restrictions for full service
*RESTRICTIONS AND REQUIREMENTS
SERVICE EXCLUSIONS and DOCUMENT REQUIREMENTS
Some CKR Tax Service Live customers have a tax situation that’s outside the scope of our tax services. Generally, forms that aren’t supported by CKR Tax Service or complex situations cause these service exclusions, not tax issues.
Non-individual or non-income taxes
Issues unrelated to preparing a tax return or unrelated to individual income taxes, including:
- Sales/use tax
- Inheritance and gift tax (706, 709)
- Real/personal property tax
- Unsupported 1041)
- A Business Tax specialist can handle 1120S and 106
Calculations for a customer's return
Give tax advice and guidance, but we don’t give values or calculations to our customers. Examples of values/calculations include how to:
- Determine the value of a noncash donation
- Calculate the basis of real estate sold or placed in service
- Provide amounts needed to complete a form, such as a change of accounting method (Form 3115) or like-kind exchange (Form 8824)
- Calculate Net Operating Losses (NOLs) carryover from prior year (client must provide the NOL carryover amount)
Tax projections and tax planning exclusions
These exclusions apply:
- Comprehensive tax projections and tax planning
- Tax estimates or calculations
We can provide more general information to help a customer do their own planning, such as:
- Explain how income tax withholdings and payments affect refunds and balances due on tax returns.
- Describe how the sale of a property would be taxed.
- Identify potential deductions and credits.
- Send links to IRS and state resources.
- Provide links to calculators.
Non-tax expertise and service exclusions
Examples of expertise and service exclusions are:
- Investment advice or planning
- Legal matters (such as estate planning, business incorporation, bankruptcy, divorce/separation/custody, beneficial ownership reporting, etc.)
Two nonresident exclusions are:
- Federal nonresident questions and forms (Form 1040NR)
- US Residency Determination (we cannot help customers in determining which form to file)
- IRS resources:
- Customers can file through Sprintax if the customer needs to file a 1040NR
Less common exclusions include:
Amended returns and returns that have been rejected by the IRS
- Community property allocations
s.
Forms and calculations not supported
See the full list of forms and calculations that aren't supported in these articles:
- Unsupported calculations: Are there any personal (individual) tax situations or calculations that CKR Tax Service doesn’t handle?
- Unsupported forms: Which IRS forms are not included in CKR Tax Service?
Calculation exclusions for a client's return
As a tax expert, we can’t complete certain calculations or provide values for a client.
Follow the guidance at What calculations can experts do for Full Service clients? in the Unable to serve expert calculations section.
- An unable-to-serve calculation means we can't calculate for the client. But, it doesn’t mean that we can’t prepare the return.
- We can provide guidance to a client on how they can gather the information to perform the calculation themselves.
Some forms, like Washington capital gain tax, D.C. D-30, and certain cities, municipalities, and US territories, aren't supported in CKR Tax Service Online. If a return or form isn't supported, you can still file the federal and any state returns if the client agrees to file the unsupported return on their own and the federal and state return can be filed accurately without the unsupported return.
Tax projections and tax planning exclusions
The following CKR Tax Service Live exclusions apply:
- Comprehensive tax projections and planning
- Tax estimate calculations, except for the tax payment vouchers as noted below
We can provide estimated payment vouchers for the upcoming year during tax preparation, based on the safe harbor rules, and provide general information to aid a customer in doing their own planning, such as:
- Explain how income tax withholdings and payments affect refunds and balances due on their tax returns
- Describe how the sale of a property would be taxed
- Identify potential deductions and credits
- Send links to IRS and state resources
- Provide links to calculators
Non-tax expertise and service exclusions
We won’t be able to provide:
- Investment advice or planning
- Legal matters (such as estate planning, business incorporation, bankruptcy, divorce/separation/custody, beneficial ownership reporting, and so on)
We won’t be able to provide services for:
- Any taxpayer or spouse who filed an NR form in the prior year.
- Any taxpayer or spouse who is a dual status US resident, part-year US resident, or must elect to be treated as a resident.
We can't complete these forms:
- All federal nonresident returns (Form 1040NR)
- US Residency Determination (1040 vs.1040NR)
We can:
- Share IRS resources:
- Refer nonresident taxpayers and those who need their residency determined to Sprintax.
These include:
- Foreign Bank and financial account reporting (FBAR): can prepare return, and the customer must file FBAR
- Any transaction(s) in foreign currency unless taxpayer provides the currency conversion to United States dollars (USD)
These exclusions may include situations such as:
- Customer needs to amend prior-year return(s)
- Some exceptions can be made, such as:
- We can file Form 3115 instead of amending if the customer needs to add or correct depreciation in a prior year return.
