Eic And Self-employed

[duanecpa]

For those TP that bring in their QB files (self-employed) who may qualify for the EIC, what are the suggested extra steps that need to be taken to provide 'enough assurance' that the EIC is warranted given the fact that the QB files have been created by the TP?

Thank you.

[KBTS]

Only you can determine what you believe is "due diligence" in a case like this. If you are looking for substantiation of the numbers in QB, you could ask for copies of all bank statements, paid invoices, paid receipts, etc.

[BP.]

what are the suggested extra steps that need to be taken to provide 'enough assurance' that the EIC is warranted given the fact that the QB files have been created by the TP?

http://www.eitc.irs.gov/public/site_files/housecleaner_FS_7-7-2-11_.pdf

This is a link to preparer's EIC toolkit with an example of how IRS suggests handling EIC & SE due diligence.

[Gretel]

Only you can determine what you believe is "due diligence" in a case like this. If you are looking for substantiation of the numbers in QB, you could ask for copies of all bank statements, paid invoices, paid receipts, etc.

Yes, I agree with KBTS. I actually would not just accept reports printed from QB. There can be a number of things not becoming obvious by looking at P&L and BS, not even by a bank reconciliation. QB is so much more than just bookkeeping records and the more features a client uses, the greater the danger of wrong financial statements if one does not know QB well.

If QB is essentially used for bookkeeping only I would want to see reconciled bank statements plus bills for bigger ticket items.

[KBTS]

Yes, I agree with KBTS. I actually would not just accept reports printed from QB. There can be a number of things not becoming obvious by looking at P&L and BS, not even by a bank reconciliation. QB is so much more than just bookkeeping records and the more features a client uses, the greater the danger of wrong financial statements if one does not know QB well.

If QB is essentially used for bookkeeping only I would want to see reconciled bank statements plus bills for bigger ticket items.

I'm not too sure people should be allowed to buy and use QB without passing some kind of test : )

I did a QB training recently where the person had pointed their only income item to an expense account. Then they failed to deposit items from the undeposited funds account and instead re-entered the checks into deposits and pointed them to another expense account they had created. Needless to say, the income statement was completely useless before we fixed everything.