Many new clients call us in a panic when they receive a letter from the IRS that their income tax return has been selected for an audit. In most cases the client knows that they overstated their tax deductions, or less likely did not report all of their income. In either case, being caught is not a pleasant result. When the IRS audits an income tax return for deductions, it focuses on whether you have a receipt. From the basic perspective, the IRS is looking for a stack of receipts that add up to the tax deduction taken on the income tax return.
A lot of clients think that a bank statement or credit card statement is a receipt. This is not correct, since a bank statement or credit card bill only shows that the expense was paid, but not the details of the item purchased in order to verify it is a business deduction. Therefore, its important to save the actual receipts to get the tax deduction you are entitled to.