Chapter purpose
This chapter serves as the foundation for the entire EA program.
Target: 35-40 textbook pages
This is a production specification. It is not the finished 35-40 page textbook chapter.
Chapter production specification
Tax Return Preparation Fundamentals
Before a preparer can determine income, deductions, credits, or tax liability, the preparer must understand the tax return preparation process itself. This chapter establishes professional workflow, taxpayer interview methods, documentation requirements, due diligence standards, return review procedures, and risk management.
Learning objectives
- Explain the tax return preparation process.
- Conduct a structured taxpayer interview.
- Identify required tax documents.
- Evaluate prior-year tax returns.
- Recognize common preparation risks.
- Apply due diligence standards.
- Maintain proper taxpayer records.
- Review returns for accuracy.
- Respond to common IRS correspondence.
- Prepare audit-ready documentation files.
Lessons
Lesson 1 | 5 pages
The Tax Return Preparation Process
Topics:
- Purpose of tax return preparation
- Tax return lifecycle
- Information gathering
- Analysis
- Preparation
- Review
- Filing
- Record retention
Illustration: Client Intake -> Document Collection -> Analysis -> Return Preparation -> Review -> Client Approval -> E-File -> Retention
Examples: 4
Review questions: 10
Flashcards: 15
Lesson 2 | 6 pages
Client Interview Methodology
Topics:
- Initial consultation
- Interview objectives
- Open-ended questions
- Detecting missing information
- Follow-up procedures
- Red flag identification
- Practitioner Note: Clients often fail to mention 1099 income because they believe taxes were already paid.
- Practitioner Note: Always ask directly about gig work, consulting, cash income, and online sales.
Case study: Client forgets to report DoorDash income, interest income, and crypto transactions.
Lesson 3 | 6 pages
Taxpayer Documentation Requirements
Topics:
- W-2
- 1099-NEC
- 1099-MISC
- 1099-INT
- 1099-DIV
- 1099-B
- 1099-R
- K-1
- Deduction Documents
- Credit Documents
- Foreign Asset Documents
Decision tree: Income Reported? -> Yes -> Source Document Present? -> Yes -> Verify Amount -> Proceed
Lesson 4 | 5 pages
Prior-Year Return Analysis
Topics:
- Why prior returns matter
- Carryovers
- State tax refunds
- Capital loss carryovers
- AMT credits
- Passive loss carryovers
- Practitioner Note: Never prepare a return without reviewing the prior-year return when available.
Examples: 3
Lesson 5 | 6 pages
Due Diligence Standards
Topics:
- Reasonable inquiry
- Known information standard
- Inconsistent information
- Due diligence penalties
- Form 8867
- Practitioner Note: Preparers may not ignore information that appears incorrect.
Examples: 4
Lesson 6 | 4 pages
IRS Notices and Correspondence
Topics:
- CP notices
- Math error notices
- Audit notices
- Collection notices
- Identity theft notices
Examples: 5
Lesson 7 | 6 pages
Recordkeeping and Audit Readiness
Topics:
- Retention periods
- Electronic records
- Business records
- Audit support documentation
- Best practices
Decision tree: Document Needed? -> Tax Impact? -> Yes -> Retain
Chapter case studies
- Simple W-2 Employee
- Self-Employed Consultant
- Taxpayer With Rental Property
- Taxpayer With Foreign Assets
- Multi-Issue EA Simulation: W-2, Schedule C, rental property, dependent, and education credit
Chapter exam alerts
Minimum: 15 alerts.
- Failure-to-file penalties
- Due diligence penalties
- Carryover issues
- Unreported 1099 income
- Missing K-1 reporting
Question bank
Basic
25 questions
Intermediate
15 questions
Advanced
10 questions
Total
50 questions with complete explanations
Flashcards
100 flashcards
- Definitions
- Forms
- Deadlines
- Due diligence
- Documentation
- IRS notices
- Recordkeeping
Illustrations
Minimum: 8 illustrations.
- Return Preparation Workflow
- Client Interview Workflow
- Document Collection Matrix
- Income Verification Tree
- Due Diligence Process
- Return Review Checklist
- IRS Notice Classification
- Record Retention Decision Tree
Chapter output
Lessons
7
Pages
35-40
Questions
50
Flashcards
100
Case Studies
5
Exam Alerts
15
Illustrations
8
Decision Trees
3
Production sequence
This becomes the production template. Chapters 2-52 should be built to the same standard, adjusted for topic complexity.
Next production specification: Chapter 2: Taxpayer Identification Systems