Question

Jack uses his personal vehicle in his sole proprietorship. He keeps no records of any kind regarding his business use of the car and doesn't really know for certain when and where he used the automobile for business. Jack will not be claiming the EITC this year. Which of the following is correct?

Answer 1

To comply with due diligence, every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.

Step-by-step explanation:

Earned Income Tax credit (EITC) is a refundable tax that is returned to small to medium income earners. It can either reduce your tax of you will get a refund.

Sole proprietors often use their personal vehicles for business purposes. The expense for this is tax deductible. Deduction can be based on true cost of expenses like gasoline bought, or by standard mileage rate.

Vehicle use for personal purposes is not tax deductible.

In this scenario Jack has no records of his vehicle use for business and personal running. There is a need to seperate his use of the vehicle for business purposes.

Every effort should be made to reconstruct Jack's vehicle expenses. If the records cannot be reconstructed then Casey should not claim the EITC this year.