Audits for compliance with EITC due diligence requirements are another tier of our EITC Preparer Compliance Program. We look at returns with a high chance of errors completed by the same preparer. We use that information to select preparers for audits. We may have contacted the preparer using one of the other tiers of our Preparer Compliance Program but we don't use all of them for every preparer. See EITC Preparer Compliance - Targeted, Tailored and Tiered for information on the other tiers).
During these audits, we review at least 25 EITC returns. We look at the return and the following for each return:
We specifically look for evidence the preparer met the knowledge standard. To meet the knowledge standard preparers must:
Get all the facts to make sure your client truly qualifies for EITC.
We do charge penalties when we find the preparer did not comply with EITC Due Diligence requirements. We have greatly improved our audit selection process to find a high potential for a preparer to be filing returns with EITC errors. Using this new process, we penalized over ninety percent of the preparers audited.
We charge most of the penalties to preparers who did not meet the knowledge standard. The penalties range from $100 to $5,000 per incident so can be substantial. Read more about penalties and the consequences of filing EITC returns incorrectly here.
If we propose or charge penalties and you don't agree, you have the right to request:
To reduce the burden on preparers, IRS combines the due diligence audits with certified acceptance agent visits as needed.
Last updated: 6/20/2012