Preparer Due Diligence Requirement Expansion Reminder
This is a reminder that the preparer due diligence requirements were expanded by the PATH Act last year to include the child tax credit and the American Opportunity education credit as well as the earned income tax credit. This means that under IRS Code section 6695(g) the IRS has the authority to penalize a tax preparer $510 for each return (and for each credit on that return) for which the preparer fails to comply with the due diligence requirements related to these three credits.
The Four Due Diligence Requirements can be summed up as follows:
It is important to note that preparers need to pay particular attention to meeting the knowledge requirement and be sure that they are asking enough questions to ensure they have enough information to be sure each of these credits is correctly claimed. Lack of meeting the knowledge requirement is the area where a due diligence penalty is assessed is most cases when the IRS performs a due diligence audit.
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:
2018 Depreciation Changes
October 18, 2018
2018 Tax Law Changes that are Directly Reported on Form 1040
October 3, 2018
IRS Tax Transcripts Changes
September 27, 2018
Revised 2018 Schedule A due to Tax Cuts and Jobs Act Changes to Itemized Deductions
August 29, 2018
2018 Expansion of Preparer Due Diligence Requirements
August 8, 2018
IRS Accepting Renewal Applications for ITINs Expiring at End of 2018
July 25, 2018