I write articles on my website and collect donations from anonymous people on the Internet via PayPal. I end up with a fair bit of income that way each year, but it's never a large amount, so I'd always file my "business income" based on what I cashed out of my PayPal account, and it's never been an issue after all these years.
However, last year was particularly successful, and I cashed out quite a lot of money. A significant enough amount that it may potentially throw a red flag, since it's vastly greater than the ballpark amount I usually file.
Now the issue is, although I can continue to file as I always have, I don't actually have any business invoices to provide to back this income, due to the nature of the money being donations. The only documentation that I could provide would be my bank account transactions, and the PayPal withdrawals shown on them.
On the PayPal side, they aren't marked as Goods & Services; they're just direct credits marked as "Donation" in the notes. Hence, I don't have any details about the senders of the donations either. The best I could provide would be a summary of all the credits I received and debits I performed in my PayPal account.
In this particular scenario, what should I do to cover myself during any potential auditing? I'm fully prepared to file the taxes on all of the money I cashed out, that's not an issue. I'm not trying to evade taxes or anything. The issue is that I don't have any meaningful documentation to provide in case the government asks, "Where did this money come from?" I don't have any paper trail to provide; only my word for them to believe.
Also, even if I do get by last year's return scot-free, subsequent years will be hazardous as well, as I may not make nearly as much as I did last year. So it will suddenly be a nose dive in income, which would again be a red flag.
Thank you for taking the time to help.