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Quality Review of Tax Return

Pub 4012 – Tab K

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Lesson Topics

Principles of Quality Review (requirements and basic concepts of Quality Review)
Conducting a Quality Review – One Example
QR Saves the Day (real life examples)

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Learning Objectives

Learners will:

Understand why quality review is important
Explore benefits of quality review
Review basic quality review process
Learn one QR technique using QR Print Set
Review real life examples illustrating value of a good QR
Discuss Best Practices for Quality Review

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Principles of Quality Review

Accuracy is Job #1

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QR = Accuracy – It’s a Fact

IRS reviews showed:

Volunteers who prepared returns using complete Intake/Interview and Quality Review Process achieved 98.65% accuracy rate
Volunteers using incomplete or non-existent Intake/Interview and Quality Review Process attained only 77% accuracy rate

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Quality Review

Quality Review is more than proofreading exercise
Reviewer must:

Review Intake Booklet with the taxpayer
Update Intake Booklet if there are changes
Engage with taxpayer – ask questions to verify information
Evaluate overall return – do numbers make sense?
Can taxes be reduced for the taxpayer?

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Requirements

While methodology may differ site-to-site, these rules apply to all:

ALL returns must receive a quality review by second, independent certified Counselor
Quality review must be completed with taxpayer(s) present
Quality review takes place after return is prepared, before return is printed, and before taxpayer signs return

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Quality Review Methods

Designated reviewer – Best Practice

More experienced Counselor
Able to resolve more complicated tax issues

Peer review – Any second, independent Counselor review
Self-review – never acceptable

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Benefits for the Taxpayer

Prevent IRS notices/contacts
Calculation of correct tax, avoiding paying money back with interest and penalty
Receives all credits and deductions they are entitled to
Increase confidence in Tax-Aide service

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Consequences of a Poor Quality Review

Notices from IRS are extremely stressful

No one enjoys being pen pals with IRS

Taxpayer hardship paying money back
Costly interests and penalties
Missed eligible credits or deductions

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Benefits for the Counselor

Reduces anxiety knowing another Counselor “has your back”
Receiving feedback increases skills and builds confidence
Raises volunteer morale
Fosters teamwork

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Benefits for the Site

Reduces e-file reject rates
Ensures compliance with Quality Site Requirements
Increases productivity, reduces rework (amended returns)
Gives taxpayers more confidence in site’s ability to prepare complete and accurate tax returns

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Quality Review Resources

Quality Review resources

Gold Standards for Quality Review

AARP portal – Type “gold” in search box – in Libraries

Pub 4012 Tab K Basic Quality Review Process

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Quality Review Process

The Quality Reviewer must verify:

All issues on tax return are within scope DO THIS FIRST
Both tax preparer and reviewer are certified to complete the tax return for the tax year
All required entries in Intake Booklet were completed and marked Yes or No

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Keys to an Accurate Quality Review

Involve the taxpayer(s)
Thorough review of Intake Booklet
Careful review of tax return
All errors/deficiencies corrected
Compare with last year’s return (if available)

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Involve Taxpayer

Review any issues that came up during preparation
Ask taxpayer(s) if they have any other income
Does taxpayer have any questions?
Make sure taxpayer understands that they are responsible for accuracy of their return

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Review Intake Booklet

Review preparer notes, changes, new information, clarifications, etc. on Intake Booklet
Parts I & II

Confirm most advantageous and correct Filing Status selected
All dependents claimed as Qualifying Children or Qualifying Relatives as appropriate
Dependent questions (gray section) answered

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Review Intake Booklet

Part III - Income

Tax documents match appropriate checked boxes
All “Unsure” or unmarked boxes resolved
All tax documents accounted for and entered

What do you always ask the taxpayer?

”Did you have any other income?”

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Review Intake Booklet

Part IV – Expenses

Only qualifying expenses entered on return
All available adjustments to income included
Appropriate deductions (standard or itemized and/or qualified business income) used to compute taxable income
All available credits applied to reduce total tax
Credits make sense (EITC, AOC, CTC, etc.)

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Review Intake Booklet

Part V – Life Events

Confirm all events affecting return
Pay attention to estimated tax payments
Check for capital loss carryover
Infrequently seen items sometimes out-of-scope
Form 1095-A entered correctly for Marketplace coverage

Premium tax credits correctly reconciled on Form 8962

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Review Intake Booklet

Additional Information

Note any direct deposit/direct debit
Check bank account information
Add additional notes if applicable

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Notes

Notes to add to return in TaxSlayer (examples)

Missing form and taxpayer will return
Different spelling of name on social security card versus last year’s return
Power of attorney for absent taxpayer
Pension exclusion on Form 1099-R complete

Distribution fully taxable going forward

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Bottom Line

Quality Review

More than a proofreading exercise
Insures an accurate return
Provides the lowest tax for taxpayer

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Conducting a Quality Review

One Example

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Conducting a Quality Review

Methods include:

Reviewing QR Print Set (recommended)
Retracing preparer’s steps
Reviewing Summary/Print and linking to input screens

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Pub 5310

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Conducting a Quality Review

QR on computer rather than printed return

Incomplete/missing forms are apparent
Ease of updating errors
Saves paper and ink/toner

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Quality Review Example

This example is for a typical tax return for a young married couple

MFJ with two dependent children (age 6 and 14)
Two W-2s (one with 401(k) contribution)
Unemployment
Child Care Payments

This example uses 2020 forms and schedules

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Quality Review Return PDF

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Select Quality Review

Click

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Personal Information Summary

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Review and check for errors

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Review Intake Booklet

What credits or forms might you expect to see?

