Income Reporting & Adjustments

Income Reporting & Adjustments

This lesson provides required training on proper income reporting and allowable income adjustments under federal tax law. Accurate income reporting is essential to determining correct tax liability, credit eligibility, and refund accuracy.

All preparers must complete this lesson before reporting income or applying adjustments on any client tax return.

Purpose of This Lesson

The purpose of this lesson is to ensure tax preparers can correctly identify all sources of taxable and non-taxable income, apply required reporting rules, and properly calculate adjustments to income in accordance with IRS regulations.

This lesson reinforces accuracy, consistency, and compliance when handling client income information.

What This Lesson Covers

This lesson includes instruction on:

• Common types of taxable income and how they are reported

• Non-taxable income and reporting exclusions

• W-2 income, 1099 income, and other earned income sources

• Interest, dividends, and investment income

• Retirement income and distributions

• Other income categories requiring disclosure

• Adjustments to income and eligibility requirements

• Required documentation to support reported income and adjustments

• Common income reporting errors that lead to IRS notices or audits

All examples and procedures align with current federal tax law and approved office standards.

Preparer Responsibilities

When reporting income and applying adjustments, preparers are required to:

• Ask complete income-related questions during the client interview

• Review all income documents carefully before entry

• Ensure all income is reported accurately and completely

• Apply adjustments only when eligibility requirements are met

• Maintain detailed notes and documentation within the client file

Income may not be omitted, estimated, or altered to increase refunds or eligibility for credits.

Compliance Notice

Failure to properly report income or incorrectly apply adjustments may result in IRS penalties, delayed refunds, or preparer sanctions. All income entries and adjustments are subject to review and audit.

Completion of this lesson is required before a preparer may independently report income or apply adjustments on client tax returns.