Tax Return Analysis
Generates a structured financial assessment memorandum from one or more years of tax returns for litigation use.
Prerequisites
- Tax returns — Form 1040 with all schedules per year
- Legal context — proceeding type (bankruptcy, family law, personal injury, other) and taxpayer's role
- Jurisdiction — state/court for applicable thresholds (e.g., median income for means testing)
- Optional — bank statements, K-1s, business records for cross-reference
Memorandum Sections
Produce each section in order:
1. Executive Overview
2–3 paragraphs covering: taxpayer profile (individual vs. couple, occupation), income trajectory (growing/declining/volatile), significant life events reflected in returns, and bottom-line framing for the attorney.
2. Multi-Year Comparison Table
| Tax Year |
Filing Status |
Total Income |
AGI |
Tax Liability |
Refund/(Owed) |
Key Observations |
| per year |
status |
amount |
amount |
amount |
amount |
notable changes |
Follow with narrative interpreting year-over-year trends.
3. Taxpayer Identification & Status
- Names, last four SSN digits for all filers
- Filing status per year — flag changes (e.g., MFJ→MFS may signal marital discord)
- Dependents: name (last four SSN), age, relationship, status
- Note relevance to support obligations, means testing, or custody
4. Income Analysis
Address each category with context, not just amounts:
| Category |
Address |
| W-2 wages |
Employer, stability, year-over-year changes |
| Schedule C |
Business nature, gross receipts, net profit/loss, expense ratio |
| Investment income |
Interest, dividends, capital gains — asset base implications |
| Retirement distributions |
Regular vs. premature; financial distress indicators |
| Social Security |
Exclude from bankruptcy means test calculations |
| Other (K-1, rental, alimony) |
Source, consistency, legal significance |
Conclude with AGI compared to applicable median income standards.
5. Deductions, Credits & Tax Position
- Standard vs. itemized — what the choice reveals
- Itemized: mortgage interest (debt level), SALT, charitable (flag large pre-filing donations)
- Schedule C deductions — reasonableness; flag expense-to-income ratios above 70%
- Credits — child tax credit, EITC, education credits and significance
- Refund/balance due — large refunds suggest overwithholding; balances owed suggest cash flow issues
6. Red Flags
Flag each with legal significance:
| Category |
Watch For |
| Income discrepancies |
Reported vs. lifestyle; unreported sources |
| Deduction anomalies |
Excessive/undocumented deductions; luxury items as business expenses |
| Timing patterns |
Income drops or deduction spikes near filing/litigation dates |
| Bankruptcy-specific |
Large charitable gifts pre-petition; losses inconsistent with continued operations |
| Family law-specific |
Cash underreporting; inflated expenses; hidden assets |
| Fraud indicators |
Inconsistent schedules; missing forms; round-number patterns |
7. Proceeding-Specific Considerations
Tailor to the legal context:
- Bankruptcy — means test positioning, above/below median income, disposable income impact, carryover losses affecting future tax positions
- Family law — income available for support beyond AGI, imputed income arguments, lifestyle inconsistencies
- Personal injury — pre-injury vs. post-injury earning capacity, lost income quantification
Explain why each issue matters legally, not just what it is.
8. Information Gaps
For each gap: (1) what is missing, (2) what question it leaves unanswered, (3) legal significance, (4) specific document to request.
9. Conclusion
1–2 paragraphs: synthesize key findings, assess reliability of returns, prioritize concerns requiring immediate attention, recommend next steps.
Critical Rules
- Tone: objective, analytical — this is a professional memorandum
- Social Security: always flag exclusion from bankruptcy means test
- Charitable contributions: scrutinize gifts 1–2 years pre-petition as potential preferential transfers
- No legal conclusions — identify issues and explain significance for the attorney to evaluate
- Unverifiable figures: mark with
[VERIFY]
- Fewer than 2 years: note trend analysis limitations and recommend obtaining additional years
1---2name: tax-return-analysis3description: Produces litigation-ready financial memoranda from multi-year tax returns, covering income trends, filing status changes, deduction patterns, red flags, and trustee considerations. Use when reviewing Form 1040s for bankruptcy means testing, family law support calculations, personal injury damages, or financial discovery analysis.4---5
6# Tax Return Analysis
7
8Generates a structured financial assessment memorandum from one or more years of tax returns for litigation use.
