Prior Year Reviews

[Snaggletooth]

What position do you take when a client brings you a prior year return and asks you to check it? Says he will pay you $25 to look it over...

Here are two possible positions:
1) Go ahead and give it a brief scan, looking for obvious errors, estimate what it will cost to do an amended return, and go for it.
2) Your ogligation as a paid preparer is to prepare a return. Thus you tell your client that you have to prepare the prior year return from scratch, and charge him accordingly.

Bear in mind that H&R Block does a cursory review for a nominal fee. They advertise that they find errors in 4 out of 5 returns prepared by others. That sounds high, but if they are reviewing DIY returns using TurboTax, that ratio could very well be accurate.

[Black Bart]

Checking 'em out.

1) Go ahead and give it a brief scan, looking for obvious errors, estimate what it will cost to do an amended return, and go for it.

I do this one.

...H&R Block...advertise(s) that they find errors in 4 out of 5 returns prepared by others. That sounds high, but if they are reviewing DIY returns using TurboTax, that ratio could very well be accurate.

I agree; Block must be throwing in the DIY stuff to come up with 4 out of 5. Shoot, if we were that bad, we could just go to work for IRS answering the 800-829-1040 line.

[kaimana]

I haven't counted the number of errors I have found on HRB returns.

Reviews are 100. If there is an error I tell the client there is an error but not what it is. Then I explain that he/she can go back to the ori preparer and have it corrected or I will prepare an amended return at my usual fee.

[dsi]

I will never allow the client to dictate my fee. In your scenario, I would reply "I'll be happy to review your return, but my fee is $75 per hour, minimum 1/2 hour." Furthermore, I will never do it with the client in my office. I always tell them that I will get back to them within a couple of days.

[erchess]

Comments

At one time Block checked returns in this way. I believe they still do. The first step is to eyeball the return for obvious theory errors and the second is to check for math errors if it was not done on a computer. If the office happens to be busy that is all the checking that is done but the ads begging people to bring in returns to be checked run during the weeks when the offices are rarely busy. If the office is not busy a preparer who is the most junior who would have been allowed to do a return like that one would be told to key it in for the practice value. And yes returns with a hundred stock transactions including shorts options and so and in addition a Sch C/E or even two have been subject to this treatment.

I will eyeball a return and check the math for free and also discuss any specific concerns the taxpayer may have at no charge if it is either the off season or I have been engaged to do this year's return. If it is tax season and I am not engaged to do this year's return I charge $50 for the check but remember I have done the check in their home or office rather than received them in the home office I don't really have. In or out of season if we decide together that I should key in their return in my software then I charge by the form what I would have charged to be the original preparer. Then if we together decide that I should amend the return that is another $55. Note that in tax season if they are not engaging me to do the current year return their fee is $105 plus whatever I would have charged to do the original return. Out of tax season or with me preparing this year's return the fee for the amend is $55 plus whatever I would have charged to do the original return.

When I check a self prepared return I nearly always find clear errors both for and against the taxpayer. One return that had been done in TT had within a dollar of the right bottom line despite numerous theory errors. When I check a return from certain offices I find a lot of errors but when I check returns by most offices I very seldom find errors and most of the errors I find appear to me to be due to the other professional not asking enough questions or the right questions or one party not understanding the other. I do pride myself on my interviewing skills which I have carefully honed over the years.

[travis bickle]

Not quite correct

What position do you take when a client brings you a prior year return and asks you to check it? Says he will pay you $25 to look it over...

Bear in mind that H&R Block does a cursory review for a nominal fee.

HRB does a complete review for $29 under their "Second Look" program. The tax preparer doing a Second Look enters all the client's information into their system from scratch and does a complete return, comparing the HRB result with the original result.

[JohnH]

I want to tell them I'm not a schoolteacher so I'm not set up to make money grading papers, but I try to be more diplomatic. What I usually say is that I pay a lot of money for software that I trust to help me get it right, so the only way I'll check a return is to enter the relevant info in the same manner as I do when preparing a return. That will cost them about the same as I charge for preparing an original return.

The problem with this whole "grade my paper" scenario is that if you come up with the same numbers or an irrelevant difference, you spend additional time explaining to them why there's nothing wrong with the return as it is. Before long, you have invested as much time in the project (or more), as you would have spent just to do the job in its entirety. May as well get paid for it.

