Due Diligence For Schedules A, C, and E

Due Diligence For 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 not properly reported;
  • Rental depreciation not being correctly calculated;
  • Limitations surrounding passive activities, basis, and at-risk rules are not properly considered or calculated.

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