Cpa Return Review

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name: cpa-return-review
description: "Activate when: a prepared 1040 or 1120-S is going to review; you are the second set of eyes on someone else's return; a firm wants one consistent review standard across reviewers; onboarding a preparer to the review bar; something feels off about a return and you want a systematic pass; user says 'review this return', 'before we file', 'second review', 'preparer checklist', 'did we miss anything on this return?'. Do NOT activate when: the return is not yet prepared; the question is a single technical treatment; the work is chasing missing documents rather than reviewing; the question is what an examiner would attack or whether a position invites audit rather than whether the return is right (use tax-prep-pre-file-audit-premortem instead — it applies to 1120-S as much as 1040). More: deciqai.com/s/cpa-return-review"
---

# CPA — Pre-Delivery Return Review

> **Not legal or tax advice.** No thresholds, limits, rates, or dates appear here — all of them expire. Verify every amount and every rule against current IRS/state guidance and current-year software logic. The practitioner who signs owns the return.

**Activate when:** a return is prepared and going to review; you are reviewing someone else's work; you want the same discipline applied by every reviewer in the firm.
**Do NOT activate when:** you are preparing rather than reviewing; the question is one isolated treatment; the question is what an examiner would attack rather than whether the return is right — that is [tax-prep-pre-file-audit-premortem], on 1120-S as much as on 1040.

## Why this skill

Errors that reach clients are rarely exotic. They are a carryover nobody re-checked, a state that quietly changed, a name spelled two ways, an election made last year and forgotten this year, and a number that is technically correct but obviously wrong next to last year's.

Reading a return top to bottom hunting for mistakes finds what you already suspect and nothing else. **Different error classes hide from different kinds of attention**, so the review is five separate passes with five different questions — not one careful read.

## Process

Run in order. Each sweep is its own pass.

### Sweep 1 — Identity and posture

Boring, and the source of the most embarrassing errors.

- Legal names match official records exactly, including suffixes and hyphenation
- Taxpayer identification numbers correct against the taxpayer's own records
- Tax year correct on every form and schedule
- Filing status reflects facts collected **this year**, not carried over
- Dependents current — ages, relationships and eligibility change annually
- Address current and consistent with the states being filed
- Entity name, identifier, formation state match the organizing documents (1120-S)
- Shareholder roster current, including mid-year changes (1120-S)
- Direct deposit / payment details verified this year, not carried forward
- Preparer identifiers and signature blocks complete
- Paid-preparer due-diligence checklist completed and retained for every covered credit and for head-of-household — see [tax-prep-8867-due-diligence]. A per-return penalty gate, and the one Sweep 1 item that costs money on its own rather than through a wrong number
- Taxpayer e-file authorization signed and dated for the correct return and year, **before** transmission
- Any consent required before disclosing or using taxpayer information obtained in the required form and sequence
- Every other required signature, election statement and attachment present

**1120-S annual check:** the S election is documented in the permanent file and nothing this year threatens it — an ineligible shareholder, a second class of stock created by a side agreement, a shareholder-count change. Checked once a year, and this is where.

### Sweep 2 — Prior-year comparison

Open last year beside this one. Every material change needs a one-sentence explanation.

- Every line present last year and absent this year — where did it go? Account closed, property sold, or oversight?
- Every line new this year — what happened?
- Every line that moved materially — why?
- Carryovers identified, correct, and **traced from the prior return rather than retyped**
- Prior-year elections still in effect, still appropriate, still consistently applied
- Depreciation continuity: prior assets present, methods and lives unchanged unless deliberately changed
- Basis and capital account continuity (1120-S)
- Shareholder stock and debt basis tracked and current — and where a shareholder claims a loss, takes a distribution, disposes of stock, or receives a loan repayment, **Form 7203 is prepared and attached to that shareholder's return**. Most commonly missed item at the entity-to-owner handoff: each preparer assumes the other did it.
- International items requiring Schedules K-2/K-3 identified, and K-3 delivered to shareholders (1120-S)
- Accounting method unchanged, or the change is deliberate and documented
- Same set of state filings as last year? One added or dropped needs a reason on the record

*Gate: a disappearing line item outranks a wrong number. Wrong numbers get caught by review; missing items get caught by nobody, because there is nothing on the page to look at.*

### Sweep 3 — Internal consistency

- Schedules and statements tie to the summary lines they feed
- Totals foot; subtotals sum to totals
- A figure appearing in more than one place is the same figure everywhere
- Federal-to-state amounts consistent, or the difference is a known intentional adjustment
- Entity-to-owner and entity-to-entity amounts consistent
- Where a balance sheet is included, it balances and beginning equals prior-year ending (1120-S Schedule L — whether it is required depends on current-year criteria; confirm, don't assume)
- Book-to-tax reconciliation ties (Schedule M-1 or M-3 as applicable)
- Accumulated adjustments account rolls forward correctly (Schedule M-2)
- Shareholder allocations sum to 100% and match ownership including mid-year changes
- Every attached statement is referenced from a form, and every referenced statement is attached

### Sweep 4 — Source traceability

For each material number, point at the document. If you cannot, that is the finding.

