Taxslayer Pro automatically runs a series of tests on the return you are preparing, looking for inconsistencies, highlighting possible oversights, and providing important reminders. This information is provided at the bottom of the 1040 interactive screen in a section labeled either Diagnostic Warnings or Diagnostic Errors.
- Diagnostic Warnings are possible oversights and important reminders. Evaluate each warning to determine whether or not it is germane to this return. Diagnostic Warnings don't prevent the return from being marked complete and e-filed.
- Diagnostic Errors are surrounded in red and indicate a problem that must be fixed. Diagnostic Errors prevent the return from being marked complete.
Examples of Diagnostic Errors that must be corrected:
- Form 4136 May Not Be Filed Electronically (return will need to be paper filed)
- Total Amount Deposited On Form 8888 Must Match Amount on Form 1040
- Spouse Must Have Valid SSN to e-File
Examples of Diagnostic Warnings:
- Amended Return Will Not Be Sent To the IRS
- This return contains Form 2555/2555-EZ. If you are filing a paper return, mail the return to, etc.
- Gambling losses reported on Schedule A cannot exceed gambling winnings reported on Form W-2G.
A deduction for gambling losses can only be taken to the extent of gambling winnings. Return to the itemized deductions menu and reduce the amount of gambling losses to the amount of gambling winnings.
- The Taxpayer is at least 62 years old and a Form 1099-SSA has not been reported.
Given the taxpayer's age, they may have received a Form 1099-SSA. Verify with the client whether or not social security benefits were received. If so, obtain the Form 1099-SSA showing the amount of benefits they received and enter the benefits in the tax program.
- No state return has been marked for electronic filing.
The federal return has been marked for electronic filing, but the state return has not. If you wish to e-file the state return at the same time as the federal return, go to the state return and mark it for electronic filing.
- There is a balance DUE on the Federal return, is Form 2210 required?
When there is an amount due on a tax return greater than $1,000, there may be a penalty for underpayment of estimated tax. Complete Form 2210 under the Payments, Estimates & EIC menu.
- A return that contains a Form W-2 with an invalid EIN is not eligible for electronic filing.
The IRS requires a valid EIN on all Form W-2(s) and Form 1099(s) for the return to be eligible for electronic filing. You must enter a valid EIN on each Form W-2, or remove the return from electronic filing and mail it in.
- The taxpayer is less than 59 and a half and a Form 1099-R has been completed. Is the taxable amount subject to a 10% penalty?
Generally, if a taxpayer is less than age 59-1/2 and they receive a Form 1099-R, they will be subject to a 10% penalty on the taxable portion of the distribution. If the taxpayer is subject to the penalty, return to the Form 1099-R edit screen and select box f. Subject to 5329.
- There is a large mortgage interest deduction on Schedule A. Make sure the deduction is within the limits for the home mortgage interest deduction found in Publication 936.
The amount of mortgage interest you can deduct each year is limited. There is one limit for loans used to buy or build a residence - called "home acquisition debt." And there is another limit for loans not used to buy or to build a residence - called "home equity debt." All loans, whether secured by your main home or your second home, are subject to the same overall limitations. To review more information see Publication 936.
- EITC Due Diligence Questions are turned off in Taxslayer Pro.
You can complete the Form 8867 by accessing the Payments Menu and then selecting Earned Income Credit. Paid preparers must meet four due diligence requirements on returns with EITC claims or face possible penalties. IRS regulations clarify these requirements and set a performance standard for the "knowledge" requirement - what a reasonable and well-informed tax return preparer, knowledgeable in the law, would do. When preparing EITC returns and claims for refund, paid preparers must:
- Evaluate information received from clients
- Apply a consistency and reasonableness standard to the information
- Ask additional questions if the information appears incorrect, inconsistent or incomplete
- Document and retain the record of inquiries made and client responses
- A Net Operating Loss has been calculated on this return. If you choose not to carry back the NOL, return to the Miscellaneous Forms Menu and select Net Operating Loss Worksheet / Form 1045. Change the IRC Sec 172(b)(c) Election to Forego the Carryback Period to Yes.
The IRS requires an election to be made and included with the tax return if the taxpayer chooses not to carry back a NOL. To include this election with the tax return, from the Main Menu of the Tax Return (Form 1040), select:
- Miscellaneous Forms
- Net Operating Loss Worksheet / Form 1045
- IRC Sec 172(b)(c) Election to Forego the Carryback Period. Answer YES.