The Q Word

March 10, 2014

Comments and Advice to Help Improve the Tax Returns That We Prepare

Often one tiny error can make a huge difference. And thats why sometimes the reviewer feels

TERRIFIED OF QUALITY REVIEW

Sometimes it seems that doing quality review is as much art as science. Someone else has completed something complex, based on lots of information determined in a number of ways. The reviewer is supposed to sort through all of this and, perhaps, find an error that may be no more than a needle in a haystack. Its a big responsibility, for sure. I know it scares me. There are basically three categories of errors: 1. A blunder that is just irritating. For example, the street name in the address might be spelled wrong. If the client is using direct deposit, this error will probably have no effect except that every time the client looks at the return he will feel a pang of frustration and, probably, lack of confidence in the preparer. 2. Errors that cause rejects. This could be something like the EIN on a W-2 was entered incorrectly. This kind of error can be problematic, since it might delay the refund. However, computers will catch such errors and provide an opportunity for correction. 3. Mistakes that affect the bottom line. This would be when something was entered wrong or incompletely and it affected the tax return computations. This kind of error can make a huge difference in the outcome of the tax return. Whats worse, if it is not discovered during quality review, probably no one will ever find it; not the person who closes out with the client and not the IRS. If such a mistake decreased the clients refund by $2,000; that $2,000 may be lost to the client forever. Here are some real-life examples of the third kind of error that were found during quality review. If youre a reviewer, watch for these. Its likely that you are the last chance to get it right. Checking One of Those Little Boxes The client was a single dad with $25,000 wage income and three qualifying children. He was getting a nice size refund, including $2,053 EITC. The shrewd reviewer thought that the EITC seemed low, causing her to look at it one more time by comparing it to the EITC tables. She discovered that the $2,053 was the EITC for one qualifying child. Inadvertently, the preparer had not checked the EIC box on the Main Information Sheet for two of the children. By correctly checking the boxes for all three children the correct EITC was actually $4,465 - a refund increase of $2,666.

The Q Word National Community Tax Coalition

March 10, 2014

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Comment: When something seems amiss, it often relates to an error on the Main Information Sheet. Reviewers should always pay close attention to the Main Info.

The Client Must Answer All the Intake Questions Starting quality review, the reviewer noticed that the client had not answered several questions on page two of Form 13614-C. Being a diligent reviewer, he insisted that the client answer ALL of the questions on page two. Turns out the answer to question 12 in Part II, regarding unemployment compensation, was yes and the client had $12,000 in unemployment income with no withholding. This is an error that IRS would catch and the client would have a refund to repay. By discovering this during quality review, the client was saved lots of bother, and perhaps, penalties. Comment: If, for example, a client hasnt completed Part I, question 12, do I look the 18-year-old client straight in the eye and ask him if he adopted a child last year? You betcha. You never know. Another Stinkin Little Box The single mom with three children had a Form 1099-R with $25,000 in taxable income. It was reported on Form 1040, line 16, as usual for retirement income. The quality reviewer noticed that the client seemed young to have retirement income and saw that the Form 1099-R had code 3 (disability) in box 7. After a few questions, it was determined that this was disability income and the client was clearly under retirement age. The preparer should have checked the disability box, directly under item 7 on Form 1099-R. So what? If a disabled person receives a disability pension before retirement age, the income reported on Form 1099-R is treated as wages. It is reported on line 7 of Form 1040 and qualifies as earned income for computation of the EITC, as well as the additional child tax credit. In this case, the bottom line went from $0 overpayment to a $7,419 refund. Comment: Watch out when you see a Form 1099-R with distribution code 3. When that client has not reached retirement age, make sure the income is treated as wages. While this is usually beneficial on the federal return, it can cause a balance due on many state returns. But treating it as earned income is not a choice; its the law. Married Is Married The reviewer was just finishing: single filing status, $8,000 wage income, no kids. The client was getting his withholding back plus $483 EITC. As the reviewer was finishing, the client said, The lady told me I might be getting back almost $900. The reviewer acknowledged this and then heard the client say, Im going to wire part of it to my wife in Columbia. Uh oh. The reviewer discovered that the client had been married for many years to a woman in Columbia. Since he hadnt seen her for over 5 years, hed been filing as single. It was explained to him, Married is married, and that he could file married filing separately or married filing jointly. Since his wife had no SSN or ITIN and did not want to file with him, he was stuck with married filing separately - and no EITC. Comment: It can be tempting to ignore this one. Remember that any precedent set by previous years does not change the fact that he is married. We prepare the return in front of us correctly and gently suggest that he amend previous year incorrect returns. Scared now? Want to get some practice and hone your skills? You can take NCTCs online quality review training. Its free! Its open to everyone! Its fun! Go to www.tax-coalition.org and log in. If you do not have a username, register and then log in. If you have any problems accessing the course, contact: NCTC Help Desk: (312) 273-1913 or learn@tax-coalition.org,

The Q Word National Community Tax Coalition

March 10, 2014

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The Q Word is written to provide commentary, information, opinions and observations from a grass roots perspective to all preparers, managers, and coordinators that are involved in free income tax preparation programs. If you have any suggestions for the Q Word, or would just like to submit comments, questions, praise, or bitter criticism, please e-mail: Barbara DelBene at bdelbene@tax-coalition.org