issues, business, personal finance and recreational vehicles. Woodman is pursuing a Bachelor of Science in finance through online education.