As the fourth quarter of 2025 wanes, it is worthwhile to maintain focus on documentation needed for the upcoming tax season, such as receipts.
If you claim a business or personal expense on a tax return, you have the burden of proof to show an Internal Revenue Service (IRS) auditor that it was legitimate. This means being able to deliver records, receipts, statements, bills, cancelled checks, bank statements or your certified public accountant (CPA) who can answer questions about the missing documents. While you may be convinced there is no tax fraud in your tax return, the IRS will want proof.
Whether for your annual tax return or an IRS audit, receipts can be an important piece of the puzzle of your tax return. What happens if your record keeping is shoddy and you do not keep receipts, or you just cannot find the pivotal receipt you need to support an expense? The short answer is you will have to do the painful work of tracking down digital or hardcopy documents to support your claim or face having the expense disallowed by the IRS. But for some people, the lack of a receipt for a real or imagined expense is not a problem. Instead, they create a fake.
The Next New Grift, Fake Receipts
Actually, making fake receipts is not a new thing. It has simply taken on a more clever face with the use of AI. As long as there have been documents, there have been forgeries. As technology improves, so do the forgeries. To be fair, some people may create fake receipts as a stand-in for an actual lost receipt that supported an expense. However, a fake receipt is still a fake receipt.
With chatbots came the capability of creating fake receipts and entirely fraudulent expense streams. As with other types of tax crimes, like payroll tax fraud, the enterprise might start small. But the lure of easy money can be difficult to ignore. One faked receipt for a legitimate expense can become a habit for receipts submitted to an employer or to the IRS.
AI vs AI
Although AI can create a convincing fake receipt, there are also large language models designed to detect and identify fake receipts. The software is used by employers and the IRS. The IRS also has a wealth of cross-referenced data to trace money trails, reported and unreported income and corresponding vendor information. While an improperly claimed expense reported on your tax return can be disallowed if the IRS believes it is a mistake, creating and trying to pass off falsified receipts is tax fraud, and could cost you a lot more than the face value of that receipt.
If you are using AI to support a fraudulent tax scheme, or you have a sinking feeling because you know you stretched your tax return with fake documentation, it is important to understand the risks and potential consequences.
Concerned About Being Charged with Tax Fraud?
If you have concerns about false information or documentation on your individual or corporate tax returns, call us at 440-250-9709 or reach out to set up a consultation. We serve domestic and international clients from offices in Cleveland and Chicago.
Not sure what to expect if you are under scrutiny? Download our free ebook, "Will I Be Charged with Criminal Tax Fraud?" for insights into warning signs, legal defenses, and what to do if the IRS comes knocking.
