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Category: Due Diligence Requirements for Preparers

Due Diligence and Schedules A, C and E

 Schedule A
To prepare an accurate Schedule A, you should ask your clients sufficient questions to determine that the expenses that are being claimed are correct.  The most common Schedule A issues are:
  • Unreimbursed Employee Business Expenses claimed on Form 2106: Taxpayers may only claim allowable unreimbursed expenses.
  • Mileage claimed on Form 2106: Taxpayers should provide you with documentation to support business miles claimed.
  • Travel, meals and entertainment expenses: Taxpayers must have documentation of business purpose, as well as receipts to support expenses claimed.
  • Charitable Contributions: Taxpayers must have receipts for all cash contributions and adequate documentation for all non-cash contributions.

 Schedule C
To prepare an accurate Schedule C, you should ask your clients sufficient questions to determine that the expenses claimed are correct.  The most common Schedule C issues are:
  • Gross receipts not being fully reported: Books and records should be available for review.
  • Business Expenses:
    • Expenses claimed must be ordinary and necessary for the type of business reported.
    • All expenses claimed must have been paid or incurred in the current year and the allowable amount of the expense must be correctly computed.

 Schedule E
To prepare an accurate Schedule E, you should ask questions to determine income and expenses claimed are correct.  The most common Schedule E issues are:
  • Rental income and expenses are not properly reported
  • Rental depreciation not being correctly calculated
  • Limitations surrounding passive activities, basis and at-risk rules are not properly considered or calculated


Last Updated: 3/9/2015


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