15 Questions Your Tax Preparer Should Have Asked You

Quick answerMost return-level surprises begin with a change: a job, a move, a marriage, a birth, a sale, a new side income, a retirement account decision. Documents report the transaction; the change explains why the transaction happened and what else it touched.

I gave them everything.

You probably did. Documents are the easy part — they arrive on their own, in January, with a form number in the corner. The harder part is the year around them.

A return is a description of a year. Forms describe the pieces of the year that a third party was required to report. Everything else has to be said out loud.

That is why the first question is deliberately wide. It is not looking for a number. It is looking for the sentence that starts with "oh, and also…".

• Marriage, separation, or divorce
• A birth, an adoption, or a dependent who moved in or out
• A move — across town, across a state line, or across a border
• A new job, a lost job, a second job, or self-employment
• A house bought, sold, refinanced, or rented out
• An inheritance, a gift, a settlement, or a large one-time payment
• A retirement account moved, tapped, converted, or rolled over

None of those are unusual. All of them can change what belongs on a return, and several of them can change what belongs on next year’s return too.

Quick answerFiling status, dependency, and several credits depend on household facts — who lived with you, for how long, and who supported them. Those facts rarely appear on any tax form, so they have to be asked.

No employer reports your household. No brokerage reports your household. The only source is you.

Dependency and filing status rules turn on relationship, residency, age, support, and in some cases who else could claim the same person. The IRS publishes the tests in plain language, and they are more specific than most people expect.

My daughter moved back in for eight months.

That sentence can matter. So can "my mother lives with us," "my son turned 17," "we share custody," and "my partner and I both pay for the apartment."

Certain credits also carry specific paid-preparer due-diligence requirements, which is one of the reasons careful preparers ask household questions in writing rather than assuming last year’s answer still holds.

¹ IRS Publication 501, Dependents, Standard Deduction, and Filing Information² IRS, Due Diligence Requirements for Paid Preparers (Form 8867)

Quick answerMultiple jobs, job changes, bonuses, or large changes in household income can cause withholding to differ from your eventual tax liability. Payroll generally calculates withholding from the information available to that employer; your tax return looks at the broader household picture.

I sent you both W-2s.

We know. That isn’t quite the question.

The W-2 tells us what was paid and what was withheld. It does not tell us that the first job ended in April, that the second job started in June, or that each payroll system was withholding as though it were the only income in the household.

Withholding is an estimate made by someone with partial information. Liability is a calculation made at the end of the year with all of it. When those two drift apart, the difference shows up as a balance due or a refund — and sometimes as an underpayment penalty.

Withholding is not liability. It is a prepayment against a number nobody has calculated yet.

Severance, a signing bonus, accrued PTO paid out, or a bonus withheld at a flat supplemental rate can all widen the gap in either direction.

Withholding is not tax liability →Marginal rate vs. effective rate →

³ IRS Publication 505, Tax Withholding and Estimated Tax

Quick answerIncome can be reportable whether or not a form arrives. Freelance work, consulting, tips, side projects, platform payouts, and cash jobs may create self-employment reporting and, above certain thresholds, self-employment tax.

I’m not self-employed.

That is exactly why we may ask:

Did anyone pay you for work outside your regular paycheck?

People who would never describe themselves as self-employed still edit a manuscript, shoot a wedding, consult for a former employer, sell on a platform, tutor, drive, or get paid to speak. The label is not the trigger. The activity is.

Reporting thresholds for information returns have moved in recent years, and a payer’s obligation to send you a form is a separate question from your obligation to report income. A missing 1099-NEC or 1099-K does not make income disappear.

• Payment apps and marketplaces that settle income to you
• Work invoiced directly to a client or a former employer
• Honoraria, stipends, and referral fees
• Tips, and cash paid for occasional work

The follow-up question matters as much as the first one: what did it cost you to earn it? Ordinary and necessary business expenses belong in the same conversation.

