Five Questions to Ask Tax Clients This Year
A good questionnaire can identify potential landmines before they explode
Tax professionals often use tax organizers or questionnaires to gather information from clients to complete tax returns accurately. Many of these questions, however, are too complicated, and taxpayers can easily get them wrong through simple misinterpretation. The questions should use real language, not tax language.
Car Loan Interest Deduction
Ask the taxpayer:
During 2025, did you buy a new vehicle (including a motorcycle) from a dealer using a loan secured by the car?
If they answer “yes”, ask for the vehicle identification number (VIN) as well as the 2025 annual loan statement or other document that shows total loan interest paid during 2025.
It is essential to confirm the taxpayer’s intent at the time of purchase to use the vehicle more than 50% of the time for personal purposes; later changes to that usage do not change the availability of the deduction. Learn more here:
In addition, Tom’s Tax Toolbox includes a Personal Use Statement for Car Loan Interest Deduction, so the taxpayer can contemporaneously document their intent.
Digital Assets
Most tax professionals ask clients the Form 1040 question to determine if they have a digital asset reporting requirement:
At any time during 2025, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?
Do not ask this question — people do not understand it. Instead, ask the taxpayer:
Do you own any cryptocurrency or digital assets (e.g., Bitcoin, Ethereum, etc.), or an investment that owns those types of assets?
If they answer yes, inquire about the nature of the income and/or assets to determine the proper tax reporting, including how to answer the Form 1040 question.
For tax year 2025, if a taxpayer transacts a digital asset via a broker, the taxpayer will receive Form 1099-DA, Digital Asset Proceeds From Broker Transactions; however, the final regulations do not require brokers to report basis until 2026.
In addition, there are now exchange-traded funds (ETFs) that invest in digital assets, such as Bitcoin. These ETFs are financial interests in digital assets and require a yes answer to the Form 1040 question if sold or exchanged during 2025.
Foreign Accounts
Most tax professionals ask clients the Schedule B foreign account question to determine if they have a foreign reporting requirement:
At any time during 2025, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?
Do not ask the Schedule B question — people do not understand it, and someone born outside the United States could misinterpret it since their home country accounts are not “foreign” to them. In addition, the Schedule B question does not capture whether the taxpayer has other foreign reporting events.
Instead, ask the taxpayer:
Do you have any income sources or assets located outside the United States?
If they answer yes, inquire about the nature of the income and/or assets to determine the proper tax reporting.
Overtime Deduction
Ask the taxpayer:
During 2025, did you receive overtime pay for working more than 40 hours in a week?
If they answer yes, the taxpayer should provide their most recent pay statement to assist in estimating their qualified overtime compensation deduction.
If the taxpayer consistently received time-and-a-half for working more than 40 hours in a week, the deduction amount is their total overtime pay for 2025 divided by 3.
The IRS published Notice 2025-69 to provide transitional rules and methods for determining the overtime deduction amount, since employers are not required to report it this year (the IRS strongly encourages voluntary reporting in box 14).
For states with additional overtime eligibility, none of the IRS methods will yield an accurate number, because overtime paid under state law, rather than 29 U.S.C. §207, does not qualify for the deduction. Unless the pay statement separates these amounts, tax professionals will need to make a reasonable estimate of the overtime premium allocable to the federally required overtime amounts.
State Issues
Taxpayers often do not report income from activities outside their state of residence; if self-employed, they may have to allocate that income to that state.
Ask the taxpayer:
During 2025, in what state(s) did you reside, either part-time or full-time?
During 2025, in what state(s) did you work or perform services?
If they answer yes, ask good questions to determine exposure to nonresident state filing requirements.
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