Outreach and education are important parts of our tiered strategy to improve the accuracy of refundable credit claims. They are important tools to help you prepare accurate claims for the earned income tax credit (EITC), the additional child tax credit, (ACTC) and the American opportunity tax credit (AOTC). We focus on providing you with educational resources to help you understand tax law and your due diligence responsibilities.
Letters to Preparers
Another tier in our outreach and educational efforts is letters directed to specific preparers. We look at the number of returns with a high likelihood of refundable credit errors completed by the same preparer. And, we send letters to preparers who have a high number of these returns. We send letters based on the previous filing season before the next filing season starts and we send letters during the filing season for the current year.
- state we believe the preparer completed inaccurate claims,
- highlight the consequences of preparing inaccurate claims,
- outline preparer due diligence responsibilities,
- provide tips on preparing accurate returns and point to online refundable credit tools, information and other resources, and
- inform preparer that we are monitoring their future returns.
Return Preparers who complete highly questionable refundable credit claims may receive one or more of the following letters:
Letter 5025 (PDF), You may not have met your due diligence requirements
This letter is addressed to paid preparers who prepared 2017 tax returns claiming one or more of the refundable credit listed and our review of these returns indicates the preparer may not have met due diligence requirements.
The credits are:
- Earned Income Tax Credit (EITC)
- Child Tax Credit (CTC)
- Additional Child Tax Credit (ACTC)
- American Opportunity Tax Credit (AOTC)
Paid Preparers must comply with all due diligence requirements. Failure to do so can result in a penalty of $520 per failure for tax returns filed in 2019. The failure can also result in an audit, suspension or termination of e-filing privileges.
The letter will list the primary issues identified on the tax returns prepared, tax law changes that affect the paid preparer and due diligence requirements.
This letter is for information only. The IRS will continue to monitor the paid preparer's future returns prepared claiming these credits. Specific information on the questionable returns can't be provided.
Carta 5025 (PDF), Puede que usted no haya cumplido con su requisito de diligencia debida
Esta carta va dirigida a los preparadores remunerados que prepararon declaraciones de impuestos en 2017 reclamando uno o más de los créditos reembolsables enumerados a continuación; quienes, tras una revisión nuestra de estas declaraciones, podrían haber incumplido sus requisitos de diligencia debida.
Los créditos son:
- El Crédito por ingreso del trabajo (EITC)
- El Crédito tributario por hijos (CTC)
- El Crédito tributario por hijo adicional (ACTC)
- El Crédito tributario de oportunidad para los estadounidenses (AOTC)
Los preparadores remunerados deben cumplir todos los requisitos de diligencia debida. El no hacerlo puede resultar en una multa de $520 por cada incumplimiento en las declaraciones que presente en el 2019. Dicho incumplimiento también puede resultar en una auditoría, y la suspensión o terminación de sus privilegios de presentación electrónica.
Esta carta le indica los problemas principales que fueron identificados en las declaraciones de impuestos que usted preparó, los cambios a la ley tributaria que afectan al preparador remunerado, y sus requisitos de diligencia debida.
Esta carta sirve solamente para propósitos informativos. El IRS seguirá pendiente a las declaraciones futuras que el preparador remunerado presente reclamando estos créditos. No se puede proporcionar información específica sobre las declaraciones dudosas.
- Letter 5364 (PDF), Alert to EITC Return Preparers - Missing Form 8867
I Received a Warning Letter; What Should I Do?
If you get a letter from us, don’t ignore it. Review your office procedures to make sure you meet all four due diligence requirements. If you receive this letter, we will continue to monitor the refundable credit returns you prepare. If the quality of the returns you prepare doesn’t improve, you may be subject to special follow-up procedures mentioned below in “Additional Steps.” This includes the possibility of an on-site audit or a Due Diligence Compliance Audit.
We send the letters to help preparers complete accurate refundable credit claims in the future. We do not assess penalties against preparers at the time we send the letters, but we do monitor the refundable credit returns filed by these preparers to ensure accuracy improves. If there is no improvement, we may follow-up with phone calls, additional letters, educational visits or due diligence compliance audits. See "Additional Resources" below for more information on these steps.
- EITC Preparer Information on irs.gov
- Consequences of Not Meeting Your Due Diligence Requirements
- Refundable Credit Preparer Compliance - Focused and Tiered
Educational Opportunities for Avoiding EITC Error
We reach out to preparers and provide education and other resources to help you avoid refundable credit errors and help you practice due diligence. This Return Preparer Toolkit has a wealth of resources:
- Take the online Due Diligence Training Module, to help you refresh your refundable credit tax law and due diligence knowledge. The training is available in English and Spanish and may qualify you for continuing education credit.
- Learn how to meet your due diligence requirements while preparing returns with self-employment income using our Schedule C and Record Reconstruction Training. Plus, get tips on helping your clients reconstruct their business records.
- View the popular Due Diligence Videos to help you avoid common error situations and improve your due diligence interview process.
- Attend our seminars or view archived sessions from the Nationwide Tax Forums.
- Visit the Frequently Asked Questions for guidance to the right answer to similar questions you have.
- Use the headings on the left navigation bar for more tips and tools to help you avoid refundable credit errors.