What is self-employment income? →What is a business expense? →

⁴ IRS, Self-Employed Individuals Tax Center⁵ IRS, Understanding Your Form 1099-K

Quick answerDigital asset activity can be reportable even when nothing was converted to dollars. Selling, exchanging one asset for another, spending crypto, and receiving it as payment or as a reward are all events the IRS treats as potentially taxable, and every return asks a digital asset question.

I didn’t cash anything out.

That is a real answer to a different question. Trading one token for another is generally a disposition. So is paying for something with crypto. So, in many cases, is receiving it.

Basis is where these conversations usually get difficult. Assets that moved between wallets, exchanges that shut down, staking rewards, airdrops, and transfers between platforms can leave the acquisition history scattered across places that never talk to each other.

Broker reporting for digital assets has been phasing in, which means some history is now reported to the IRS and some history still lives only with you. Both halves belong on the return.

The exchange knows the transaction. It does not always know your basis.

⁶ IRS, Digital Assets

Quick answerProceeds tell us what you received. Basis helps determine how much of it is gain. When shares were inherited, gifted, acquired through equity compensation, reinvested, or transferred between brokers, the reported basis may be incomplete or absent.

The 1099-B has everything.

Sometimes it does. Sometimes a column says "noncovered," or the basis is blank, or the basis is technically correct and still not the number that belongs on the return.

How you acquired the shares is a tax fact, not a footnote. Inherited shares, gifted shares, shares from a dividend reinvestment plan, shares transferred from another brokerage, and shares that came from an employer plan each carry their own history.

The acquisition path matters. The acquisition date matters.

Holding period drives whether a gain is short-term or long-term, and wash sale activity across accounts can adjust the answer again.

What is QSBS? Section 1202 explained →What is a capital gain? →

⁷ IRS Publication 550, Investment Income and Expenses

Quick answerEquity compensation can produce two separate tax stories: compensation income when shares vest or options are exercised, and capital gain or loss when the shares are later sold. Reported basis on a broker statement sometimes omits the compensation already included in wages.

It was all on my W-2.

Often part of it was. RSU vesting is generally wages. A disqualifying disposition of ISO shares can add compensation income. The sale of the shares afterward is a separate calculation.

Compensation first, capital gain or loss later.

Exercising incentive stock options and holding the shares can also matter under the Alternative Minimum Tax rules, even in a year with no sale and no cash.

The practical failure mode is double taxation by accident: income already taxed as wages, taxed again as gain because basis was reported without it. Reconciling basis to what already ran through payroll is part of the work.

• Grant, vest, exercise, and sale dates
• Whether options were ISOs or NSOs
• Whether shares were sold to cover taxes
• Whether an ESPP purchase was qualifying or disqualifying
• Whether any Section 83(b) election was made

RSUs vs. ISOs: how they’re taxed →What is ordinary income? →Equity compensation at PRISM →

⁸ IRS, Employee Stock Options and Stock Purchase Plans (Publication 525)

Quick answerState tax generally follows both residency and where work is performed. A move mid-year, remote work across a state line, or time spent working in another state can create part-year, nonresident, or multi-state filing obligations that no federal form reports.

I changed my address.

Great. Now the annoying part.

When? And where were you actually working?

Those are two different questions and they can have two different answers. Residency is about where you lived and what ties you kept. Sourcing is about where the work was performed. A single job can generate income taxed by more than one state.

Payroll withholding often keeps pointing at the old state long after the boxes are unpacked. Credits for taxes paid to another state exist to prevent the same income from being taxed twice, but those credits have to be claimed on the right returns in the right order.

• The exact date of the move
• Days worked in each state, if the work crossed a line
• Whether the employer withheld for the correct state
• Whether a home, license, registration, or lease stayed behind

Quick answerA Form 1099-R reports that money left a retirement account. It does not always establish what happened next. Rollovers, conversions, hardship withdrawals, loans that defaulted, and returns of excess contributions are different events with different tax consequences.

I got a 1099-R.

Understood. The question underneath it is what the money was doing.

A direct rollover from one plan to another can be reportable and not taxable. A Roth conversion is generally taxable now by design. An early distribution can carry an additional tax unless an exception applies. A distribution code is a claim about the event, and codes are not always right.