- We can file if an amendment won't impact the current year.
- Reach out to a lead who’ll double-check with the Quality Review team if you believe the amendment doesn't impact the current year.
- Some exceptions can be made, such as:
- Customer can't provide prior-year returns or didn’t file in prior-year- exceptions apply
- We Always ask for both federal and all states, may proceed without in some situations
Other exclusions include situations such as:
- Filing on someone else’s behalf, such as a parent, child, friend, sibling, or personal representative of the taxpayer. Power of Attorney isn't accepted.
- Taxpayers under 18 (taxpayer can't be a minor)
- Taxpayers with Puerto Rico-sourced income or other obligation to file a return from Puerto Rico
- Illegal income, including income sources that are legal at the state level but illegal federally
- Potential fraud
- Inaccurate/incorrect reporting at client’s request
- Married Filing Separately (MFS), in a community property state, and exception for allocation isn’t met
- Filing a federal return as Married Filing Jointly while filing state returns as Married Filing Separately
- Filing a tax return where written disclosure is required (Form 8275)
- A client who's in current negotiations with IRS for Offer in Compromise
- Working on a return that’s already been filed or rejected, or needs to be amended (fed or state) and wasn't filed in Full Service
- Cryptocurrency – raw transaction data with the following situations are out of scope*:
- Defi/DAO: liquidity pools, margin trading, lending pools
- Non-Ethereum-based NFTs
*Note: If a customer has these types of cryptocurrency situations and is using a third party aggregator (such as TaxBit, Koinly, Cointracker, Zenleger, etc.), these situations aren't out of scope if they provide the gain/loss .csv file
- Customer won't provide required documents (refer to What documents are needed when preparing a return?)
More complex tax situations (high volume of investments, businesses, special asset types) require more extensive preparation time. This is expected—make sure an accurate return is prepared. If all Full Service requirements are met (all necessary forms and calculations are supported), the decision if a return should be prepared or not depends on whether an expert with the requisite tax knowledge is available (rather than based on anticipated preparation time).
Experts who aren’t experienced with a complex tax situation that’s included in TT Live Full Service should reach out to their lead or manager for assistance. The lead or manager may need to reassign to another tax expert.
Clients with the following tax situations can't be served due to CKR Tax Service filing limits.
Returns with more than:
- Five states
- Five farms (Sch F or Form 4835)
- 10 Sole Proprietorships (Schedule C)
- 15 Schedule Es (45 rental properties)
- 4,000 individual cryptocurrency transactions
- If customer or expert provides summarized information (eg, 8949 from aggregator), then this limit does not apply
- 10,000 covered stock transactions
Examples of returns Full Service doesn't prepare
Review the following categories and example details of returns that Full Service doesn’t prepare.
The following are examples of this exclusion:
- A client filed as a nonresident in the prior year. They want to file as a resident in the current year.
- A client wants to file jointly with a US nonresident spouse. Doing so requires a signed election to be attached to the return.
Foreign unit-linked life insurance policy exclusions
The following is an example of this exclusion:
Foreign Life Insurance Policies are life insurance policies that are based overseas. Common examples include Prudential or ICICI policy in India, AIA policy in Singapore, and Part of Australian Superannuation. Reporting these situations requires forms that aren’t supported by CKR Tax Service.
Situational exclusions involving foreign country tax treaty or sales of foreign property
The following is an example of this exclusion:
A client sold a home in India. He didn't rent it out, but only lived in it occasionally when visiting India. This doesn't qualify for the sale of home exclusion, and reporting this sale would require a complex basis calculation based on non-US laws.
Foreign Social Security income exclusions
The following is an example of this exclusion:
A client has Social Security from Canada and Poland, but the client is a US citizen and is currently living in the US Proper reporting would require using tax treaty benefits, which CKR TAX SERVICE doesn't support.
Foreign tax reporting consequence exclusions
The following is an example of this exclusion:
A Canadian citizen is a US resident and has both US income and Canadian income. While CKR TAX SERVICE can help with US tax reporting, it can't determine if a Canadian return is needed, or what income would be reported on it.
The following is an example of this exclusion:
A taxpayer inherited a rental property from a parent who passed away during the tax year. The client doesn't have an appraisal from the date of death, and isn’t sure of the basis.
