California Self-Compliance Letters for Car and Truck Expenses

A self-compliance pilot project initiated by the FTB's audit unit to verify car and truck expenses claimed on taxpayers' Schedule Cs filed with their personal income tax returns indicated that taxpayers incorrectly reported their car and truck expenses on more than 80% of returns selected. Although taxpayers can deduct expenses incurred while driving from their homes to a client's place of business while conducting business or between one place of business and another place of business if they are business-related, taxpayers can not deduct transportation expenses incurred between their homes and their business or regular place of work, as those are personal commuting expenses. Under the pilot project, the FTB sent self-compliance letters to taxpayers who claimed the car and truck expense. The letters included FAQs, the applicable law, and a simplified auto expense worksheet(s) for taxpayers to determine the allowable amount of their car and truck expense deductions. Due to the success of the project the FTB will consider the self-compliance letters for future use.