EITC Preparer Compliance - Focused and Tiered

We improved our EITC paid preparer compliance program and expanded it to include more preparers.

It's

Focused

We look at the characteristics of EITC returns completed by the same preparer and focus on questionable claims. We focus on a combination of characteristics that we know indicates the returns have a high likelihood of error and assign a risk level.

Tiered

 

We assign an appropriate compliance treatment in line with the preparer’s risk level. We consider what may be the cause of the errors:

  •  Not knowing the tax law?
  •  Not applying it correctly? 
  •  Or, intentionally disregarding the tax law?

 

The EITC Paid Preparer Compliance program takes a tiered approach depending on what category best fits the preparer. Our tiered approach includes educational letters and visits, audits, penalties and may result in barring preparers from filing tax returns in extreme cases.

 

Why Have a Preparer Compliance Program?

We estimate 22 to 26 percent of all EITC claims have some type of mistake which cost the government between $13.3 and $15.6 billion in 2013. Some errors are caused by misinterpreting the law; some because the preparer accepted client-provided information at face value and others are outright fraud. You, as part of the tax preparation community, are crucial in stemming these errors because paid preparers create the majority of EITC claims.

We know most paid preparers practice due diligence and prepare accurate EITC claims. But, we developed this Preparer Compliance Program to ensure you compete on a level playing field.

Where Do we Find Most EITC Errors?

About 60 percent of EITC errors fall into three key categories:

  • claiming a child who does not meet the relationship or residency tests,
  • over-or under-reporting income or business expenses to maximize the credit, and
  • filing as single or head of household when legally married.


See tips for avoiding these three key errors

What are the EITC Return Preparer Compliance Treatments?

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


IRS assesses a $500 penalty per return to preparers who do not submit the Form 8867, Paid Preparers EITC Due Diligence Checklist,  with all EITC claims. The form must be submitted electronically or attached  to each EITC claim given directly to clients for filing. Find out more about the Form 8867 and  the consequences of not completing or submitting it.

Find out more about the Consequences of Failing to Meet Your EITC Due Diligence Requirements

Educational Opportunities for Avoiding EITC Error

We reach out to preparers and provide education and other resources to help you avoid EITC errors and help you practice due diligence. This Return Preparer Toolkit has a wealth of resources:

  • Take the online Due Diligence Training Module, to help you refresh your EITC tax law and due diligence knowledge. The training is available in English and Spanish and may qualify you for continuing education credit.
  • Learn how to meet your due diligence requirements while preparing returns with self-employment income using our Schedule C and Record Reconstruction Training. Plus, get tips on helping your clients reconstruct their business records.
  • View the popular Due Diligence Videos to help you avoid common EITC error situations and improve your due diligence interview process.
  • Attend our EITC Due Diligence seminar or view archived sessions from the Nationwide Tax Forums.
  • Visit the Frequently Asked Questions for guidance on similar questions you might have. 
  • Use the headings on the left navigation bar for more tips and tools to help you avoid EITC error.

 

 

Page Last Reviewed or Updated: 03-Oct-2014