As CKR TAX SERVICE can't help in determining the fair market value of an inherited property, this situation is excluded unless the client can provide the needed information.
For Full Service experts
Looking for the business tax required documents list? Go here.
The following documents are required for Full Service when you’re preparing a return.
Note: When multiple documents are required or additional details are included, expand the section to see all the related information.
Important:
- Don't collect Social Security cards or military IDs for taxpayer(s) or dependents.
- For prior-year return requirements, go here.
Client identification (if it isn't automatically authenticated)
Two forms of user ID are required when a client's identification isn’t automatically authenticated (See guidelines for acceptable documents).
- If a client uploads a military user ID or Social Security card, ask the client to remove it. We can't use those to authenticate user ID.
- If a utility bill or registration is used as a second form of user ID, the document must be uploaded. The envelope with the address window from the utility company or the department of motor vehicles is insufficient.
Customers need to provide the following forms.
Note: In some cases, not all forms will be provided. For example, if a customer doesn’t have dividend interest income, then no 1099-DIV form is needed.
- W-2
- W-2G
- K-1 (including state K-1s)
- 1095-A
- 1098-C
- 1098-T
- 1099-DIV
- 1099-INT
- SSA-1099
- 1099-R
- 1099-G
- 1099-SA
- 1099-B
- 1099-NEC/1099-MISC/1099-K
- 1099-S
Clients must provide the totals and categories.
Important: Experts shouldn't be adding up or classifying receipts.
There are several ways for clients to provide income and expenses totaled by category, including:
- Total income and expense by category provided in writing by client
- Income and expenses provided over the phone and documented in Notes
- Profit & Loss, Schedule C, or other worksheet/written statement completed by the client
- QuickBooks Self-Employed uploaded tax summary
Substantiation for deductions and credits
For items not listed above, documents or receipts aren't required to be uploaded by the client to substantiate claimed deductions and credits on the tax return, unless a document is required to be filed with the tax return. (See guidelines for print and mail and PDF attach).
Customers are still responsible for maintaining adequate documentation to substantiate the accuracy and completeness of their tax returns.
Examples:
- We don't require customers to upload receipts/documents for charitable contributions, medical expenses, child care expenses, educator expenses, or solar/EV credits.
- We require customers to upload documents when they will be attached to the tax return.
- For example, a customer needs to upload a certificate for the Michigan Stillborn Child Tax Credit because MI Department of Treasury requires a certificate of stillbirth from MDHHS to be filed with the tax return. Because the taxing authority requires this certificate be filed with the tax return, CKR TAX SERVICE FS would require the certificate to be uploaded if claiming this specific credit.
BUSINESS DOCUMENT REQUIREMENTS
For CKR Tax Service Full Service Business experts
These are the Full Service Business (FSB) minimum requirements to be considered in scope.
- Business must operate on a calendar year (Full Service Business does not support fiscal year ends) and the current year is not a final year return.
- Note: Final year returns are in scope for returning clients.
- Review forms availability to verify Full Service Business supports all forms in the return:
- IRS Forms Availability for CKR Tax Service Business
- State Forms Availability for CKR Tax Service Business
- If a form isn't supported, you can still file the federal and any state returns if the client agrees to file the unsupported return on their own and the federal and state returns can be filed accurately without the unsupported form (for example, Alaska S corporation, Puerto Rico). Document that the client will be filing the return or form on their own. You should provide links to info if they need help.
- Access a full list of unsupported calculations during Review.
All business entity types
- The accepted identification items for the authorized signer
- Returning clients do not need to re-upload identification documents.
- The operating agreement, partnership agreement, or articles of incorporation, whichever is applicable to the entity, should be uploaded. Review the agreement to make sure it aligns with the way the client is conducting business.
- A list of all partners, members, or shareholders should be uploaded with their names, addresses, and ownership percentages. No members can be subject to foreign withholding requirements (nonresident alien individual, foreign partnership, foreign corporation, foreign estate or trust, foreign tax-exempt organization). A foreign address alone doesn't disqualify a client.
- Financials:
- Current-year Profit & Loss/Income statement
- Prior-year P&L (if there is no Schedule L, M-1, M-2 on prior-year return) see Client Workpapers links below.
