In recent years, the IRS has imposed preparer due diligence requirements for the earned income tax credit and penalized preparers who do not meet those requirements. This means you need to understand your clients’ due diligence obligations and what is required of them.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: Can the custodial parent release head of household (HOH) status and the earned income tax credit (EIC) to the other parent?
A: No, only the custodial parent is eligible for HOH filing status and EIC.
Q: If a taxpayer receives in-home supportive services (IHSS) income that is excludable from taxation, can it still be included as earned income for EIC purposes?
A: Yes, IHSS income (primarily a California program) is similar to difficulty-of-care payments under Notice 2004-7 and is considered earned income for EIC purposes.
Q: What are BAH and BAS? Are they included in the calculation of EIC?
A: BAH (basic allowance for housing) and BAS (basic allowance for subsistence) are not included in earned income for EIC purposes.
Q: What documents should be requested if a child is under school age and has no doctor visits?
A: Acceptable documentation includes court documents or official correspondence addressed to the child at the taxpayer’s address. Statements from social services or similar agencies confirming the child’s residence may also be used. A report card can serve as supporting documentation but should not be the sole proof.
To learn more about the requirements for the earned income credit, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial.
About National Association of Tax ProfessionalsThe National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.
The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.
Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.