If you’re a business that deducted expenses and you no longer have receipts, it may be logical that you would have expenses that the IRS should allow even though you don’t have a receipt. The IRS provides some flexibility and can take your word that you had allowable expenses. (This is known as the Cohan Rule based on a tax court case that may give you flexibility with your records when proving expenses to the IRS.)

Items you probably can’t recreate

The tax code requires some expenses to be documented at the same time the expense occurs, such as:

  1. Travel/entertainment expenses: These expenses are required to be recorded by receipts made at the time the expense is incurred.
  2. Charitable contributions: All charitable contributions need receipts that accurately reflect the value of the contribution.
  3. Mileage records: You are required to record the mileage, date, place, and business purpose.
  4. Gambling losses: If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation such as a diary or similar record of your losses and winnings.

Technically, if you do not have these records, the IRS can disallow your deduction. Practically, IRS auditors may allow some reconstruction of these expenses if it seems reasonable. Learn more about handling an IRS audit.

Reconstructing records for the IRS

Most importantly, get to work immediately to reconstruct the items. It can take awhile to put all or part of the pieces together, so start right away to meet your IRS response deadline.

You may have to reconstruct your records or just simply provide a valid explanation of a deduction instead of the original receipts to support the expense. If the IRS disagrees, you can appeal the decision. You may also have to argue against penalties during the audit by providing facts on how you made your best effort to comply. Lack of records often leads to a 20% IRS negligence penalty.

Tips to reconstruct your records:

  • Review bank statements and credit card statements. They are usually a good list of what you paid. They may also be a good substitute if you don’t have a receipt.
  • Vendors and suppliers may have duplicate records. Reach out to them if you need a copy.
  • Appointment books can provide back-up information about travel, number of clients and frequency of service.
  • Cell phone records can help establish dates of service or assist in reconstructing expenses.
  • You may be able to reconstruct a reasonable mileage argument with online map tools. Don’t just estimate miles per week x 52 = miles to deduct. Consider periods of no travel.

If you reconstruct or estimate expenses in a way other than what the IRS requires, create a declaration, and sign it under penalty of perjury.

A tax pro can help

Filing taxes is difficult. Dealing with tax problems can be very difficult. Tax professionals can help when you can’t get access to all the records the IRS may be asking for.

Experienced tax pros know your options and the likelihood of an IRS agent accepting your reconstructions. They can also get you back on track and get your record-keeping in tip-top shape.


At Nugent & Associates, we're not just number crunchers. We bring over 3 decades of invaluable certified public accounting and tax expertise to your company – serving as business and financial strategists who can offer such services as tax and financial planning, investment advice, diligent financial records, and help with estate planning.

Even better, we will give you time to focus on what you do best: running the day-to-day operations that drive your business toward success.

Take advantage of our FREE and no obligation business checkup.

We will visit you at your business at a time and day convenient for you, analyze your numbers, discuss your goals and concerns and report back with a complimentary detailed written analysis to help your business succeed!

At Nugent & Associates, we're not just number crunchers. Our people bring decades of invaluable certified public accounting and financial and tax expertise to you – offering tax and financial strategies to individuals such as yourself. If you have any questions or concerns about your own tax, financial or investment matters, please do not hesitate to contact us.

Experienced tax and financial experts are not just for the super rich. At a reasonable fee you too can maximize your wealth and receive professional guidance for retirement, and/or any tax issues you may be facing, no matter your situation, with a tax and financial expert as your consultant.

Contact Nugent & Associates today. We don't charge for phone calls. You may just find you found an ally in your quest to have a great financial future.

After all, at Nugent & Associates, we succeed when you succeed!


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