Child Tax Credit (both Sean and Thomas)
Retirement Savings Credit (Form 8880)
Child Care Credit (only Sean, Form 2441)
Additional Child Tax Credit (Refundable, Form 8812)
Earned Income Credit (Refundable, Schedule EIC)

Note: Child & Child Care credits are refundable in 2024

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Listing of Forms

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Verify list matches documents taxpayer has provided

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Verify Unemployment

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Form 1099-G will not be displayed – verify the information here. Social Security benefits Form 1099-SSA also displayed on this screen

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Verify W-2 information

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Code D may mean a retirement Savings Credit is present which should be verified

Does the address match the taxpayer’s W-2?

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Verify W-2 information

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Second W-2

Verify information matches paper document

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Review Form 1040

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Verify check boxes here

Is the Standard Deduction correct?

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Page 2 of Form 1040

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Verify Bank Information

Do the CTC and ACTC look correct for two children under age 17 (or RCTC for under age 18 in 2024 only)?

Verify occupations and IPPIN

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Review Schedules (Number will vary by year)

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Is state refund taxable?

Unemployment

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Review Schedules

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What are ways these taxes could be lowered?

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Review Schedules

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Do non-refundable credits agree with taxpayer documents and situation?

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Review Schedule A

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Itemized deductions can be verified on Schedule A

QR print set also includes detailed entries (medical, charity, etc.)

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Child Care Credit

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Carries to Schedule 3

Verify information matches taxpayer documents

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Review Schedule EITC

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Verify boxes in the Personal Information Section are correctly marked

Verify all appropriate Qualifying Children entered for EITC

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Review Form 8880

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Jeremy had a code D on his W-2. Carries to Schedule 3

Did any pension distributions need

to be subtracted

(e.g. military)?

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Compare Current and Prior Year Returns

TaxSlayer has a Year to Year comparison

Summary/Print screen

Major differences:

Refund went up due to tax law changes
Dividends $120 last year, none this year
Wages went down $1,000

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2019 vs. 2020 Tax Return

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2019 Tax Return

2020 Tax Return

Dividends

Missing 1099-DIV?

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Summary

The QR Print Set is a useful tool for verifying the accuracy of the return
The need to examine individual data entry pages inside the return can be minimized if not eliminated altogether
Counselors can assist Quality Reviewer by using the itemized amount detail in TaxSlayer

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TaxSlayer Detail Icon

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QR Saves the Day

Real Life Cases

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QR Saves the Day

Following cases are real life examples
QR “saved the day”

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Case 1 – Just because there is a form………..

Page 1 of Form 1040 reviewed in the QR Print Set
Reviewer noted taxpayer provided the Form 1098-MA

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What do you think?

Payments not taxable, but Form 1098-MA is out of scope!

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Case 2 – Accepting things at face value………..

Page 1 Form 1040 was being reviewed in the QR Print Set – and the reviewer noted this
The taxpayer had a 1099-MISC with entry in Box 3
Taxpayer worked part-time for a contractor doing construction work

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What probing questions should be asked?

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Case 3 – Taxpayers don’t know all the rules

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What probing questions should be asked?

>Taxpayer filed MFS in the past

>Last year separated

>Lived apart the last 8 months of the year

>Children lived with her

>Met requirements for HoH

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Case 4 – Why the QR does an interview

Part II, line 2, of the Intake Booklet handed to the QR
Single return claiming no dependent or nondependent:

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Case 4 – The rest of the story

Same intake sheet after the QR updated the Intake Booklet:

Taxpayer, single, worked only part-time (wages $21,355) cared for disabled brother
Brother is qualifying child for the EITC

EITC went from zero to $2,925

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Case 5 – It’s not always that simple

Part III of the Intake Booklet handed to the quality reviewer:

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Case 5 – The rest of the story

Return looked so easy: Single guy age 28, one W-2 for $28,000 wages. What should you ask?

QR: So, you just had one job last year?

Taxpayer: I did some seasonal work delivering packages during the holidays, but didn’t get a tax form and I don’t think that they took out much in taxes anyway.

QR: You need to report that income, too. Maybe you can get access to the W-2 online?

Taxpayer: Maybe. I think it went to my dad’s house.

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Case 5 – The rest of the story (part 2)

QR: Did you have any other income?

Taxpayer: Last summer I worked construction for about a week and it paid well. But they just gave me cash. I earned $1,200.

QR: That needs to be reported, too. Did you have any expenses related to the construction work? When you come back with that W-2, I need to know about that construction job, how much you were paid and the amount of any expenses

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Case 5 – The Updated Intake Booklet

Here is the updated Intake Booklet:

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Check box 7

“Yes”

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Case 6 – Leave no question unanswered

Part VI of the Intake Booklet handed to the quality reviewer:

Same Intake Booklet after the quality reviewer update:

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Case 6 – The rest of the story

Taxpayer received IRS letter for a prior year about claiming her grandchildren as dependents and as qualifying children for the EITC and child tax credit
Taxpayer needed help responding to IRS inquiries
Referred to a Low Income Taxpayer Clinic (LITC)
Completed Form 8862, Information to Claim Certain Refundable Credits After Disallowance to file with this year’s return

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Case 7 – Taxpayer did not read fine print

Part II, line 2, Intake Booklet handed to the quality reviewer:

Intake Booklet after the quality reviewer’s interview:

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Quality Review

Questions?

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