Are You Asking Clients the Right Tax Prep Questions?

The top ten tax questions that too often go unasked.   Ed Mendlowitz, CPA Trendlines contributor and tax practice veteran, says he sees many professionals fail to systematically ask clients some basic and important questions. Here’s his top ten list of key questions to ask this year. What would you add?

1. Foreign bank accounts: Make you ask every client if they have a foreign account and if they do report the income and file the proper forms. The penalties are too great if it is wrong.

2. Incorrect 1099s: Enter it as income and then subtract separately the amount that is not right to make it come out to the correct net amount.

3. SEPs and IRAs can still be opened for 2012. Let clients know where applicable. You can also suggest that clients make their 2013 payments now rather than waiting until next year.

4. Spouses that are partners in a two person partnerships do not have to file a 1065. They can report their portions on separate Schedule Cs. Note that this does not apply to LLC ownership.

5. Deeds in lieu of foreclosure or foreclosures reported on 1099-A are treated as a sale. The unpaid recourse mortgage portion is not treated as income until actually forgiven, at which time a 1099-C will be issued. Income will be recognized when debt is actually cancelled.

6. Taxpayers who have cancellation of debt income reported on 1099-C and who are insolvent can exclude part or all of the income reporting the exclusion on Form 982.

7. Roth IRA conversions in 2010 not reported in 2010: Pick up half in 2011 and the balance in 2012.

8. Unreimbursed partnership expenses required by the partnership agreement are deducted on a separate line on Schedule E.

9. Self employed taxpayers can deduct Medicare premiums along with other self-employed health insurance premiums.

10. NOLs cannot be carried forward unless an election was previously made to do so, or to the extent they weren’t absorbed when previously first carried back. Also, if a client has a 2011 NOL, discuss with client whether to carry back or elect to carry forward.

Is Ed on target? How would you answer this question? Have a question of your own? Email Ed here, or add to Comments below.

Ed is the author of “Implementing Fee Increases.”

4 Responses to “Are You Asking Clients the Right Tax Prep Questions?”

  1. LynetteR

    I have a checklist this year and have been asking clients about 2013 changes that could make them bounce ove the 200/250K line and be subject to Medicare Surplus taxes.

  2. Ed Mendlowitz

    Good comments – thanks.

  3. Frank Stitely

    We have started asking about income from eBay and PayPal. Surprisingly or maybe not surprisingly, people seem to believe this income escapes taxation.


    I want to see a copy of the settlement statement for all purchases, sales, and refinances of real estate

    I want to see previous tax returns for new clients