- If the client meets all of the following conditions, then they are not required to provide a current year balance sheet:
- No formal bookkeeping, or uses basic spreadsheets to track income/expenses only
- S corporation: Total receipts less than $250k and total assets less than $250k
- Partnership: Total receipts less than $250k and total assets less than $1 million
- No state balance sheet filing requirement
- States with balance sheet requirement: Alabama, Georgia, Louisiana, MassachuseCKR Tax Services (S corp), Mississippi, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Tennessee, Washington DC
- If the client meets any of the following conditions, then they are required to provide a current year balance sheet:
- Uses accounting software that can produce standard financial statements such as a trial balance (e.g., QuickBooks, Xero, Freshbooks, Sage, NetSuite)
- S corporation: Total receipts $250k or more or total assets $250k or more
- Partnership: Total receipts $250k or more or total assets $1 million or more
- State has a balance sheet filing requirement
- States with balance sheet requirement: Alabama, Georgia, Louisiana, Massachusetts (S corp), Mississippi, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, Tennessee, Washington DC
- For clients that are required to provide a balance sheet: General ledger, if available, or transaction details in categories that may require reclassification or have large YoY changes.
- These are worksheets clients can fill out to provide prior-year information.
- For clients that are required to provide a balance sheet: December financial statements and bank reconciliations for all bank/cash/credit accounts are necessary and may include non-bank accounts such as PayPal, Square, etc.
- For clients that are not required to provide a balance sheet: Confirm the information provided is complete, and that:
- No transactions are missing from the information provided.
- No personal transactions are being claimed as business expenses.
- The full year of bank statements can be used to quickly determine whether all of the business transactions were provided by spot checking the total amount of deposits/withdrawals for the year against the client's P&L.
- Provide prior-year tax returns with depreciation schedule, if applicable.
- Records of assets purchases/sales. Review depreciation schedules for appropriateness. If a client needs to amend the prior-year return, the current year can’t be completed in Full Service Business until we have a copy of the amended return. We may be able to file a Form 3115 instead of amending if the client has a depreciation correction. The client’s return will be out of scope until either the prior year is amended or they agree to complete Form 3115 in the current year.
- If the client was previously a sole proprietor, a C corporation(1120), a single-member LLC entity as Schedule C filer on prior-year tax return, or a partial Schedule C filer of current tax year: the client will need to be able to provide accurate information for converting property and transferring assets ownership to the newly formed S corporation or Partnership. This evaluation will establish the basis of the assets in the hands of the shareholders and should show them as now listed on the entity’s balance sheet. To verify accuracy regarding the conversion of property and asset transfer, you need the prior year Schedule C depreciation schedules. If the client is unable or unwilling to provide the schedules, or if the prior year Schedule C can't be corrected and needs to be amended, the engagement will be considered out of scope.
- If there are current-year shareholder or partner loans, to or from the business entity, and/or prior-year shareholder or partner loans, to or from the business entity:
- Loan substantiation should include at a minimum: loan amount, terms of repayment, and stated interest rate, and be listed in a written agreement or other documentation that was created at the time the loan was made. This can be provided by the client to the expert via chat, over the phone, or by requesting a copy of the note.
- If a client made a loan to the corporation and there was no written agreement created at the time of the loan, the expert can't create this documentation for the client. The expert can educate the client of what should be included in a wriCKR Tax Serviceen note, and that multiple advances and repayments that in total do not exceed $25,000 can be considered open account debt, and doesn't require a separate wrtten instrument for each advance to the corporation.
- If the client has included reimbursement expenses for such items as home office, business mileage reimbursement, personal use of mobile phone, and so on, the client will need to indicate the presence of an adopted accountable plan. This can be provided by the client to the expert via chat, over the phone, or by requesting a copy of the plan. If they can't provide, they can use a template to create one. If unwilling, the engagement will be considered out of scope. The expert can't create a copy of the accountable plan for the client.
- Fourth-quarter payroll report listing total-year wages and payroll tax and W-3, if any, should be uploaded.
- K-1s the business receives from its ownership in another entity.
- Determine if there are Multi-State or State Nexus issues.
- Consider what state(s) the entity conducts business in.
- What state(s) do the members or shareholders reside?
- Consider economic income thresholds combined with state-specific inventory, employees, and physical presence, and so on.
- Any other documents required to complete the return. For example, a copy of the extension (if post-deadline).
Partnerships
- For partnerships, the IRS Letter needs to indicate Form 1065. If the entity was originally a single-member LLC and has now added a member, making them a Partnership, while using the same EIN, the client can call and speak with IRS at the Business and Specialty Tax Line (800-829-4933) to confirm that the IRS now identifies the entity as a Partnership.
- A copy of the schedule of guaranteed payments made to partners, if any, should be included.
