good preparer procedures will reduce review time

bonus: a 28-point checklist.

by ed mendlowitz
how to review tax returns: the field-tested update

the better the quality of the return that is submitted to the reviewer, the easier it will be for the reviewer allowing them to spend more time using their brain instead of their eyes.

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many procedures whose purpose is to reduce reviewer’s time will add to the preparer’s time and occasionally will add to the total time for the return. that is so and should be acceptable because there are more preparers than reviewers.

also, it is with the reviewers where bottlenecks develop. further, the cost and billing rates for reviewers is substantially greater than for preparers, so savings of reviewer time can actually reduce the time charges for the returns where there is the tradeoff.

added effort by the preparer will save reviewers’ time. there is no question that requiring preparers to have extensive, complete, neat, organized and indexed working papers or pdf files will take added time but will definitely also reduce the time it takes the reviewer on that same return.

comment: you need to determine the added time for a preparer and reduced time for the reviewer, but on returns with some complexity the time saved for the reviewer can be substantial. for a workload of 50 somewhat complex returns, saving the reviewer an hour per return will result in a week’s added work, or reduced overtime. further, the use of smartscanners can save the preparer time on those returns, so effective management can have the preparer spend no additional time while the reviewer’s time is reduced time.

here is a work process and procedures checklist for preparers to follow. probably a better way would be for the preparer to use the reviewer’s checklist.

preparer’s work process and procedures checklist

1. work carefully and deliberately.
2. do not hand in work with mistakes.
3. double check your work.
4. if possible, look for an alternative way to check your work.
5. compare the final return with previous year’s return – line by line.
6. avoid spelling errors, improper use of words and poor grammar.
7. look at final result – ask yourself if it seems reasonable.
8. if there is an unexpected result, e.g., a large balance due or refund, you should find out why and explain it in the work papers.
9. if there are large differences in individual items or category totals this year when compared to last year, you should find out and explain why in the work papers.
10. find out if a projection was prepared for this client and if so, reconcile any differences with the final result and put that in the work papers.
11. make sure you understand the reasons for all differences.
12. “large” and “substantial” differences might mean different things to different people – so if the difference is more than 10 percent, use that as the reference point. for example, if the adjusted gross income is $170,000 instead of $150,000, that is a greater than 10 percent difference. likewise if the refund is $10,000 rather than $8,500, that is a difference greater than 10 percent; also a balance due of $6,000 rather than $7,000.
13. exercise judgment.
14. if something looks like a red flag that might cause an audit, question what it is.
15. look at every page of final return – ask yourself if what you see makes sense.
16. if you need to look up or research something, do not spend more than 30 minutes on it. afterward you can ask for assistance.
17. on a technical issue, do not ask for help unless you tried to find out the answer by yourself (using the 30-minute time budget). include on your list of open items a brief summary of what you found out or weren’t able to find out.
18. on non-technical matters relating to a client, make a list of your questions, and when you reach a stopping point, ask your supervisor for help. try to accumulate your questions. if you do not get a response within three days, please follow up with the supervisor.
19. if you need to contact a client for additional information, do so, and follow up every three days thereafter until you get the information. if you do not receive what you request after two followup calls, notify your supervisor when it would be the time for you to make a third followup call.
20. use the tax comparison worksheets from your tax software to compare the last year’s categories to this year’s. for more involved returns prepare and review an excel tax comparison worksheet.
21. follow uniform procedures and use worksheets documenting what you did wherever possible.
22. make sure that all worksheets, schedules and lead sheets tie into amounts on the tax return.
23. complete all checklists after reading each question or item while you are working on the return.
24. respond to all open items in the software diagnostics so there are no items left for the reviewer to resolve or follow up on.
25. if client asked any questions or made comments on the data submitted, make sure of and indicate that all questions and comments were responded to or that manager or partner were told of the questions or comments
26. indicate whether another preparer pre-reviewed the detail input, and enter their name here: _______________________
27. make sure you responded to all items you could if reviewer asked you to follow the reviewer’s checklist.
28. do not become guilty of upward delegation. do as much as you possibly could so the reviewer or supervisor won’t have to do something you could have.

posted on april 17, 2020