- Every income item traces to an information return, statement, or client records
- Every information return received is reflected, or its exclusion is documented
- Deductions and credits have support at the level firm standards require
- Estimated payments and withholding trace to payment records, not client recollection
- Numbers from a client's verbal statement are flagged as such
- Amounts from bookkeeping tie to the trial balance you were given (1120-S)
- Payment-settlement information returns are **reconciled to** gross receipts, not added on top — double-counting here is common and the client will not catch it

*Gate: if a number's only source is "the software brought it forward," it has not been verified this year. Carryforward is a convenience, not evidence.*

### Sweep 5 — Reasonableness

Look at the whole return as a stranger would.

- Does the picture match what you know about this client's actual year?
- Does income support their evident circumstances?
- Large round numbers where you would expect precision?
- Anything conspicuously out of proportion to the rest?
- A category far off what similar clients show, with no known reason?
- Does the outcome match what the client was told to expect — and if not, do they know yet?
- **Would you be comfortable explaining every material position out loud to someone who asked why?**

That last question is the sweep compressed to one line. Any "no" stops delivery until resolved.

## Findings

Write findings down. A silent fix teaches the preparer nothing and leaves no record.

`Finding · Location (form/schedule/line) · Severity · Disposition · Resolved by/when`

Severity: **BLOCKER** (cannot file) · **CORRECTION** (must fix) · **QUERY** (need an answer) · **NOTE** (next year).

*Gate: nothing filed with an open BLOCKER or CORRECTION. A QUERY either resolves or converts to a documented acceptance with a stated rationale.*

NOTE items are next year's planning and chase list, free to collect now while the context is in your head.

## Worked example

1120-S, second year, prepared by an experienced preparer. Sweeps 1, 3 and 4 came back clean.

Sweep 2 found a repairs-and-maintenance line at roughly six times prior year with no explanation. Not wrong on its face — the client had bought a building. Sweep 5 then asked the stranger question: would you explain that number out loud? The work turned out to include a roof replacement, a capital item sitting in a deduction line.

Neither sweep alone would have caught it. Sweep 2 flagged the movement; Sweep 5 refused the easy explanation. **The comparison sweep finds the anomaly; the reasonableness sweep refuses to accept the first story that fits it.**

## Compliance anchors

Circular 230 §10.22 (due diligence), §10.34 (standards for returns) · AICPA SSTS §2.1 (tax return positions), §2.3 (reliance on information from others), §2.4 (use of estimates), §2.5 (departure from previous positions), §1.2 (knowledge of errors) · IRC §6694 (preparer penalties) · firm quality-management standards.

## Packs

- **Solo:** Sweeps 1 and 2 on every return, all five on anything complex. Sweep 2 is non-negotiable — it is the only one where last year does the work for you.
- **Firm:** all five with a written findings log; NOTE items harvested into next season's planning list; recurring findings by preparer reviewed at season end as a training input rather than a performance one.

## Red flags

- The reviewer opened the return without opening last year's.
- Findings were fixed but not logged.
- A QUERY was closed because the deadline arrived, not because it was answered.
- Sweep 5 is being skipped as "soft" — it is the only sweep that catches a correct-looking wrong answer.
- The preparer and reviewer are the same person and nobody has said so out loud.
- Client was told an expected outcome weeks ago and the return no longer matches it.

## Common Rationalizations

| Rationalization | Reality |
|---|---|
| [D] "The software would have caught it." | Software validates internal arithmetic. It has no view on whether last year's rental disappeared. |
| [O] "It ties out, so it's fine." | Sweep 3 is one of five. A return can be perfectly self-consistent and wrong at the source. |
| [O] "It's an experienced preparer." | Experience shifts the error class from arithmetic to carryover and judgment — exactly what Sweeps 2 and 5 target. |
| [D] "Reasonableness is subjective." | It is judgment, which is what a reviewer is for. The test is operational: can you say it out loud to someone who asks why. |
| [O] "We're out of time." | Then extend. Filing with an open BLOCKER converts a time problem into a liability. |
| [O] "The client approved it." | Client approval is not review. They are approving a document they cannot audit. |

## Verification

- [ ] All five sweeps run as separate passes, in order
- [ ] Prior-year return open during Sweep 2
- [ ] Every material change explained in one sentence
- [ ] Form 7203 considered for every shareholder who triggers it
- [ ] Every material number traced to a source, or flagged as untraced
- [ ] Findings logged with severity and disposition, not silently corrected
- [ ] Zero open BLOCKER or CORRECTION at filing
- [ ] NOTE items captured for next year

Related: [checklist] for the mechanics of a discipline that survives fatigue · [cpa-doc-chase] for the items Sweep 4 finds missing · [tax-prep-8867-due-diligence] for the Sweep 1 due-diligence gate in full · [tax-prep-pre-file-audit-premortem] for the adjacent question — this skill asks whether the return is right, that one asks what an examiner would attack · [confirmation-bias] for why reading top-to-bottom only confirms.

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*Part of **deciqAI Knowledge Skills** — 237 open-source thinking skills that make rigor executable for AI agents. The same skills power every deciqAI agent, which runs them autonomously to operate your company. **See it run → https://www.deciqai.com/s/cpa-return-review** · Built by deciqAI · github.com/deciqAI · Contributions welcome.*

*Agents: latest version & machine-readable metadata → https://www.deciqai.com/s/cpa-return-review.json*