Quality Review of Tax Return Albany Instructors Meeting Training Plan November, 2016

QR Training – Agenda What’s new What’s not new Training Plans Transition 2016 TaxSlayer Demo Remaining pages are NTTC QR training Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

QR Training – What’s New TAXSLAYER! QR training required for Client Facilitators CFs must pass QR test AARP requirement Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

QR Training – What’s Not New Quality Review Process Doesn’t Change Step 1: Interview/Intake Review with TP Step 2: Check entries on computer Step 3: Compare with last years return Step 4: Finish Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

QR Training – Materials NTTC QR package #6 OneSupport>taxtraining>materials/present ations Also each training lesson has QR info Gold Standard document One support>tax training>tax law/policy Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

Quality Review Training Plan Present QR Process using NTTC pkg 6 (can hide pages) Emphasize review of Intake sheets including NYS More careful review (no carry forward) Importance of comparing with last year’s return Give demonstration of Quality Review in TaxSlayer Organize TP documents, match with intake sheets TS different ways to view forms, how to make corrections Proceed in order of intake sheets Making notes, setting status Have each returning volunteer quality review a return in class Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

First Year Transition to TS Need practice to become comfortable with TS How to view forms, where to make changes Sites need to allocate enough QR time and expertise Longer appointments, especially at start of season Have experienced preparers QR complex returns Assign “dedicated QR” person, if feasible Other? Effective QR training will help! Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

Backup: QR Focus Areas TaxSlayer is better than TaxWise in many areas but not all Federal examples 1099R box 2 Gambling losses on Sch A Pension simplified method NYS examples Pension exclusion and exemption amounts Tuition credit (no red form in tree) LTC (no carryover from federal) Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

TaxSlayer Demonstration Show 2016 QR demo – Gail Archer Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

NTTC QR Training Following is NTTC presentation pkg#6 Quality review has been a consistent weak area every year in IRS Site Reviews New page – Albany Training Class

Quality Review IRS site reviews consistently observe that quality review process has been a significant weak area. Deficiencies include: Failure to refer to Intake Sheet (Form 13614-C) Little or no engagement with taxpayer Checking only to see if data are properly entered but not evaluating overall return Failure to inform the taxpayer that return is their responsibility Quality review has been a consistent weak area every year in IRS Site Reviews NTTC Training – TY2016

Requirements ALL returns must receive Quality Review by 2nd certified preparer Quality Review must be completed with taxpayer(s) present The Quality Review takes place after return is prepared, but before taxpayer signs return NTTC Training – TY2016

Quality Review Methods Designated Review – preferred method Designated Quality Reviewer Dedicated to reviewing completed returns Peer Review – volunteers exchange returns with each other Self-Review – never acceptable Designated review can be done at the preparer’s computer or at a separate station as decided by the Local/Site Coordinator. However, it must always have the taxpayer present NTTC Training – TY2016

Who Conducts The Quality Review? Second Certified Tax Counselor must Quality Review EVERY return QR on computer rather than printed return Incomplete/missing forms are apparent Ease of updating errors Saves paper and ink/toner Counselors must be certified for the specific tax year when reviewing prior year returns. NTTC Training – TY2016 14

Quality Review Process The process must include these elements: All issues on tax return are within Tax- Aide scope and within certification level and training of both volunteers Verification that all required entries on Form 13614-C were completed The Quality Reviewer should make corrections on the Intake Form if there are any noted during the QR interview NTTC Training – TY2016

Intake/Interview Sheet Explain Quality Review Process to taxpayer Review Intake Sheet with taxpayer Review any ‘issues’ that came up during preparation Highlight any carryovers (e.g. capital loss) Respond to any questions Preparers can help the quality reviewer by making notes on the intake form to note any issues that arose during the interview NTTC Training – TY2016

