How to review outsourced tax returns

Section 10.22(b) presumes due diligence when a practitioner relies on another person’s work product, but only if the practitioner used reasonable care in engaging, supervising, training and evaluating that person. A documented review process is the evidence of that care.

Section 10.36 places a duty on anyone with principal authority for overseeing a firm’s practice to take reasonable steps to ensure the firm has procedures for compliance. An outsourcing review workflow is one of those procedures.

Not every return needs the same depth. Set tiers by complexity and by the provider’s track record on that return type, and move a return type up a tier when review notes start to climb.

• Tier 1: completeness and tie-out only
• Tier 2: add analytical review against prior year
• Tier 3: full review of positions, elections and statements

When the client’s books are in HelloBooks, the reviewer can compare the return to the profit and loss, balance sheet and 1099 vendor totals directly, instead of trusting the provider’s summary. Differences become review notes with a clear source.