If you lose your tax documentation for a year the IRS has decided to audit (or they were destroyed, the dog ate them, whatever) neither the government nor the tax court will show you any mercy. You are allowed to reconstruct the data from documentation available and the auditor will probably give you some time, but if it is not sufficient be prepared to lose some deductions and pay some tax. I once had a specialty furniture company audited and in a move the accounts receivable was accidently shreaded (the controller was an idiot.) We were able to reconstruct the receivables and deferred customer deposits (the area the auditor wanted to declare $200,000 in income) and save the client about $50,000 in taxes, but we billed the client an additional $9000 that he didn’t have to pay if the records were on hand. Make sure you scan and backup all your tax and audit data to make sure it doesn’t happen to you. Remember the kid whose dog ate his homework usually gets an F.