This was a recent, real life VITA site scenario. I am seeking suggestions on how to better handle this in the future.
Facts: Filing status is Single
Client is lawfully eligible for the EITC.
Client's earned income is well to the left of the first kink in the 2021 EITC curve.
Earned income is entirely Schedule C income.
Client has used his vehicle in 2019, 2020 and 2021 for this self-employment.
In 2019 and 2020, the Client did not take any mileage or car expenses as a deduction on Schedule C.
The Client recently appeared with a log of miles that appear to qualify as non-commuting et cetera miles. That is, the Client often traveled to his main job (so non-deductible miles occurred) and then from his main job, traveled to a second job site (miles are deductible, by my understanding) and then back to the main job site.
Client has no other record of car expenses.
Software facts (not reflecting the law as yet): Taking miles as an expense at 56 cents per mile, the EITC goes down, and the bottom line, overall refund to the client is lower.
Not taking miles as an expense at 56 cents per mile, the EITC goes up, and the bottom line, overall refund to the client is higher.
Question: What are the tax preparers lawful options to maximize the client's bottom line, overall refund?
I am reading here:
- The client did not take mileage as an expense for his car in 2019 (the first year the car was in use), due to lack of records. Could the tax preparer then lawfully ignore the mileage records for 2021 and have the client not take the miles as a self-employment expense?
- Could the client opt to use the "actual expense" method for car expenses for 2021, re-construct with difficulty (he is disabled) what he spent on gas and use this actual expense (which would result in a higher bottom line refund to the client compared to using actual miles)?
- Due to the poor records for actual expense of car use, could the client have reported no actual expense (and so no expenses at all) for the vehicle?
Kvetching: Before I could process the situation fully (doh duh, dumbass on my part?), a reviewer informed me the client had to use the mileage log, because if written records of miles are available, the IRS does not allow manipulating of this nature to increase the EITC. For this disabled, low income client, using the mileage log and taking miles as a business expense cost the client a few hundred dollars.
I think VITA (and I) could have served the client better and of course still have been within the law's requirements. (In fact the reviewer's approach may have violated the law?)
I hate messing over the disabled. I think I blew this majorly. All I have are shitty excuses.