domain5 by Norma Wahnon

DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

About the Author

Norma Wahnon integrated her accounting and taxation background and experience to produce the â&#x20AC;&#x153;1040 Exam Prepâ&#x20AC;? eBook Series to help tax return preparers pass the IRS competency exam and become Registered Tax Return Preparers. Wahnon was raised in Argentina and after graduating with an Accounting degree from National University of Misiones, in 1989, and running her accounting practice for 10 years she moved to the Canary Islands, Spain, for one year, to complete a MBA program. From 2000 to 2006, she lived in the capital of Cape Verde, the city of Praia (Africa). She became a resident of the United States in 2006 and a citizen in June 2010. In November 2010 she successfully completed all sections of the Uniform Certified Public Accountant Exams in few months. After working in the tax return preparation industry for several years, she created and owns TaxBiz Solution, an accounting and tax practice service located in Silver Spring, MD, USA. Lastly, she earned the RTRP credential by passing the competency exam in September 2012.

Norma Wahnon Author

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

DOMAIN 5

COMPLETION OF THE TAX RETURN FILING PROCESS

By Norma Wahnon

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

COMPLETION OF THE FILING PROCESS _________________________________________________ INTRODUCTION Domain 5 of the IRS exam specifications is designed to ensure tax return preparers are well qualified to verify the accuracy of tax returns they prepare. In that regard, tax return preparers should be able to review returns they prepare with their clients to ensure the documents and information provided in them by the taxpayer is complete and accurate. In addition, prior to submitting a return to the IRS preparers must be able to advise clients about their record-keeping responsibility, the significance of the joint and several liabilities rule, and of the penalty of perjury implicit in signing a return. The tax preparer should be able to inform the taxpayer of the responsibilities related to electronic returns rejected by the IRS and remedies available when such rejection occurs. Where tax is due, the return preparer must explain to the taxpayer the payment requirement and options available, but equally important is the preparerâ&#x20AC;&#x2122;s responsibility to help the taxpayer understand the options when refunds are due. For taxpayers who are required to pay estimated taxes, the tax preparer must be able to explain the estimated tax requirements and potential penalties for non-compliance. The pages that follow provide details of taxpayerâ&#x20AC;&#x2122;s responsibilities in preparing tax returns and the obligations of the tax professionals to ensure that the taxpayer is made fully aware of the responsibilities inherent in filing tax returns.

CHECK RETURN FOR COMPLETENESS AND ACCURACY As stated in Internal Revenue Service publications, the registered tax return preparer (RTRP) test will focus on the ethical responsibilities of tax return preparers in completing the Form 1040 series returns, including the Schedules and complementary forms. Completeness and accuracy of the return is a high concern issue for the IRS, so it should be also for tax practitioners and taxpayers. Before taxpayers sign their returns, tax practitioners should assist them in understanding the liability inherent in signing a Federal tax return as well as encourage them to make a detailed review of the return before signing it.

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS Tax return preparer has the ethical responsibility to produce a tax return that is truthful, accurate, and free of errors for their clients. In meeting this responsibility, tax preparers should verify the accuracy and completeness of the returns they prepare by performing the following checks:

C HECK ACCURACY AND CO MPLETENESS OF THE TAXPAYER ’ S KEY INFORMATION Specifically, check taxpayer’s name, identification number or social security number, date of birth, address, and any other information deemed appropriate. This may include: (See Figure 1 and Figure 2 for samples of Form 1040) 

Review of prior year’s return (i.e. Form 1040) and check for accuracy, compliance, and completeness;

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Check on taxpayer’s biographical information (i.e. date of birth, age, marital status, dependents); citizenship, immigration and residence status (i.e., visas, green cards, resident alien or nonresident alien);

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Check on taxpayer filing status (i.e. single, MFJ, MFS, widow, HOH)

Figure 1 — Form 1040, Taxpayer Key Information

C HECK FOR ACCURACY AN D COMPLETENESS OF KE Y INFORMATION ON THE T AXPAYER ’ S DEPENDENTS Completion of the Tax Return Filing Process - Domain 5 of the IRS Test Specifications www.1040examprep.com (C) Copyright. July, 2012. All Rights Reserved

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS Specifically, check dependents’ names, social security numbers, date of birth, and any other information deemed appropriate;

Figure 2 — Form 1040, Filing Status Section

C HECK FOR ACCURACY AN D COMPLETENESS OF AL L SOURCES OF INCOME , DEDUCTIONS AND TAX C REDITS As examples, check for interest and dividends (Form 1099), wages (Form W-2), business income (Form K-1), sales of property, rental income and any other income source. All entries should be cross-checked against documents provided by the taxpayer, which may also include the checking of: 

All sources of applicable adjustments to gross income (i.e. retirement plans, HSAs, alimony, health insurance, moving expenses, self-employment tax);

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All sources of applicable deductions (i.e. itemized and standard deductions)

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All sources of applicable credits (i.e. education, filed tax, retirement, energy, child care)

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Tax payments (i.e. withholding, estimated payments, earned income tax credit)

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Items that will affect future returns (e.g., carryover, operating losses, NOL, schedule D, Form 8801)

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DOMAIN 5: COMPLETION OF THE RETURN FILING PROCESS

QUICK REVIEW Choose TRUE or FALSE for the following statements (25 questions): 1.

Receiving taxpayers refund check is one of the tax preparers responsibilities.

When taxpayers and tax preparers sign a tax return they are endorsing that to the best of their knowledge, the information contained in the return is true, correct and complete

Taxpayers, not tax preparers, bear the responsibility before the IRS for the information on the return and the consequences of any misinformation.

Taxpayers are required to keep records of property they own to the extent that those records are related to the basis of the property. The records must be kept for at leat three years after disposition or sale of the property.

The “joint and several liability” responsability assumed by a married couple by signing a joint return means that each spouse, individually, is responsible for the entire tax liability, including interest and penalties on the return and the IRS can claim collection against either or both spouses.

The “penalty of perjury” statement in Form 1040 applies to taxpayers only. It does not apply to tax preparers.

The 2012 e-file manadate for tax preparers is mandatory on preparery who reasonably anticipate to prepare and file more than 100 returns during 2012.

E-filing is mandatory for tax preparers filing Forms 1040, 1040A, 1040EZ, and 1041.

Tax preparers must retain Form 8879 for two years from the later of the return due date or the date the IRS received the return.

10. Tax preparers should always e-file a return, even though a taxpayer does not want to e-file. 11. When a e-filed returnis rejected by the IRS and the reason for rejection can not be resolved, the tax preparer must file the Form 8948 “Preparer Exaplanation for not Filing Electronically”

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