Why Having a Tax Professional Review Prior-Year Tax Returns Matters

Aaron Engleman, Two Teachers' Tax Service
Feb 3
2 min read

Many taxpayers assume that once a tax return is filed, the opportunity to make improvements has passed. In reality, a professional tax review of a prior-year return can uncover missed credits, deductions, and carryforwards that may result in significant refunds or future tax savings. This type of review is especially important when life circumstances change, tax laws evolve, or returns were prepared without a deeper analysis.

A Real Example of the Value of a Tax Review

Recently, a new client came to us to have their 2025 tax return prepared. As part of our standard process, we reviewed their 2024 tax return. During that review, we discovered two important issues:

Their child had not been claimed for the Child Tax Credit on the federal return.
An additional dependent exemption was missed on their South Carolina state tax return.

By amending the 2024 return to correct these oversights, the client received a $2,300 refund—money they were not expecting and would have otherwise left unclaimed. This outcome highlights how easy it is for credits and state-specific benefits to be overlooked, even when a return appears complete.

Why Tax Reviews Are Especially Important for Landlords

For rental property owners, a prior-year tax review can be critical. Rental losses are often limited by the passive activity loss rules, which means losses may not be fully deductible in the year they occur. Instead, they can become passive activity loss carryforwards.

If these carryforwards are not properly tracked:

Losses may never be used
Taxpayers may overpay when properties are sold or income increases
Opportunities to offset future rental income can be lost

A professional review ensures that passive losses are correctly calculated, documented, and available for use when allowed under IRS rules.

Why Investors Should Have Prior Returns Reviewed

Taxpayers who buy and sell stocks, mutual funds, or ETFs should also strongly consider a tax review. Capital losses are subject to annual limitations, and excess losses are carried forward to future years.

A review can uncover:

Unallowed or unused capital losses
Incorrect cost basis reporting
Missed carryforwards that could offset future gains

Failing to identify these items can result in higher taxes in later years, especially during years with significant investment gains.

The Bottom Line

A prior-year tax review is not about finding mistakes for the sake of it—it’s about ensuring accuracy, compliance, and that you are receiving every tax benefit you are legally entitled to. Whether it’s a missed credit, an overlooked state benefit, or unused loss carryforwards, a second look by a qualified tax professional can make a meaningful financial difference.