9
10## Prerequisites
11
12- **Tax returns** — Form 1040 with all schedules per year
13- **Legal context** — proceeding type (bankruptcy, family law, personal injury, other) and taxpayer's role
14- **Jurisdiction** — state/court for applicable thresholds (e.g., median income for means testing)
15- **Optional** — bank statements, K-1s, business records for cross-reference
16
17## Memorandum Sections
18
19Produce each section in order:
20
21### 1. Executive Overview
22
232–3 paragraphs covering: taxpayer profile (individual vs. couple, occupation), income trajectory (growing/declining/volatile), significant life events reflected in returns, and bottom-line framing for the attorney.
24
25### 2. Multi-Year Comparison Table
26
27| Tax Year | Filing Status | Total Income | AGI | Tax Liability | Refund/(Owed) | Key Observations |
28|---|---|---|---|---|---|---|
29| *per year* | *status* | *amount* | *amount* | *amount* | *amount* | *notable changes* |
30
31Follow with narrative interpreting year-over-year trends.
32
33### 3. Taxpayer Identification & Status
34
35- Names, last four SSN digits for all filers
36- Filing status per year — flag changes (e.g., MFJ→MFS may signal marital discord)
37- Dependents: name (last four SSN), age, relationship, status
38- Note relevance to support obligations, means testing, or custody
39
40### 4. Income Analysis
41
42Address each category with context, not just amounts:
43
44| Category | Address |
45|---|---|
46| W-2 wages | Employer, stability, year-over-year changes |
47| Schedule C | Business nature, gross receipts, net profit/loss, expense ratio |
48| Investment income | Interest, dividends, capital gains — asset base implications |
49| Retirement distributions | Regular vs. premature; financial distress indicators |
50| Social Security | **Exclude from bankruptcy means test calculations** |
51| Other (K-1, rental, alimony) | Source, consistency, legal significance |
52
53Conclude with AGI compared to applicable median income standards.
54
55### 5. Deductions, Credits & Tax Position
56
57- **Standard vs. itemized** — what the choice reveals
58- **Itemized**: mortgage interest (debt level), SALT, charitable (flag large pre-filing donations)
59- **Schedule C deductions** — reasonableness; flag expense-to-income ratios above 70%
60- **Credits** — child tax credit, EITC, education credits and significance
61- **Refund/balance due** — large refunds suggest overwithholding; balances owed suggest cash flow issues
62
63### 6. Red Flags
64
65Flag each with legal significance:
66
67| Category | Watch For |
68|---|---|
69| Income discrepancies | Reported vs. lifestyle; unreported sources |
70| Deduction anomalies | Excessive/undocumented deductions; luxury items as business expenses |
71| Timing patterns | Income drops or deduction spikes near filing/litigation dates |
72| Bankruptcy-specific | Large charitable gifts pre-petition; losses inconsistent with continued operations |
73| Family law-specific | Cash underreporting; inflated expenses; hidden assets |
74| Fraud indicators | Inconsistent schedules; missing forms; round-number patterns |
75
76### 7. Proceeding-Specific Considerations
77
78Tailor to the legal context:
79
80- **Bankruptcy** — means test positioning, above/below median income, disposable income impact, carryover losses affecting future tax positions
81- **Family law** — income available for support beyond AGI, imputed income arguments, lifestyle inconsistencies
82- **Personal injury** — pre-injury vs. post-injury earning capacity, lost income quantification
83
84Explain *why* each issue matters legally, not just what it is.
85
86### 8. Information Gaps
87
88For each gap: (1) what is missing, (2) what question it leaves unanswered, (3) legal significance, (4) specific document to request.
89
90### 9. Conclusion
91
921–2 paragraphs: synthesize key findings, assess reliability of returns, prioritize concerns requiring immediate attention, recommend next steps.
93
94## Critical Rules
95
96- **Tone**: objective, analytical — this is a professional memorandum
97- **Social Security**: always flag exclusion from bankruptcy means test
98- **Charitable contributions**: scrutinize gifts 1–2 years pre-petition as potential preferential transfers
99- **No legal conclusions** — identify issues and explain significance for the attorney to evaluate
100- **Unverifiable figures**: mark with `[VERIFY]`
101- **Fewer than 2 years**: note trend analysis limitations and recommend obtaining additional years
CaseMark