IRS assesses more than 90 percent of all due diligence penalties for failure to comply with the knowledge requirement of IRC § 6695 (g). These examples show how asking the right questions can help you get all the facts. Remember to document any additional questions you ask your client and the answers your client gives at the time of the interview either in the client file or within your software.
Handling Common Situations
Separated Spouse Example: your client and her husband are separated. She wants to claim EITC for her 7-year-old child who lives with her. What filing status should your client use? The outcomes change depending on the questions you ask and the answers she gives.
An Eighteen-Year-Old Daughter Lives with Her Parents: your 18-year-old client tells you she lives with her parents, has a two-year-old daughter and wants to claim EITC. Is she eligible? View the three different outcomes based on the questions you ask and the answers she gives.
Twenty-Two-Year-Old with Two Sons: your 22-year-old client tells you he has two sons and wants to claim EITC. Can the sons pass the relationship tests? It depends! See our example showing different outcomes depending on the questions asked and the answers given.
Self-Employed House Cleaner: Your client tells you she earned $12,000 cleaning houses, had no expenses, wants to claim head of household and EITC. Would you accept that, or would you ask more questions? Explore this scenario to answer that question.
Additional Qualifying Child: last year your client claimed single and had one qualifying child for EITC. She returns this year and has an additional child. What questions do you ask?
Can my client use this Social Security card to claim EITC?
Social Security Card Scenario: This is a scenario with an examples of an identification cards that can be used to claim EITC.
The scenarios show examples questions you might ask to get all the facts and have different outcomes based on the questions asked and the answers received (these are not all inclusive, you should ask additional questions and documents as warranted):
Scenario 1: is an example of a relative other than a parent claiming a child and deals with the adjusted gross income of the parents.
Scenario 2: gives an example of a relative other than a parent claiming another relative. It deals with age, disability and a qualifying child of more than one relative.
For more examples and scenarios, view the Due Diligence videos
More Tools and Tips
- Review our tips on preventing the most common processing errors.
- Avoid the three most common EITC errors. See our Handling the Most Common Errors
- What is Form 8867?
- Forms 886-H can assist you in tackling the difficult and probing questions
- Due Diligence on the go! Publication 4687, Paid Preparer Due Diligence, is a guide to help you comply with your refundable credit due diligence requirements. Also, available in Spanish, Publication 4687 SP.
- Your clients can find out if they are eligible for the EITC, Earned Income Tax Credit by answering some questions and providing basic income information using the EITC Assistant on irs.gov.