Preliminary Work - Part 1

Question 1

The tax preparer normally reviews and compares with the prior years tax returns. If there are wide divergences in income, expenses, credits and deductions what should the tax preparer ideally do?

Answer 1

Investigate the source of such divergences

Question 2

If the taxpayer does not have a copy of a prior-year’s income tax return, how can he or she obtain one?

Answer 2

1. Can obtain one from the Internal Revenue Service by completing Form 4506, Request for Copy or Transcript of Tax Form and mailing it along with required fee to the IRS center where the return was filed.
2. As an alternative a transcript which is a computer printout can be obtained from the IRS by filing Form 4506. Transcripts may be obtained online, by phone or by mail. There is no charge for the transcript, which shows most line items from the original return including accompanying forms and schedules

Question 3

What is the disadvantage of a tax return transcript?

Answer 3

A tax return transcript has most line items from the income tax returns along with the accompanying forms and schedules. In most cases a transcript includes all the information a lender or government agency needs.

But it does not show any changes the taxpayer, his or her representative or the IRS made after it was filed.

Question 4

The tax return transcript is generally available for how many years?

Answer 4

The current and past three years.

Question 5

What is a tax account transcript? How is it similar and different from the tax return transcript?

Answer 5

Similarities

• -Both are free
• -Both are generally available for the current year and past 3 years.

Differences
–Tax account transcript also includes any adjustments the taxpayer or the IRS made after the taxpayer filed his or her income tax return.