Federal Tax – Review Criteria Entity & 1040
Federal Tax Department – Issue Based Review Guidelines for Entities
Amended returns, Series 990 returns, and business returns with any of the following items should be logged into tax review. All other returns can be logged into tax review at the discretion of the signing KSM partner or director.
- First year for KSM to prepare return
- Initial and final year returns
- Special allocations and/or minimum gain situations
- Sale of substantially all of the business assets
- Any current year change in ownership
- Built-in gain issues
- Cancellation of debt income
- Change in accounting method
- Change in entity status (C corporation to S corporation or corporation to partnership/LLC)
- Debt financed distributions on flow-through returns
- Unique credits (this does not include WOTC, FICA, TIP, etc.)
- Investment partnerships
- Consolidated C corporation
- Any foreign reporting issues
Please try to identify any issues or significant changes in facts before sending for review. Review should be sent at the discretion of the signing partner or director. However, remember that a review by the Tax Department is a theory-based review and not a supervisor review.
Federal Tax Department – Issue Based Review Guidelines for 1040s
The Tax Department review will be limited to an issue-based review of only the identified issue(s). Please utilize the “Tax Review” drop down of the PE job record to add a new note that provides a brief description of the issues to be reviewed and link to the appropriate source documents utilizing the SurePrep link function with a Note in SurePrep labelled as “KSM_TAX Review.”
Significant Issues that Should Be Logged in for Review
- Foreign Informational Reporting (5471, 8938, 926, 8621, 8865, 8858, FBAR – NOT 1116 unless there are issues that need addressing)
- Significant disposition of closely held business interests or any similar transaction
- Complex or material Schedule C or Schedule F activities
- Excess Business Losses under Sec. 461
- 1031 Transactions
- Initial year installment sale elections
- Initial year QOZ deferrals
- Conservation easement related deductions
- Reportable transactions (other than just flowing from a K-1)
Other Issues to Consider During Preparation
- Noncash charitable contributions that require a qualified appraisal (i.e., noncash contributions that exceed $5,000 other than publicly traded securities)
- New Schedule E activities that may require nonpassive grouping elections
- Unusual at-risk/basis/suspended loss issues with K-1s
- Unusual year-over-year change in Form 8995 (QBI) or Form 8960 (NIIT)
- Significant AMT liability that isn’t easily explainable
- Interest expense limitation under Section 163(j)
- Look-back or other specialty calculations
Please try to identify any issues or significant changes in facts before sending for review. Review should be sent at the discretion of the signing partner or director. However, remember that a review by the Tax Department is a theory-based review and not a supervisor review.