What Happens If You're Audited Without Receipts? The Cohan Rule

Being audited without receipts is bad but rarely fatal. Under the Cohan rule — from Broadway producer George M. Cohan's 1930 case — courts may estimate deductible expenses when the taxpayer proves an expense clearly occurred but can't document the exact amount, resolving doubts against the taxpayer. The rule has a hard boundary: Section 274(d) expenses — travel, meals, vehicle/listed property, and (historically) entertainment — require strict substantiation and get no Cohan estimates at all.

This is general information, not tax advice; audit representation is a professional's job.

What actually happens in the audit

The examiner asks for documentation per deduction category. Where paper is missing, three outcomes exist: reconstruction (you produce secondary evidence — statements, vendor records, logs — and the deduction stands), estimation (Cohan applies: some reasonable amount is allowed, skewed low), or disallowance (274(d) categories, or no credible basis at all) — plus tax, interest and possibly accuracy penalties on the difference.

The Cohan rule's real shape

Cohan requires a reasonable basis for estimation: credible evidence the expense class existed (a painter demonstrably bought paint) and some anchor for magnitude (jobs completed, industry ratios, partial records). Courts then allow a conservative figure — "bearing heavily... upon the taxpayer whose inexactitude is of his own making," as the original opinion put it. It is a floor-saver, not a records substitute: you get less than you spent, plus the audit experience.

Where Cohan cannot save you

Congress overrode Cohan for the categories most prone to abuse — §274(d) demands amount, time, place and business purpose (and relationship, for meals) via adequate records:

• Travel — flights, lodging (folios at any amount), trip costs (the travel documentation).
• Meals — the receipt-plus-context standard (the meal rules).
• Vehicles — the contemporaneous log; courts deny reconstructed-from-memory mileage constantly (the log rules).

No records in these categories generally means no deduction, however real the expense.

The reconstruction playbook

Before conceding anything, rebuild:

1. Bank and card statements — the transaction skeleton (what statements prove).
2. Vendor reprints — stores, restaurants, hotels and platforms can reissue receipts and histories (the recovery methods).
3. Email archives — order confirmations and e-receipts are originals, not substitutes.
4. Calendars, contracts, job records — establish business purpose and pattern.
5. A reconstruction memo — organized secondary evidence presented category by category reads as credibility; a shoebox of guesses reads as Cohan-at-best.

Never fabricate a document to fill a gap — a fake receipt converts a substantiation problem into civil fraud exposure (the legal line). Reconstruction is legitimate; forgery is catastrophic.

The bottom line

Cohan gives partial credit for provable-but-unpapered expenses; §274(d) gives nothing for undocumented travel, meals and miles. Reconstruct aggressively, estimate conservatively, and let the experience justify the fix: the capture-everything system in self-employed receipt tracking, which costs twenty minutes a week and makes this entire article irrelevant to your next audit.