Intake/Interview and QR Sheet Confirm In-scope Confirm Quality Review Form 13614-C Part VIII You must verify that the taxpayer qualifies for the Personal and Dependency Exemptions shown on the return by looking at the information on Form 13614-C. Any discrepancies should be addressed with the taxpayer. For example: You would question a Dependency Exemption for a cousin if you see on Form 13614-C, Part II, that the taxpayer’s answer to the question “Number of months lived in your home last year” was only 3. Review Form 13614-C, Part III to ensure all income is included on the return. It is also important to check that all the information was input in the software correctly. Example: As part of Item 4, you verified that the taxpayer had marked the Wages box on the Form 13614-C; in Item 5 you should have verified that the EIN number was entered correctly into the software. You would now verify that all of the amounts from the W-2 are correctly showing on the return. You should be reviewing not only what is on the return but what may have been omitted. This is especially true when it comes to Credits. For example: You have already verified the taxpayer had a dependent who was under 17, but you do not see a Child Tax Credit on the return. You need to verify whether it was omitted or if the taxpayer does not qualify. You should make sure that all withholding from Forms W-2 and 1099 are correctly entered on the return. You should also verify if the taxpayer checked Yes to the question “Make estimated tax payments or apply last year’s refund to this year’s tax” on Form 13614-C, Part V. After the Quality Review and prior to asking the taxpayer to sign their return, confirm the taxpayer understands their responsibility for all of the information on the return. This can be accomplished by pointing out the wording above the signature section of the Form 1040 or Form 8879. Confirm NTTC Training – TY2016

Quality Review Process Look for typos, transposed digits, missing information, misspellings, etc. Compare Intake/Interview Sheet and supporting documents to return Ask taxpayer probing questions Ask: “Is there any other income?” Review Form 13614-C, Part III to ensure all income is included on the return. It is also important to check that all the information was input in the software correctly. Example: You verified that the taxpayer had marked the Wages box on the Form 13614-C; you should have verified that the EIN number was entered correctly into the software. You should also verify that all of the amounts from the W-2 are correctly showing on the return. NTTC Training – TY2016 18

Quality Review Techniques Techniques include: Retracing preparer’s steps Reviewing 1040 view and linking to input screens Reviewing forms in print review QR may use one or a combination of these depending on nature of return There is no one-size-fits-all process. For example, if the return is a very simple one, retracing the preparer’s steps is probably the most efficient and quickest way to review the return. Conversely, for a return that has multiple W-2s and/or 1099-Rs, it may be more effective to call up the print package and review the taxpayer’s forms against the PDF forms generated for the print package. NTTC Training – TY2016

Quality Review Techniques Compare 2016 return to 2015 paper return if available Verify differences are reasonable and taxpayer understands reasons for any significant changes NTTC Training – TY2016

QR – Personal Information Review all personal information in Parts I and II to ensure Filing Status and dependency determinations are correct Verify data for each dependent is correct including answering the questions You must verify that the taxpayer qualifies for the Filing Status shown on the return by looking at the information on Form 13614-C. Any discrepancies should be discussed with the taxpayer. For example: You should immediately question the Head of Household filing status on a tax return when the question in Part II of Form 13614-C – “Did the taxpayer(s) pay more than half the cost of maintaining a home for this person? (yes/no)” is not answered “yes” for at least one person. NTTC Training – TY2016 21

QR – Income Review all income reported in Part III to ensure: All tax documents were accounted for and entered Income is consistent with prior year return, if available Ensure all income was reported, especially self-employment and all cash income Often a tax payer will mark a block no even though they have a tax document or vice versa marking yes when they do not have a document. These inconsistencies must be resolved and the Intake Form corrected as necessary. NTTC Training – TY2016

QR – Expenses/Deductions Review all expenses reported in Part IV to ensure: Only qualifying expenses were entered on return All available adjustments to income were included Appropriate deduction (standard or itemized) was used to compute taxable income All available credits were applied to reduce total tax Again, this is where the quality review is more than just a proof reading exercise. For example, there are several ways that education expenses can be entered in the return. It is the responsibility of the Quality Reviewer to ensure that the education expenses have been applied in a manner that is most advantageous to the taxpayer. NTTC Training – TY2016

