I have always used the Preparer Notes, which is located at the very end of the all form list (F6).

It is believed that it transmits with the e-filed 1040, but no one has stated that as a fact here yet. Lots of opinions but a clarification from an Intuit Monitor would be appreciated.

I use a Q & A format, especially for new clients, on EITC, ACTC, HOH and Education Credits. I was advised many years ago to write the answer, given by the Taxpayer, exactly as it was stated to me. This can create an issue for some preparers who would like it to sound more professional, but don't fix it. It is more believable and what the Taxpayer is going to say at a later date, if asked, so let it be their words, poor grammar, slang, whatever. If they are referring to an ex spouse or partner, it can get quite colorful so use *****.

I give a copy to the client with the tax return and I believe it is reviewed, initially, by the IRS, if the return is selected for review. I know they have been received with the 1040 in the past because I have referred to the Preparer notes when speaking with an IRS agent.

However, no matter what notes you make, be sure you have the backup documents you claim to have reviewed for Due Diligence. Even if the return is correct as filed, if for some reason documents are requested by the IRS, you're either scrambling to get them, if missing, or you're facing fines and the possibility of more files being reviewed. Due Diligence is a minefield so tread carefully.

Personally, I believe the IRS has dumped the Due Diligence they could and should be doing, onto the Tax Practitioner with severe penalties for non-compliance. I really don't like asking my long time clients to prove their children are still theirs every year, but this is a major CYA event so I set up a system & use it. Fortunately I'm in a small town & have a good working relationship with the local schools & Village Hall for verification of Enrollment, Residence & HOH utility bills etc.. Have the parent sign a Release of Information for the School and get those letters.