Due diligence requirements and its consequences

The IRS is sending letters to tax preparers who completed six or more 2019 paper returns claiming refundable tax credits without attaching Form 8867, Paid Preparer’s Due Diligence Checklist. As the filing season continues, tax preparers should remember that due diligence requirements are imposed for the:

• Head of household filing status
• Earned income tax credit
• Child tax credit/additional tax credit/other dependent credit
• American opportunity tax credit

One of four due diligence requirements is to properly complete and submit Form 8867 to certify paid tax preparers confirmed their clients’ eligibility for each of the credits. Failure to complete and submit Form 8867 may result in high penalties for each failure.

Disregarding the requirements could result in penalties and other consequences for the preparer and their clients. The penalty is $530 per failure for tax returns filed in 2020.

The IRS takes tax preparer due diligence seriously, and so do we. By joining NATP, tax preparers will receive the tools necessary to comply with these requirements. NATP members have access to:

• A white paper that includes a description of preparer requirements
• A case study that shows how to apply the requirements
• An intake questionnaire

Become a member now to receive access and we’ll waive the $25 application fee to join!