I would submit that this is one of the top 3 most importing things when dealing with income taxes. When dealing with the IRS, you will prevail as long as you have the law and the facts on your side. The tax law dictates the documentation requirements.
In cases that I have studied, the IRS has consistently been able to disallow legitimate tax deductions when that taxpayer was unable to produce adequate documentation. You know the old saying, “Documentation Beats Conversation.” This is no more true than when dealing with the IRS.
There are a few ways that the law allows taxpayers to reconstruct tax records and produce after-the facts. You have to know and understand the tax laws before attempting this. You want to make sure you are well within the law on this. Tax fraud is a very serious thing, and you should steer clear of this. Make sure to consult your tax advisor if you have an IRS dispute.