Find news, tips and resources for following the rules for the due diligence tax benefits.
In this section:
- Be Sure Your Client didn't miss tax benefits in 2021
- Is Your Client's Address Up to Date?
- Paid Preparer Due Diligence Penalties Can Be Costly
- Due Diligence Form 8867 When Advance Child Tax Credit Payments Received
- EITC Relief: Temporary Special Rule for Determination of Earned Income
- Due Diligence Rules When Electing to Use 2019 Earned Income for the 2021 EITC
- IRS Due Diligence Training Module – 2022 Update
- Get Continuing Education Credit – Nationwide Tax Forums Online
- IRS Due Diligence Telephone Calls
- IRS Outreach Connection on IRS.gov
- Protect Your EFIN and PTIN
- Share Tax Credit Information on Your Social Media Network
Watch informative videos about Advance Child Tax Credit payments.
- What Are Advance Child Tax Credit Payments?
- What Do I Need to Do to Receive Advance Child Tax Credit Payments?
- When Will the IRS Issue Advance Child Tax Credit Payments?
- Who Is Eligible for Advance Child Tax Credit Payments?
- Will Advance Child Tax Credit Payments Affect Any Government Benefits Someone is Receiving?
Be Sure Your Client Didn't Miss Tax Benefits in 2021
IRS sent outreach letters to approximately 9 million taxpayers with information about the Child Tax Credit, Recovery Rebate Credit and the Earned Income Credit.
Your client may have received Letter 6550 if they qualified for one of the refundable credits expanded by the American Rescue Plan Act for 2021 and didn't file a 2021 tax return.
Eligible taxpayers may receive the full amount of these credits even if they have little or no income. Taxpayers must file a 2021 federal tax return to claim these tax credits.
See "Understanding Your Letter 6550" for more information.
Is Your Client's Address Up to Date?
Preparers should ensure clients keep their address up to date with the Internal Revenue Service. This will minimize delays in the receipt of IRS letters or refunds. Your client can find information on updating their address with the IRS here.
Paid preparers must meet specific due diligence requirements under Treasury Regulation section 1.6695-2 when preparing returns or claims for refund claiming the:
- Earned Income Tax Credit (EITC)
- Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), Credit for Other Dependents (ODC)
- American Opportunity Tax Credit (AOTC)
- Head of Household filing status
A penalty under Internal Revenue Code section 6695(g) for each failure to be diligent can be assessed against a paid preparer.
For returns and claims for refund filed in 2022, the penalty is $545 per failure to be diligent.
The penalty can be up to $2,180 on a return or claim if, for example, the preparer fails to meet the due diligence requirements for all four of the tax benefits ($545 x 4 tax benefits - $2,180).
See Due Diligence Law for more information.
If your client received an advance payment of child tax credit in 2021, the due diligence requirement to submit Form 8867, Paid Preparer’s Due Diligence Checklist, may apply to the 2021 return claiming qualifying children for the child tax credit even if no child tax credit is claimed on Form 1040 after reconciling the advance child tax credit payments received.
See ‘What is Form 8867?’ for more information.
Your client may elect to use their 2019 earned income to figure their 2021 EITC if their 2019 earned income is more than their 2021 earned income. For details, see Publication 596, Earned Income Credit.
If you prepare a 2021 return or claim for a taxpayer electing to figure the EITC using their 2019 earned income, the due diligence requirements for paid return preparers apply to your computation of earned income for both 2021 and 2019.
See Due Diligence Law for more information.
Take the free online Refundable Credits Best Practices Due Diligence Training Module to earn one continued education credit. If you already took the course this year, review the updates, but you won’t receive another credit.
English - Due Diligence Module for 2022
Spanish - Due Diligence Module for 2022
Get Continuing Education Credit – Nationwide Tax Forums Online
Learn more about refundable credit eligibility rules, paid preparer due diligence requirements and more. Watch the IRS Nationwide Tax Forums Online and take online, self-study seminars.
View due diligence presentations:
- Be Tax Ready – Understanding Rules for Due Diligence and the Child Tax Credit and Earned Income Tax Credit Under the American Rescue Plan Act of 2021
- Keys to Mastering Due Diligence Requirements and What to Expect During a Due Diligence Audit
For a complete list of available online seminars, see IRS Nationwide Tax Forums Online.
For more educational resources, see Educational Opportunities.
IRS Educational Letters to Paid Tax Return Preparers
We send educational letters to certain paid preparers to inform them of potentially questionable returns they filed, and to help them stay compliant with due diligence rules. We’ll continue to monitor returns submitted by the preparers to see if their accuracy improves. You can view the letters, in both English and Spanish, here.
We may contact potentially noncompliant paid preparers by telephone to review due diligence rules and discuss possible consequences if they continue to send us questionable returns. The calls are exempt from IRS directives on not calling taxpayers. We won’t discuss specific tax returns or ask the preparer to disclose client information. For more information, review Reaching Out to Paid Preparers.
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Keep yourself and your tax preparation business safe from fraud. For more information, see What Can I Do to protect my EFIN and PTIN? and Protect Your Clients; Protect Yourself.
See our social media resources for tax credit tweets, banner ads, Facebook ads, podcasts and more.