checklist

‘quick and dirty’ tax review

… in 17 steps.

by ed mendlowitz
how to review tax returns: the field-tested update

everything i suggest in my handbook is recommended and works well. each firm will use and adopt what they want and what fits into their practice.

more: when returns should be submitted for review | 10 errors that ‘smart’ scanners make | tax: the procedural checklists your firm needs | the best way to review a tax return | why you can’t skip checklists | how to turn tax returns into new business
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many times, i am asked for a quick down and dirty suggested review method, so i put the following together. this should not be a substitute for reading the handbook and considering all my recommendations. reviewing is a process, not a thing to do.

here is my suggested review method:

  1. reviewer receives a completed tax return ready to be sent to client, with all backup properly indexed on server.
  2. reviewer looks at prior year’s tax return or tax comparison worksheet for large differences, inconsistent amounts and surprise items, and compares to projection, if one was done, and to prior years’ amounts.
  3. if there are unexpected items or differences from the projection, then reviewer would look at preparer notes and reconciliation, and make sure differences have already been explained by the preparer and that they are understood and logical.
  4. i also suggest specifically reviewing large items.
  5. selected items can be spot checked.
  6. the reviewer can use a long form tax preparation checklist as a guide for their technical review.
  7. if you want the input reviewed, then a peer preparer should have already performed this step.
  8. reviewer should examine the return for tax issues and planning opportunities.
  9. reviewer follows the reviewer’s checklist. all items that require reconciliation or comments should have been done by preparer and the reviewer should just have to do a quick once-over.
  10. every checklist, schedule or reconciliation that is required by the firm should have been properly completed by the preparer and the reviewer should spot check these.
  11. the reviewer should look for any notes made during the year about the client by a manager or partner; or that have been provided by the client with their tax information, either as a separate note or on the organizer.
  12. reviewer should look at every page of completed return.
  13. a listing of errors should be prepared to either give, or explain, to the preparer. preparer should make all corrections.
  14. the preparer should re-review the return after the corrections are made.
  15. reviewer should re-look at every page of completed return – again.
  16. return should be “locked” in tax program so changes cannot be made after final review.
  17. the return should be sent to admin department for processing and sent to the partner to sign and then delivery to the client.

wow! after preparing this list, it seems overwhelming and has too many steps, especially for simple returns. well, if you look at each item separately, these steps are all necessary. maybe some could be eliminated, but i don’t see how any of these steps could be skipped for larger or more complicated returns.

irrespective of the above, the reviewer is a professional and needs to consider

  • the complexity and size of the return,
  • the ability of the preparer and previous experience working with that preparer,
  • the preparer’s interest in what they do,
  • their error rates and
  • their technical knowledge for the level they are at.

this knowledge and experience should be applied to the returns that are reviewed. after all, you are also being “paid” for your judgment and experience.

it is also not cost-effective to apply review procedures that would add a cost to the return that is near or in excess of any benefit that could be derived from that procedure. this latter sentence should also be considered when the reviewer gets caught up with an issue that they do not want to let go of.