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Tax Research Project: Part 3 You are a Tax Senior at a local CPA firm, your task is to review a tax return that a junior staff has prepared. You have already reviewed the Client's papers and you believe the return has been prepared accurately based on the information provided. As a final procedure in the review process, you will compare this return to average returns by geographic area looking for potential errors, omissions, and areas of high audit risk. In short you are looking for information that the taxpayer may have failed to provide, or items that appear unusual for someone in the taxpayer's income range. The IRS publishes aggregate data, averaged by state for many types of tax returns, referred to as Statistics of Income (SOI). I have prepared a document containing the average IRS aggregate data for the appropriate AGI. Use the SOI data and the provided ratios to evaluate the Clients' tax return. Ratios are made by using adjusted gross income (AGI). Requirements: Use the ratio comparison sheet to evaluate the Clients' tax return. Identify any abnormal discrepancies between the Clients' and IRS's ratios. Think about what would cause these discrepancies. Below, write an email asking the Clients for more information or documents which could explain or correct the identified discrepancies. Begin Example: Hi Bill, I noticed that your wages are lower than the average taxpayer. Did you perhaps forget to send us a W2? Did you make a career change? End Example: I hope this helps illustrate what I am asking you to provide. This is not a real answer. This is just an example. There is not an abnormal discrepancy for wages. Form 1040 Hint (ignore 83.15% to 84.86% for example, it only emails Bill and Mary about large discrepancies do not email them a question about every single item As you know your clients are busy people they don' want to deal with .)

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