You must meet four due diligence requirements. The tax benefits include the earned income tax credit (EITC), the child tax credit (CTC), the additional child tax credit (ACTC), the credit for other dependents (ODC), the American opportunity tax credit (AOTC) and head of household status (HOH). Worse, if the preparer deliberately fails to comply with the due diligence requirement, the IRS can refer the preparer to the Office of Professional Responsibility or even to the IRS Criminal Investigation unit. Preparer C failed to comply with the due diligence requirements of this section with respect to the head of household's tax marital status, and the CTC complained on the taxpayer's return.
The preparer must prepare and file Form 8867, the Paid Preparer's Due Diligence Checklist, and complete any worksheet or form on the return or related to the particular claims claimed. As part of the exercise of due diligence, the preparer must interview the client, ask the appropriate questions, and obtain adequate and sufficient information to determine and document the correct income statement and the application for tax benefits. And due diligence is always important because the IRS can impose substantial penalties on return preparers who don't meet the requirements. To meet due diligence requirements, the tax preparer must meet the following requirements.
Article 6695 of the Internal Revenue Code and related regulations establish the EITC due diligence requirements and penalties for non-compliance. A paid tax return preparer must act with due diligence when preparing any customer's tax return or refund request. Starting with the first contact with the IRS, the paid preparer should review the due diligence requirements and also review office procedures to ensure that those requirements are met. Preparer B did not meet the due diligence requirements of this section with respect to the CTC claimed in the taxpayer return, but Preparer B did meet the due diligence requirements of this section with respect to the AOTC claimed in the taxpayer's return.
A different sanction applies to the tax return preparer with respect to determining the head of household's tax marital status and to each applicable credit claimed on a return or request for reimbursement that does not meet the due diligence requirements in this section and for which the exception applies. to the fine. provided for in paragraph (d) of this section does not apply. The attorneys at Brown, P.C., in Fort Worth, advise tax preparers on compliance with due diligence requirements and represent them in responding to IRS audits in Texas and across the country.
The Internal Revenue Service (IRS) evaluates due diligence penalties for not meeting the knowledge requirement to be diligent in determining a taxpayer's eligibility to receive certain tax benefits under section 6695 (g) of the Internal Revenue Code (IRC). Completing and filing Form 8867 - (i) The tax return preparer must complete Form 8867, “Paid Preparer Due Diligence Checklist,” or complete any other form and provide any other information that may be prescribed by the Internal Revenue Service (IRS), and -. First, Form 8867, Paid Preparer Due Diligence Checklist, must be completed and filed along with the customer's tax return.