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Sunday, January 15, 2012

Due diligence reminders for 2012 filing season

I teach several different graduate tax courses and make a lot of presentations including on tax law updates, so I have a good opportunity and enjoy finding themes in what is developing in new tax guidance. One that I think has been strong in 2011 is increased focus on penalties and whether the law was properly followed.  I think this raises a lot of due diligence reminders for tax practitioners.  So, I made that the topic for my monthly AICPA Tax Insider articles, starting in January and continuing through March.

The areas covered in Part 1:
  • Schedule C, Profit of Loss From Business
  • Schedule E, Supplemental Income and Loss 
  • Cancellation of Debt Income 
  • Property Tax Deduction
Areas to be covered in Parts 2 and 3:
  • Charitable contribution deduction
  • Unreimbursed employee business expenses
  • FBAR and Form 8938
  • EITC
  • Other taxes
  • Return review
You can see part 1 - here.

I wonder if any of these areas may rise to the level where a special form is created to be sure preparers have asked the right questions and viewed pertinent documents, as is required for the Earned Income Tax Credit via Form 8867 which now has to be attached to the return, rather than just kept in the preparer's files (this is covered in Part 3).  We'll see.

There are certainly a few more that could be on the list. Did you notice this new one on the 2011 forms, such as Schedule E (see example).  At the top of the form it asks if the taxpayer is required to file Forms 1099 and if yes, did they?  So preparers are going to have to take extra steps to determine if clients need to file these forms, which is not always clear. In 2010, Congress enacted legislation calling for landlords to file Forms 1099-MISC, thus indicating that they otherwise were not required to do so absent the law change. Congress repealed this requirement in 2011. So, what is the purpose of the questions on Schedule E?  Also take a look at Section 6041 and the instructions to Form 1099-MISC (although perhaps some other type of 1099 is warranted).

What due diligence reminders are most on your mind?

1 comment:

Kenneth Gibbons said...

Good job on the blog its well written and to the point that anyone can follow. I appreciate the information since I learned somethings from reading this. Thanks, Ken