Outreach and education are important parts of our tiered strategy to improve the accuracy of refundable credit and head of household (HOH) filing status claims. They are important tools to help you prepare accurate claims for the earned income tax credit (EITC), the child tax credit (CTC), including the additional child tax credit, (ACTC) and the credit for other dependents (ODC), the American opportunity tax credit (AOTC) and HOH filing status. 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 sending letters to specific preparers. We look at the number of returns with a high likelihood of refundable credit and HOH filing status 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 and HOH filing status tools, information and other resources, and
- inform preparer that we are monitoring their future returns.
Return preparers who complete highly questionable refundable credit and HOH filing status 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 tax returns claiming one or more of the credits listed or HOH filing status 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)
- Credit for Other Dependents
- 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 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 6138 and Letter 6138 (SP)
This year the IRS sent letters to taxpayers whose previous tax return, prepared by a paid tax preparer, may contain inaccuracies. As a result, the taxpayer may have incorrectly claimed the Earned Income Tax Credit, Child Tax Credit/Additional Child Tax Credit, and/or American Opportunity Tax Credit.
The letter emphasizes the taxpayer is ultimately responsible for the information contained on the tax return. The letter also advises the taxpayer to take no action unless they believe there are errors on the tax return in question. A Form 1040X must then be submitted to the IRS.
In addition, the IRS included tips for choosing a tax preparer.
- Letter 4858 (PDF), You may not have met your due diligence requirements
- Letter 4858 en Español (PDF)
- 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 and HOH filing status 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 and HOH filing status claims in the future. We do not assess penalties against preparers at the time we send the letters, but we do monitor the 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.
- Consequences of Not Meeting Your Due Diligence Requirements
- Preparer Compliance - Focused and Tiered
Educational Opportunities for Avoiding EITC Errors
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 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 and HOH filing status errors.