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Tax return preparers and their employers need to know their due diligence responsibilities. You must follow due diligence rules when preparing returns or refunds that claim:
- Additional Child Tax Credit (ACTC) for tax years 2016 and later
- American Opportunity Tax Credit (AOTC) for tax years 2016 and later
- Child Tax Credit (CTC) for tax years 2016 and later
- Earned Income Tax Credit (EITC)
- Head of Household (HOH) filing status for tax years 2018–2025
- Other Dependent Credit (ODC) for tax years 2018–2025
Paid preparer responsibilities
You must:
- Submit completed Form 8867 with certain returns
- Keep certain records for a set time
- Verify client information is complete and accurate
Submit Form 8867
Complete Form 8867, Paid Preparer's Due Diligence Checklist for every return or claim involving HOH status, EITC, CTC, ACTC, ODC or AOTC. Submit it with the return and keep a copy. Your client’s signature and date show who gave you the information and when.
Keep required records
Keep these records for at least 3 years:
- Copy of Form 8867, Paid Preparer's Due Diligence Checklist
- Documents used to determine eligibility or amounts, like worksheets
- Record of who gave you information, how and when
- Notes on follow-up questions and client answers
You can store them in paper or electronic form. Protect them to ensure client privacy.
Verifying client information
Use professional judgment to evaluate the accuracy of information your client provides. If you can’t resolve it, don’t file the return.
Some client answers or actions might signal a problem. For example, they don’t want to report all allowable expenses to increase EITC eligibility, or their reported income seems too low to support a household.
When responses seem incorrect, incomplete or inconsistent, ask clarifying questions and request documentation.
We don’t require you to review a birth certificate or Social Security card to verify a child's age unless there’s reason to doubt the information. If you use either of these to establish eligibility, keep a copy with your records.
When multiple people in a household could claim the same child, ask questions and document answers. You don’t need to verify others’ incomes, but you can:
When you determine a client isn’t eligible for EITC, enter "No" on the EITC line of the return. This helps us know not to automatically send them a letter suggesting eligibility.
If we send a letter despite your “No” response, you can report it to us.
Clients have the right to leave you without completing a return. For example, if you decline to claim a credit or filing status and the client disagrees, the client may choose to leave.
If you suspect they will falsely claim a tax benefit elsewhere, you can report it here.
We audit or visit tax preparers when we find indications of due diligence errors in returns they filed for clients.
Employer responsibilities
If your employees don’t meet due diligence requirements, you face penalties if owners or managers:
- Knew of the failure
- Lacked or ignored procedures to ensure compliance
- Acted with negligence
These practices can help prevent problems:
- Establish and enforce internal procedures
- Train and test employees
- Review their work regularly
- Ensure they maintain documentation
Volunteer preparer (VITA) exemption
Due diligence requirements, including the 3-year record retention rule, apply only to paid tax return preparers, not to returns prepared through the Volunteer Income Tax Assistance (VITA) program.
Related
Due diligence law, regulations and requirements
Preparer compliance - Focused and tiered
Letters or phone calls about due diligence and filing errors
Barring non-compliant EITC return preparers from filing tax returns
Due diligence requirements for knowledge and recordkeeping