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I just did my 2014 taxes last night through Tax Act Online and I claimed an expense of $2,000 for improved insulation and $2,500 for replaced doors and windows on my house. I think those estimated figures are quite conservative because I probably spent more and did all the work myself so no labor costs (I am quite proficient at construction and do it as a useful hobby). Tax Act Online came up with a $500 energy credit based on those expenditures.

The problem is, I don't have any receipts so I wonder what can happen if I get audited. If so, I'd be more than happy to host an auditor to my home and show them the items installed, which all look so brand new. I will be happy to take them to the attic and show them the back paper of the fiberglass insulation I put in. However, there is no paperwork associated (purchase receipts or product documentation) because I try to minimize my record keeping (laziness/minimalism).

Considering that the amount is not that much, what are the chances I get audited and what should I do in case they demand receipts?

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Your overall chances of being audited are low. If you are audited, it looks like there is some precedent for, on occasion, to allow a deduction without documentation when the taxpayer is "candid, forthright, and credible". It's a long shot, but again, only if you are audited.

Most likely: if you can't prove the deduction it will be disallowed during an audit. You'll have to pay the tax and will be charged interest, and perhaps penalties (I think 20%, but someone else might know better). Since the amounts are small: $500 (plus interest and maybe the penalty), I wouldn't lose any sleep over it.

If you get audited and you can show good faith, even if the deduction is disallowed, my guess (emphasis on "guess") is that you have a decent chance of getting out of paying penalties by showing the work was done, even without receipts. (The IRS is actually nice when dealing with reasonable people and reasonable situations, I've found.)

Remember to keep all receipts next time. If at all possible, though, see if you can get copies of receipts from your suppliers.

  • thanks. I can also always take pictures of the work done and submit them to the auditor – amphibient Feb 12 '15 at 18:15
  • and i don't see myself really saving receipts much beyond the absolutely necessary ... because it is PIA. i try to simplify mu life by minimizing record keeping (even with all the electronic media) – amphibient Feb 12 '15 at 19:12
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    I would consider this case to be part of the "absolutely necessary" exactly because you need it for tax documentation. If you accept the risks, okey dokey. – Rocky Feb 12 '15 at 20:13
  • certainly, that's a wise suggestion – amphibient Feb 12 '15 at 21:21
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My own reading of the instructions is that you can't deduct the value of your own labor. For receipts, if you paid for the materials with a credit card, the card records (e.g. a charge at Home Depot on such and such a day) would at least be something.

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