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No Expense Receipts for the IRS? Try a Song and Dance Routine.

Not only did song and dance playwright, George M. Cohan lead the way on Broadway, he also broke new ground with the IRS. Cohan who wrote Broadway hits like “Give My Regards to Broadway” and “Yankee Doodle Boy” paid for much of his travel and entertainment with cash and was bold enough to go up against the IRS when, back in the 1920’s they denied all his deductions.

We all know how important it is to keep our receipts in case we ever get audited, especially travel and entertainment receipts the IRS already looks upon with suspicion. However, most people don’t know about or think about the Cohan case. But, thanks to good old George, even if you can’t find a receipt today, you’re not up the creek without a paddle. He took the IRS to court and eventually won.

I am not advocating sloppy or careless recordkeeping, however there are times when critical receipts seem to vanish. Here’s the gist of the 1930 Appeals Court Cohan, which is to this day an exception to stringent IRS record keeping requirements. The Cohan Rule allows taxpayers to prove by “other credible evidence” they actually incurred deductible expenses.

Unlike during Mr. Cohan’s time, we have digital trails of our expenses, though a cash trail is still impossible to follow. You may have to go to court even though the argument doesn’t always work there. If you’re unwilling, like George Cohan was, to take “no” for an answer, you might find that providing written statements and/or other supporting evidence could prove to be convincing to the IRS or an Appeals Court. In many cases even charitable contributions have been allowed under the Cohan Rule, though not in cases subject to special strict substantiation requirements.

If you are afraid to take a deduction because you don’t have a receipt, remember the song and dance man and remind your lawyer of the Cohan Rule. And if you’re ever in New York City, stop by and pay him tribute. You’ll find a statue of the IRS and Broadway pioneer in Times Square.



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