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Preparer’s Tax Cuts & Jobs Act Due Diligence Requirements, December 2017 Tax Reform changes
New Preparer Due Diligence Requirements and Tax Cuts and Jobs Act (TCJA)
Preparer addresses client concerns and sets up appointment (Due Diligence CTC-ODC Part I)
Preparer’s office interview with client (Due Diligence CTC-ODC Part 2)

Jeff: Hi Tracey Hi Jeff!

Jeff: I can come back and see you now?

Tracey: Sure. Come on in, come on it.

Did you have problems finding the place?

Jeff: Not at all.

Tracey: Well welcome. Have a seat there.

Tracey: Thank you for sending all the information on the list It really helped me to get a feel for your family and the tax situation.

We're reviewing it again in person because as a professional tax preparer, I am required by law to ask you questions to make sure I meet my due diligence.

So I want to do a good job in preparing an accurate tax return and meeting all IRS requirements.

You know as we talk I will be checking things off my list to be sure I’ve covered everything.

Jeff: Okay, sounds great.

Tracey: So starting from the beginning it looks like your divorce was final in January 2018 right?

Jeff: Right. Tracey that relationship is DONE.

But I still have the best part, the kids!

Tracey: Oh yes, yes.

So, what’s the living arrangement for the kids?

How much time did they spend with you?

Jeff: So, we do have shared custody, but I’m the primary parent for physical custody.

Tracey: Ok, so for 2018, how long did the kids live with you?

Jeff: Well, they were with me since the start of the year, January except every other weekend and one day during the week.

Oh, and we did alternate holidays.

Tracey: Are there any requirements in the divorce decree as far as custody or who can report the kids on the tax return?

Jeff: Well the divorce decree did document the arrangement I just told you about but it didn't cover who could report the kids on the tax return.

Tracey: Did you or your wife sign any kind of tax agreement, separate from your divorce paperwork, where you gave your wife permission to claim the kids on her tax return?

Jeff: No.

And for the record, she’s my ex-wife.

But what kind of an agreement do you mean?

Tracey: Did you sign the IRS form 8332 or any kind of agreement where you allowed her to claim the kids?

Jeff: No. Absolutely not.

Tracey: So based on the information you gave me, it looks like your kids where with you more than 6 months of this year so this goes a long way in determining your filing status and what credits you're eligible to claim.

Jeff: Really? Well, that’s good news but what else do we need to cover today?

Tracey: Let’s look at your income for this year earnings, investments, or any other monies you made.

Jeff: OK. I wish I made more because kids sure are expensive.

But I gave you my W-2, and that shows $86,000 in wages and I made $50 in dividends and interest.

I’ve got nothing else going on except the child support I get for the kids Tracey: Ok, so far so good.

Again, based on your income, it looks like you do not qualify for the Earned Income Credit.

but, because you were unmarried on the last day of the tax year, it looks like you may qualify for Head of Household.

I’ll ask you the cost of the upkeep of your household later.

Now back to the kids.

It looks like they both have valid SSN's that allow them to work and they were born in the US.

That's great!

But next, I do need the age that they were at the end of last year.

Jeff: OK. Danny turned 17 in November, and Chelsea was 14 in April.

She thinks she’s 24 I know you've been there with your daughter.

Hey, let's not bring that up now.

I don't want to scare you.

Now, I see here that Danny, looks like he worked a part time job.

Do you have any idea how much he earned last year?

Jeff: Danny worked part-time at Buy-Best Computers he made $10 an hour, just working a few hours on Saturdays.

Tracey: If he was only working Saturdays, Danny should be within the limits to qualify him for what is called the "other dependents" for the Credit for Other Dependents on your tax return.

this is a part of the new tax legislation that came out in December 2017.

This credit will reduce the amount of tax you will owe but it is not considered refundable.

But Chelsea on the other hand, who is under the age of 17 qualifies you for a $2,000 child tax credit.

Jeff: What? That’s good news, right?

Tracey: That is good news.

Now earlier you mentioned that you get child support.

Now how much did you receive last year?

I need to consider this amount in determining support and the cost of keeping up a home.

Jeff: I only get $100 a month for each child, which started in February.

That came to $2,200 last year, But that didn't even cover utilities.

But hey, I guess every little bit helps right?

Tracey: Ya, you're right. But I'll do the worksheet to be sure however, based on what you have told me, you definitely paid more than half the cost of keeping up your home.

So, you will qualify for Head of Household.

Jeff: Oh, I like that.

Tracey: And, even with the child support you receive for Danny, you still provided more than half of the total support, so you can take the new Credit for Other Dependents.

Jeff: Well you know what?

This meeting with you today, has me feeling a lot better about my taxes.

Tracey: That's great. I'm glad I can help.

But I'm not quite done with personal questions.

So does anyone else live in your home with you and the kids?

Jeff: No one else besides Rover.

But I’ve always heard claiming a furry family member on your tax return is a big No-No.

Tracey: Now that's correct, and good job.

Jeff: I do know a little bit about taxes.

Tracey: One other item not on the list I want to ask about.

Did IRS ever notify you that you could not take the Child Tax Credit Or, the American Opportunity Tax Credit which can be taken for the first four years of college?

Jeff: Well, Danny is not in college yet but you can bet I’ll be thinking about it when he does start.

Now as far as the Child Tax Credit, I’ve never had a problem with that before Actually, I’ve never been audited, thank goodness.

And this return right here, is going to keep it that way, right?

Tracey: I can’t promise you that, but you can count on me for an accurate return based on what you told me.

Jeff: Tracey, You’ve been great!

I cannot wait to see my refund Tracey: mmm. Well let me do some number crunching first.

I don't want to promise you a refund.

I should have your return ready in a few days.

But first, I’d like someone in my office to give it a double check.

Now about my fee.

Jeff: Ok.

Ok. This looks reasonable.

I think from all that you've done for me it's going to be worth every dollar I spend.

Tracey: Well Jeff, I'm glad to help. And it was great seeing you again So enjoy the rest of your day.

Jeff: Alright. Thank you.