EITC Preparer Compliance - Targeted, Tailored and Tiered

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

It's

Targeted Our approach is to look at returns with a high likelihood of EITC error completed by the same preparer.
Tailored We look for the cause of the errors. Is it not knowing the tax law; not applying it correctly, or, is it an intentional disregard of the tax law?
Tiered Our goal is to reduce preparer errors by matching our response to the risk level of the same preparer continuing to have a high level of EITC error. Our responses range from education to barring return preparation through injunction.

 

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 out and out fraud. You, as part of the tax preparation community, are crucial in stemming these errors because paid preparers produce the majority of EITC claims.

We know most of you in the paid preparer community practice due diligence and file accurate EITC claims. 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 age, relationship, joint return, or residency tests,
  • Filing as single or head of household when legally married, and
  • Over-or under-reporting income or business expenses to maximize the credit.


See tips on 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 treatments listed below: 


IRS is now starting to assess 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

Educational Opportunities for Avoiding EITC Error

Our first step is to 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 or resources:

  • An online training course, the Due Diligence Training Module, to help you refresh your EITC tax law and due diligence knowledge is available in English and Spanish. This course may qualify for continuing education for you.
  • Our Schedule C and Record Reconstruction Training module  helps you meet your due diligence requirements while preparing returns with self-employment income and provides tips for helping your clients reconstruct their business records.
  • Our popular Due Diligence Videos help you avoid common EITC error situations and are fun to watch.
  • Attend our EITC Due Diligence seminar at the Nationwide Tax Forums.
  • Visit the Frequently Asked Questions part of this site. Your colleagues have asked IRS numerous questions related to EITC. Our answers will guide you to the right answer for similar situations.
  • And more, follow the headings on the left navigation bar for more tips and tools to help you avoid EITC error.

 

 

Page Last Reviewed or Updated: 26-Nov-2013