Diversity Income Tax Service

Due Diligence Questions

By law, a tax preparer must keep contemporaneous records of their interaction with the taxpayer, asking the taxpayer questions and documenting their answers.

Here are some different kinds of questions taxpre may want to ask.

If the taxpayer has income, does the income reported seem sufficient to support the taxpayer and the qualifying children being claimed? If not, you should ask additional questions pertaining to both the income and the children.

If the taxpayer has self-employment income, ask your client: How long have you owned your business? Do you have documentation to substantiate your business? Who maintains the business records? Do you have separate banking accounts for personal and business transactions? If not, how do you differentiate between the two? Have you received a 1099-NEC or 1099-MISC to support the income?

Ask yourself: Did the client provide satisfactory records of all income and expenses? Are the expenses reported consistent with this type of business? Is the amount of expenses reported reasonable? Are there expenses missing that are typical for this kind of business?

If the taxpayer is claiming Head of Household status, ask your client: Have you ever been married? Is your spouse deceased? If divorced, can you provide a copy of your divorce decree if requested by the IRS?

If separated, can you provide a copy of a separate maintenance agreement if requested by the IRS?

If married, did you live apart from your spouse for the last 6 months of the year and can document that if requested by the IRS? Did you maintain more than half of the cost of the home and can you document that if requested by the IRS?

By asking detailed questions and clarifying unclear information, as a tax preparer not only comply with IRS regulations but also to ensure the accuracy of tax returns especially those claiming specific credits or filing statuses, protect both tax preparer and the clients from potential audits, disallowances, penalties, and interest.

Is It Time To Stop Tossing Your Paystubs? Time To Take a Closer Look

The abbreviation "EMB" on a check stub most likely stands for Employer-Paid Benefits or Employee-Paid Benefits.

This indicates contributions made toward benefit plans such as health insurance or retirement savings.

The specific meaning can vary by employer, as companies often use customized codes for items on a pay stub. To be certain, you should check with your employer's human resources or payroll department.

It's advised to read your paycheck to ensure you are being compensated correctly, catch errors in pay, hours, deductions, correct tax withholdings, your name, Social Security Number, and other details are accurate to prevent tax filing errors.

A common, unfortunate discovery made at tax time is when employees realize their tax withholdings were insufficient, leading to a substantial balance due." As a taxpayer, you are responsible to pay the taxes owed regardless of errors made by third parties, such as your employer employer's error. You can inform your employer of their error and ensure they fix their withholding for future pay periods by submitting a new Form W-4.

Regularly checking your pay stub is a fundamental financial habit for financial control and accuracy, errors happen more often than you think.

How do you get ready for tax season?

Every tax year brings about changes to the hows and whys of tax-filing.

To prepare for tax season, understand your filing status, determine your ax bracket, make sure your name & address are updated gather all tax documents, decide whether to file yourself or use a tax preparer, look at credits and deductions, max out your IRA contributions and adjust your tax withholding to ensure you pay the proper amount throughout the year. If you have requested a PIN and you're unable to retrieve your IP PIN online, call 800-908-4490 for specialized assistance. If you file your return without your IRS-assigned IP PIN: They’ll reject your electronic return. You must have the PIN to file your tax returns.

By the time you file your taxes, it is too late to change your adjusted gross income. At this point, the tax year is already passed; a more suitable way to help ensure you maximize income after tax is to be proactive with your planning.

Planning ahead can help you file an accurate return and avoid delays that can slow your tax refund.

If you have any questions. I am here to provide the guidance and support you need every step of the way. Please don’t leave personal information on this page.

Thank you for entrusting us with your financial affairs and allowing us to be a part of your journey. I am honored to be your financial advisor.