Let EITC Due Diligence Work for You Syllabus

This is a supplement to the tax forum seminar, Let EITC Due Diligence Work for You. It links you to the resources you need so you can let EITC due diligence work for you.

If you missed it or haven’t attended, the forum provides the information you need to get EITC correct for your clients and avoid due diligence consequences. Find out what is required to “know the law, ask the right questions, get all the facts, and document the answers” to get EITC due diligence right. And, save yourself money and time by avoiding audits and needless preparer penalties.

You can find most of the listed resources and more on EITC Central. We provide links to the direct source but you will want to bookmark Central as your place to go for everything you need to know about the Earned Income Tax Credit. Also, find information on the Other Refundable Credits Toolkit.   Keep up-to-date on the latest news on EITC and other refundable credits, check our What's Hot page often. We also have Hot Topics for Return Preparers and Hot Topics for Other Refundable Credits.

2014 Income Limits and Maximum Credit Amounts

And, we update this income limit and range of EITC page after October 15th.

Benefits of Due Diligence

The benefits of practicing due diligence are quality and accurate returns and avoiding the consequences of not meeting your due diligence. Errors can cause electronic returns to reject and fixing those rejects is uncompensated rework. Letters and audits don’t make your clients happy and if you provide a guarantee for your clients that’s uncompensated rework as well. There are additional consequences for not meeting your due diligence. See our Consequences of Filing EITC Returns Incorrectly on the Tax Preparer Toolkit.

Due Diligence Requirements

EITC Due Diligence is the law. Find out more about the law and the revenue procedure here.

The Due Diligence Must Do’s

Know the Law. You must know the law to avoid mistakes. 

 

Understand Knowledge Requirement— (Coming Soon!)

  • You do have to know the law but the knowledge requirement is more. It is also using your knowledge of industry standards and information about your clients to apply the tax law and determine what questions you are going to ask your clients.
  • Develop client interview techniques, see our page, Interview Best Practices– (Coming Soon!)

Complete, Record, Keep and Retain

Complete and Record

  • Complete Form 8867 thoroughly
  • Complete and keep all EIC worksheets used to calculate the credit
  • Record any additional information you gather at the time of the interview

Keep and Retain

  • Keep copies of documents used to determine EITC eligibility and compute amount of the credit
  • Retain your files either on paper or electronically in a secure environment to protect your client’s privacy.
  • Keep a back-up in separate, secure place

Make sure you can produce records if IRS asks for them

Common Due Diligence Errors

  • Not completing and submitting Form 8867—find out What is Form 8867 here.
  • Not meeting knowledge requirement
  • Not keeping records

 

The Tax Preparer Toolkit has numerous resources to help you meet your EITC due diligence requirements and avoid these common errors:

 

Protect Yourself as an Employer

  • Review current or develop new office procedures
  • Instruct your employees on procedures and expectations
  • Conduct EITC due diligence training and/or require your employees to take our online EITC Due Diligence Training annually
  • Use the Due Diligence Videos as part of your training
  • Test your employees knowledge
  • Perform recurring quality review checks
  • See our Due Diligence Frequently Asked Questions, especially:
    • Is it true that if I employ other preparers and they don't meet their due diligence requirements, my firm can be penalized?
    • How can I as an employer protect myself from penalties caused by my employees not meeting their EITC due diligence requirements?

EITC Compliance Strategy

What is IRS, doing to stop bad preparers. The goal of our compliance strategy is to reduce the amount of EITC paid out in error and make sure only those truly eligible get the credit they earned. Find out more about our focused and tiered compliance strategy.  

Preparers filing returns with questionable EITC claims may receive any of the treatments listed below:

 

IRS is now assessing a $500 per return penalty to preparers who do not submit the Form 8867 with EITC returns submitted electronically or attach the form to EITC returns given directly to his or her client for filing. Find out more about the form and  the consequences of not completing or submitting the Form 8867 on our  What is the Form 8867? page.

What Happens if I Don’t Agree with the Penalties?

See our page, Appeal of EITC Due Diligence Penalties

We would like to hear from you…reach out to us at: EITC.Program@irs.gov

Page Last Reviewed or Updated: 08-Jul-2014