QR – Life Events Review life events in Part V to ensure any events affecting return were confirmed and correctly entered This area is often least understood by taxpayers and often overlooked by Counselors It is also the area that contains some of the less seldom seen items and items that are out-of- scope This is the last section on page 2 of the intake sheet and many taxpayers do not understand this section or fail to complete it properly. It is not unusual to miss the fact that the taxpayer made estimated payments since it is a seldom seen event and even the taxpayer doesn’t recognize the question. So probing questions should be asked even if the answer is marked no, especially for self-employed taxpayers. NTTC Training – TY2016

QR – ACA Review taxpayer’s responses to ACA questions in Part VI to ensure: Minimum Essential Coverage for each month of the year was properly reflected for each person Any appropriate exemptions were identified and recorded on Form 8965 Any Shared Responsibility Payments are accurate and appropriate TaxSlayer software does a good job of “walking” the counselor through ACA. The quality reviewer should carefully examine the Health Coverage section of the return by “stepping” through the data entry screen to ensure the entries properly reflect the taxpayer’s health coverage. NTTC Training – TY2016

QR – ACA (Con’t) Review taxpayer’s responses to ACA questions in Part VI to ensure: Form 1095-A is present for marketplace coverage Data from any Forms 1095-A were properly entered Premium Tax Credits were correctly reconciled, if applicable, on Form 8962 ACA requires a comprehensive and in-depth interview NTTC Training – TY2016

QR – EIC Ensuring taxpayer receives correct amount of EIC requires reviewing several elements of return The EIC Due Diligence questions are a new aspect for our returning volunteers and should be answered per the TaxAide guidance. NTTC Training – TY2016

QR – EIC (Con’t) Careful review and interview with taxpayer key Has the EIC Checklist been properly completed? Is Filing Status correct? Are birthdates correct? Have all questions in personal information been properly answered to ensure dependents qualified? Were disability pensions entered as wages? Was self-employment income accurately entered? The birthdates and questions in the Personal Information section for the taxpayer, spouse, and dependents have a significant impact on the EIC calculation. Children over age 19 need to have the full-time student question marked if applicable and older dependents need to have the disability block marked in order to qualify for EIC. Self-employment income can be problematic and is sometimes a source of fraud with respect to EIC. NTTC Training – TY2016

QR – Refund/Payment Options Review Part VII to confirm taxpayer’s preferences for receiving refund or making payment for balance due Validate bank account information was entered correctly on return The Quality Reviewer should also examine the source of the bank information. If it is not a paper check or official bank document, has the Local/Site Coordinator approved the source? This will depend on District/Site policies. NTTC Training – TY2016

QR – Prior Year Comparison (Available starting with TY2017) If returning taxpayer, review the Prior Year Comparison under Helpful tools Verify differences are reasonable and taxpayer understands reasons for any “significant” changes Checking a last year’s return can often reveal a document that the taxpayer has forgotten to bring or that they may not have received. For example, if the taxpayer received a pension last year it is reasonable to assume that they are still receiving that pension. NTTC Training – TY2016

QR – Completion Complete Quality Review by: Reviewing tax return notes Verifying that questions have been answered in e-file section of return Updating Intake Sheet with notes Entering initials in QR Field NTTC Training – TY2016

QR – Completion (con’t) Complete Quality Review by: Answering any taxpayer questions Advising taxpayers of their responsibility for the accuracy of information on the tax return NTTC Training – TY2016 32

Feedback to Preparer Any discrepancies or errors noted should be discussed with tax preparer as appropriate This is best done privately after taxpayer has left NTTC Training – TY2016

QR Gold Standard Available on One Support NTTC Training – TY2016

QR Gold Standard (con’t) NTTC Training – TY2016

Bottom Line Quality review is not just a proofreading exercise Purpose of quality review is to ensure that we file an accurate return for taxpayer which provides the highest refund (or lowest amount due) to which they are entitled NTTC Training – TY2016 36

Common Errors Improper SSN Incorrect name Errors in entry: W-2, 1099R, EIN name Improper entry of 1099 information Improper use of 1099-R Simplified Method Entry of 1099-OID as tax exempt Improper calculation of EIC Transposed characters/numbers Return prepared with out-of-scope issues NTTC Training – TY2016

A good quality review takes time. Do not short-change the taxpayer by rushing through it. NTTC Training – TY2016

Quality Review Questions? Comments… NTTC Training – TY2016