If you are paid to prepare a return claiming EITC, due diligence regulations require you to complete and submit Form 8867*, Paid Preparer's Earned Income Credit Checklist. Using the Form 8867 ensures you consider all EITC eligibility criteria for each return you prepare. Under the new regulations finalized December 2011, you are now required to:
You need to complete all four parts of the Form 8867:
Tips on completing Form 8867
You need to answer the questions covering EITC eligibility on the Form 8867 using information from your client. We recommend you ask each question in language your client understands and ask probing questions of your client instead of questions with a yes or no answer. For example, the question, "Is the taxpayer's filing status married filing separately?" Don't let your client tell you his or her filing status. You need to determine your client's filing status and ask the questions that get you to the correct answer. See some of the suggested questions you might ask of a married taxpayer who isn't planning to file a joint return to find out if he or she qualifies for single or head of household in our tips for "Handling the Most Common Errors" page.
Completing and submitting the Form 8867 for each tax return claiming EITC is a due diligence requirement. Starting with Tax Year 2011, you must submit the completed Form 8867 with each EITC return you file electronically or by mail. If you give your client a paper return to sign and submit, you must attach the completed Form 8867 to it.
If you fail to do so, you do not meet your due diligence requirements and are subject to a $500 penalty under Internal Revenue Code section 6695(g) for each EITC return or claim for refund. You are subject to the $500 penalty for not completing the form and for not submitting it. There is no maximum to the number of penalties IRS can impose. The penalty is $500 for each EITC return submitted without the Form 8867 and there is no limit to the number of penalties we can impose. For example, you submit 50 returns with EITC claims and no Forms 8867, your penalty could be $25,000.
See Consequences of Filing EITC Returns Incorrectly for additional actions IRS can take for failing to meet your due diligence requirements.
During July, 2012, we sent Letter 4989 to preparers who submitted Tax Year 2011 EITC returns without attaching the Form 8867. The letter warns the preparer that they did not meet their due diligence requirements in 2011. IRS will not assess penalties as a result of these letters, but starting with Tax Year 2012, IRS will assert due diligence penalties for failure to submit Form 8867 with any return claiming EITC.
*This link brings you to the most current version of the Form 8867 available.
Last Updated 10/24/2012