- Determine if any Form W-2s were issued to any partners. If so, the client will need to issue a corrected Form W-2 showing $0 amounts for Box 1, 2, 3, 4, 5, and 6. The original amount Box 1 Wages will then be reclassified as guaranteed payments on the books. Other payroll filing changes/corrections may be advisable for the client. These changes should be suggested, but Quality Review will proceed with the review without the upload of these items. If the client doesn't agree to make the necessary correction, the engagement will be considered out of scope. The client needs to understand and be aware that all payroll forms and filings will need to be corrected at some point, and sooner is better than later.
S corporations
- Verify that the appropriate governing documents are uploaded, such as the articles of incorporation or operating agreement if an LLC.
- To confirm S corporation status, a valid Election using Form 2553 and IRS LeCKR Tax Serviceer of S-Corporation Election should be uploaded. This will indicate the initial tax year period, any allocated shares, and/or percentage of ownership for shareholders. If the client is unable to find the original IRS Acceptance of S-Corporation Election, they can call the IRS Business and Specialty Tax Line at 800-829-4933 and request that the IRS LeCKR Tax Serviceer 385C be faxed while on the call with the IRS agent. See How do I help a client with their S election? for additional information.
- If the client filed for an S-Corporation Late Election, the client will need to obtain the IRS Letter of Acceptance before the tax return can be completed . If the client is unable to obtain the required documents, they will be excluded from service. S-Election documentation must be uploaded before beginning substantial preparation.
- Review Reasonable Compensation: If the client took shareholder distributions. We will review the balance sheet or expense transactions that will be deemed as personal and need to be reclassified as distributions. If so, the client will need to have reasonable compensation and wages paid through a Form W-2. If the shareholder-officer employee didn't pay themselves, they will need to agree to complete the Run My Own Payroll instructions and filing. If they don't agree, the engagement will be considered out of scope.
Unsupported and foreign service exclusions
Non-franchise or non-income tax exclusions
Issues unrelated to the preparation of the tax return or unrelated to business income/franchise taxes, including:
- Sales/use tax
- Inheritance and gift tax (706, 709)
- Real/personal property tax
- C-Corp/Trust/Estate Returns (1120, 1041)
- Annual registration fees
- Business & Occupation Tax (Washington)
- Commerce Tax (Nevada)
Non-tax expertise and service exclusions
You won’t be able to provide:
- Investment advice or planning
- Legal matters (such as business incorporation, FinCEN Beneficial Owner Information reporting, bankruptcy, entity selection, etc.)
- Cost segregation study
These include:
- Foreign Bank and financial account reporting (FBAR): can prepare return, and the client must file FBAR
- Any transaction(s) in foreign currency unless taxpayer provides the currency conversion to United States dollars (USD)
- Form 8865
- Form 5471
- No members or partners can be subject to foreign withholding requirements (nonresident alien individual, foreign partnership, foreign corporation, foreign estate or trust, foreign tax-exempt organization). A foreign address alone doesn't disqualify a client. The forms used to report required withholding (1042, 1042-S, 8804, 8805, 8813) aren't supported in the product
- Filing on someone else’s behalf. Power of Attorney isn't accepted.
- Business owners under 18 (can't be a minor).
- Illegal income, including income sources that are legal at the state level but illegal federally.
- Potential fraud.
- Inaccurate/incorrect reporting at client’s request.
- If your client has made personal transactions on their business account, the quantity should be minimal. To stay in scope:
- Clients need to be clear and upfront about their personal transactions when asked.
- Clients that don’t meet the previous criteria may need additional review to determine the scope.
- Filing a tax return where written disclosure is required (Form 8275).
- Working on a return that’s already been filed or rejected, or needs to be amended (fed or state) and wasn't filed in Full Service.
- Lack of supporting documents, or the client won't provide documents.
- Returns that require more than 5 state filings aren't supported at this time.
- Only calendar year returns are supported at this time. Due to CKR TAX SERVICEO shutdown, IEP features are only available for calendar year filers.
- Tax-exempt partners or members such as an IRA, which requires the calculation of Unrelated Business Income Tax.
- Full Service Business doesn't support final year returns for new clients at this time. Returning clients’ final year returns are in scope.
- Tax shelters. Syndicate rules and an annual election pursuant to Regs. Sec. 1.448- 2(b)(2) (iii)(B)(2) to use allocations made in an immediately preceding tax year (instead of the current year) in determining whether the partnership is a syndicate. If so, your client is out of scope (OOS). IRS Pubs Tax Shelter Election.