Section 1: Preliminary Work and Taxpayer Data
Preliminary work to prepare tax returns
- Use of prior years' returns for comparison, accuracy, and carryovers of current year’s return
- Taxpayer biographical information (e.g., date of birth, marital status, dependents)
- Residency status and/or citizenship (e.g., citizen, visas, green cards, resident alien or non-resident alien)
- Taxpayer filing status (e.g., single, MFJ, MFS, QW, HOH)
- Sources of all taxable and nontaxable income (e.g., interest, wages, business, sales of property, dividends, rental income, flow-through entities, alimony received)
- Sources of applicable adjustments to gross income (e.g., retirement plans, HSAs, alimony paid, health insurance, moving expenses, self-employment tax)
- Sources of applicable deductions (e.g., itemized, standard)
- Sources of applicable credits (e.g., education, foreign tax, retirement, energy, dependent care)
- Sources of tax payments and refundable credits (e.g. withholding, estimated payments, earned income tax credit)
- Previous IRS correspondence with taxpayer
- Additional required returns filed taxes paid (e.g., employment, gifts, and information returns)
- Special filing requirements (e.g. foreign income, presidentially declared disaster areas, Form 1040-NR)
- Foreign account and asset reporting (e.g., FBAR, Form 8938)
- Filing requirements for tax returns and extensions (e.g., dates)
- Personal exemptions including dependents
- Minor children’s unearned income (Kiddie tax)
Section 2: Income and Assets
Income
Retirement income
Property, real and personal
Adjustments to income
- Taxability of wages, salaries and other earnings (e.g., earned income, statutory employee)
- Interest Income (e.g., taxable and non-taxable)
- Dividends and other distributions from mutual funds, corporations, and other entities (e.g., qualified dividends)
- Rental income and expenses (e.g., vacation homes, notfor-profit rentals, calculation of deprecation)
- Gambling income and allowable deductions (e.g., W-2G,documentation)
- Tax treatment of forgiveness of debt (e.g., 1099C,foreclosures)
- Tax treatment of a U.S. citizen/resident with foreign income (e.g., individual tax treaties, form 2555)
- Other income (e.g., scholarships, fellowships, Social Security benefits, barter income, independent contractor income, hobby income, alimony, non-taxable combat pay, unearned income, taxable recoveries)
- Constructive receipt of income (e.g., cash vs accrual)
- Constructive dividends (e.g., payments of personal expenses)
- Passive income and loss (e.g., loss limitations)
- Royalties and related expenses
Retirement income
- Basis in a traditional IRA (Form 8606)
- Comparison of, and distributions from, traditional and Roth IRAs
- Distributions from qualified and non-qualified plans (e.g., retax,after-tax, rollovers,1099R)
- Excess contributions and tax treatment (e.g., penalties)
- Prohibited transactions and tax effects
- IRA conversions and recharacterizations (Form 8606)
- Required minimum distributions and excess accumulations
- Loans from IRC section 401(k) plans and other qualified plans
- Taxability of Social Security benefits
Property, real and personal
- Capital gains and losses (e.g., netting effect, short-term, long-term)
- Basis of assets (e.g., purchased, gifted or inherited)
- Basis of stock after stock splits and/or stock dividends (e.g., research, schedules, brokerage records)
- Sale or disposition of property
- Sale of a personal residence (e.g., Sec 121 exclusions)
- Installment sales (e.g., related parties, original cost, date of acquisition, possible recalculations and recharacterization)
- Options (e.g., stock, commodity,ISO, ESPP)
- Like-kind exchange
- Non-business bad debts (e.g., documentation required)
Adjustments to income
- Self-employment tax
- Retirement contribution limits and deductibility (e.g., earned compensation requirements)
- Health savings accounts
- Other adjustments to income (e.g., student loan interest,alimony, moving expenses, write-in adjustments)
Section 3: Deductions and Credits
Itemized deductions
Credits
- Medical and dental expenses
- Various taxes (e.g., state income, personal property, real estate)
- interest expense (e.g., mortgage interest, investment interest, tracing rules, points)
- Charitable contributions (e.g., cash, non-cash, 50% vs 30%, documentation required)
- Nonbusiness casualty and theft losses
- Miscellaneous itemized deductions
- Employee travel, transportation, and entertainment expenses
- Other employee expenses (e.g., education, reimbursement, eligibility, home office)
- AGI limitations
- Allowed itemized deductions for Form 1040-NR
Credits
- Child and dependent care credit
- Child tax credits
- Education credits
- Foreign tax credit
- Earned income tax credit (e.g., paid preparer’s earned income credit checklist, eligibility and disallowance)
- Retirement contribution credit
- Adoption credits (e.g., carryovers, limitations, special needs)
- Other credits (refundable and non-refundable)
Section 4: Taxation and Advice
Taxation
Advising the individual taxpayer
- Alternative minimum tax
- Credit for prior year minimum tax
- Penalties and exceptions on premature distributions from qualified retirement plans and IRAs
- Household employees
- Underpayment penalties and interest
- Conditions for filing a claim for refund (e.g., amended returns)
- Self-employment tax
- Excess social security
- withholding
- Tax provisions for members of the clergy
Advising the individual taxpayer
- Reporting obligations for individuals
- Property sales (e.g., homes, stocks, and businesses)
- Education planning (e.g., lifetime learning credit, IRC section 529 plans)
- Estate planning (e.g., gift versus inheritance, trusts, family partnerships, charitable giving, LTC, life insurance)
- Retirement planning (e.g., annuities, IRAs, employer plans, early retirement rules, required minimum distribution, beneficiary ownership)
- Marriage and divorce (e.g., divorce settlement, commonlaw, community property)
- Items that will affect future returns (e.g., carryovers, net operating loss, Schedule D, Form 8801)
- Injured spouse
- Innocent spouse
- Estimated Tax
- Adjustments, deductions, and credits for tax planning
- Use of capital gain rates versus ordinary income rates (e.g., character of transaction)
Section 5: Specialized returns for individuals
Estate tax
Gift tax
- Gross estate
- Taxable estate: calculations and payments
- Unified credit
- Jointly held property
- Life insurance and taxable estate
- Marital deduction and other marital issues
- IRAs and retirement plans
- Filing requirements
Gift tax
- Gift-splitting
- Annual per donee exclusion
- Unified credit
- Effect on estate tax (e.g., Generation skipping transfer tax)
- Filing requirements