The form reports the movement. The story determines the tax.

Required minimum distributions, inherited accounts, and 60-day rollovers each add their own timing rules — and timing is usually the part that cannot be fixed after the fact.

⁹ IRS, Retirement Topics — Exceptions to Tax on Early Distributions¹⁰ IRS Publication 590-B, Distributions from IRAs

Quick answerEstimated payments are prepayments toward a liability that is still being calculated. The amount, the timing, and the reasoning all matter, because underpayment penalties are generally assessed quarter by quarter rather than on the year as a whole.

But taxes came out of every paycheck.

Withholding and estimated payments are both prepayments, but they behave differently. Withholding is generally treated as paid evenly across the year. An estimated payment is credited when it was made.

That difference is why two taxpayers who paid the same total can end the year with different penalty exposure. Safe harbor rules provide a floor, but meeting a safe harbor does not mean the balance due is zero — it means the penalty may be avoided.

The useful version of this question is not "what did you pay." It is "what were you paying against."

Underpayment penalty calculator →Safe harbor and still owing →

¹¹ IRS, Estimated Taxes

Quick answerNotices carry deadlines. A CP2000 proposing changes, a balance-due notice, an identity verification letter, or a state adjustment can affect the current return, a prior year, or both — and response windows are usually measured in weeks.

I thought it was junk mail.

It happens constantly. Envelopes get set aside, especially when the notice concerns a year that already felt finished.

Some notices are informational. Some propose a change and give you a window to disagree. Some are the last step before collection activity. The difference is stated on the notice, usually in small type, near a date.

A notice about a prior year can also change the current year — through carryovers, estimated payment credits applied to the wrong period, or an adjustment that ripples forward.

Common IRS notices, explained →

¹² IRS, Understanding Your IRS Notice or Letter

Quick answerForeign accounts, foreign pensions, foreign property income, and certain foreign investments can create reporting obligations that are separate from whether any tax is owed. FBAR and Form 8938 are information reports with their own thresholds and penalties.

It’s a small account I opened when I lived there.

Size matters for thresholds, not for the question. FBAR reporting is triggered by aggregate account values over a threshold at any point in the year, and it is filed with FinCEN rather than on the tax return itself.

A tax-reduction provision is not automatically a reporting exemption.

Income excluded or offset by a credit can still be reportable. Foreign pensions, inherited accounts abroad, signature authority over an employer’s foreign account, and foreign mutual funds each raise their own questions.

FTC vs. FEIE: the question is bigger than it looks →

¹³ FinCEN / IRS, Report of Foreign Bank and Financial Accounts (FBAR)¹⁴ IRS, Comparison of Form 8938 and FBAR Requirements

Quick answerSeveral tax attributes carry forward: capital loss carryovers, passive activity losses, charitable contribution carryovers, credit carryforwards, AMT credits, and basis records. A carryover that is dropped in one year is often difficult to reconstruct later.

You have last year’s return.

A PDF of last year is a summary, not always a complete set of records. Carryover schedules, basis worksheets, and state-specific attributes sometimes live in the preparer’s software rather than the delivered copy.

This is one of the most common quiet losses when a taxpayer changes preparers: nothing looks wrong on the new return, because the missing attribute simply is not there.

• Capital loss carryovers, federal and state
• Passive activity and at-risk loss carryforwards
• Charitable contribution carryovers
• Credit carryforwards, including AMT credits
• Depreciation schedules and accumulated basis

Quick answerYou are the only person who knows what your year actually looked like. Reviewing the return before signing — names, dependents, income sources, bank details, state returns — catches errors that no software validation can flag.

You’re the tax professional.

True. And you are the only witness to the year. Both are needed.

A preparer can verify internal consistency. A preparer cannot independently know that a 1099 arrived for an account you closed in March, or that a dependent’s address changed, or that the direct deposit account on page two is the one you stopped using.

Signing a return is a statement that, to the best of your knowledge, it is true and complete. A slow read before signing is part of the process, not a lack of trust.