Federal Refundable Credits – Preparer Due Diligence and Other Things to Know About Refundable Credits
This page is designed to give preparers the details they need to know about the preparer due diligence requirements which now include not only the earned income tax credit but also the child tax credit and the American Opportunity education credit.
Preparer Due Diligence Requirements Have Been Expanded to Other Refundable Credits
At the end of 2015 Congress expanded preparer due diligence requirements under Code Section 6695 (including the $510 penalty) to include not only the earned income tax credit but also the child tax credit and the American Opportunity Education credit.
As a result of this change the Form 8867 has been modified as follows:
For more details on these changes see the draft of the 2017 Form 8867 on the IRS website.
Due Diligence Requirements for Return Preparers
IRS code section 6695(g) gives the IRS authority to penalize a tax preparer $510 for each return for which the preparer fails to comply with the due diligence requirements imposed by the Treasury Secretary by regulation with respect to determining the eligibility for, or the amount of credit allowance for the earned income tax credit, child tax credit or the American Opportunity Education Credit.
The Four Due Diligence Requirements can be summed up as follows:
For more information, see the Refundable Credit Preparer Due Diligence Law page on the EITC Central website.
For more information on other aspects of due diligence and refundable credits see the following pages on the EITC Central website:
PATH Act Changes that affected Refundable Credit Reminders
Refunds for Federal Returns with EITC and/or Additional Child Tax Credit will not be released until February 15
IRS is now required to not release the refund on federal returns that claim the earned income tax credit or additional child tax credit until February 15.
Therefore any return that claims one of these credits that is prepared in the early part of the filing season will not be released for up to 4 weeks (depending on when the return is filed) instead of the standard 21 days or less timeframe.
Additional Earned Income Tax Credit (EITC) Changes
The following changes were made that may affect individuals who claim EITC on their returns:
Changes for Child Tax Credit and the American Opportunity Education Credit
The PATH Act made the following changes for returns that claim the child tax credit or the American Opportunity credit:
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