Having said all this, let me add that I always ask them why they think the return needs a review. If their explanation indicates there is likely fertile ground for amending, I may change my whole policy and give it a once-over for free. After all, my policies are in place for my convenience, not the clients'.

[equinecpa]

HRB does a complete review for $29 under their "Second Look" program. The tax preparer doing a Second Look enters all the client's information into their system from scratch and does a complete return, comparing the HRB result with the original result.

And that is a complete review? The errors I find are not normally calculation errors or input errors like not putting client info in...but errors where someone hasn't asked "did you buy a new car this year" (sales tax deduction)...and medical expenses (itemized)..etc. Or on business schedules there are always all sorts of missed deductions (home office -"my tax preparer told me I'd get an audit...I don't claim that" or depreciation calculated incorrectly.

I charge regular rates to review and amend. And I pretty much always find errors or some kind or other.

[Burke]

I used to do them. I don't anymore. One guy used to do his on TT and then bring it to me for a review. I always found obvious problems. He always took it home and redid it but paid me for my time. And as a paid preparer, I was required to sign it? Always a question. I quit doing them, since I felt it was only a cursory overlook, and to do it right having the entire return with all the supporting documents, and standard interview I would do with any new client, and input to my software was the better method. Full price.

[ChEAr$]

Call me old fashioned

but $100???? Wow.

Anyway, if a friend of an existing client wants me to look it over, I'll do it for free, not checking
each and every item of course. After all, these days with returns prepared by computer
you don't even have to "do the math".

So I'll tell them I don't see any material errors if that's the case, or if I do sense something
amiss, I'll outline the situation without specifics, saying that if they want me to amend,
then great and estimate how much I estimate their tax savings will be, or estimate how much
more they will owe.

After all, the purpose of an amendment is to get the return correct, not JUST to get a
refund.

(I guess i'd never survive in Hawaii! grin)

[kaimana]

Burke why would you tell him what the errors are. I would just say there are errors and if he wants me to prepare the return properly for him I will wave the review fee and charge my normal fee.

[erchess]

Prices are higher in HI

Just look at the Federal Perdiem rates.

[travis bickle]

My apologies

And that is a complete review? The errors I find are not normally calculation errors or input errors like not putting client info in...but errors where someone hasn't asked "did you buy a new car this year" (sales tax deduction)...and medical expenses (itemized)..etc. Or on business schedules there are always all sorts of missed deductions (home office -"my tax preparer told me I'd get an audit...I don't claim that" or depreciation calculated incorrectly.

I charge regular rates to review and amend. And I pretty much always find errors or some kind or other.

because I did not explain the process in my other post. It is a complete review and not a cursory review. As the tax preparer enters the data into the software, there exists a litany of questions on each and every screen [Sch A items, Sch C items, Depreciation screens, OIH screens, Other Income screens, Pension Plans & IRA screens, etc ad nauseum] which the preparer has to answer [after discussing with the client, of course] by checking Y, N or entering the appropriate data.

It is the same process as preparing a new return. So, the preparer is not merely copying data from a different return.

[Zee]

HRB does a complete review for $29 under their "Second Look" program. The tax preparer doing a Second Look enters all the client's information into their system from scratch and does a complete return, comparing the HRB result with the original result.

Are you saying HRB reviews all the original documentation, input documents, etc., and conducts a client interview as if they were a new client? Do all HRB offices follow the same procedure?

Travis, if you're an HRB employee. Please explain how HRB defines an error and how they determine the average amount saved by their "second look", I think most of us believe the statistics presented in the HRB ads are misleading. If that's not true, it'd be nice to know. I'm also wondering what % of those with a "second look" are self-prepared vs professionally prepared and what % of the errors are items overlooked and not-communicated to other preparers.

Unfortunately, statistics can be easily be manipulated to the point where although misleading, they're factual.

[BHoffman]

I bet any client could come up with some sort of "self employment" if pressed hard enough, file a Sch C with a loss and the tax goes down.

Guy came to me this year with a return from 2007 prepared by one of the chains. He makes glass bead jewelry and sold around $700 at yard sales and he rented a booth at an arts and crafts fair. Sch C.

Has no intention of actually profiting from this. He's happy to make sales to cover his supplies costs.

So I guess it's a matter of opinion sometimes. I can disagree and say this guy has a hobby and not a business. Someone else could say the opposite without necessarily being wrong. However, the amount they charged for the Sch C and depreciation and home office deduction, etc. far exceeded the actual tax benefit he got from this.