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:
Tax Preparer Security Awareness
June 19, 2019
2019 Federal Tax Changes
April 24, 2019
When a Rental Activity Can Be Included as Qualified Business Income
March 19, 2019
Safe Harbor Rule for Autos that Claim Bonus Depreciation
February 27, 2019
2018 Federal Return and Taxpayer Expectations
January 30, 2019
Reminder of 2018 Itemized Deduction Changes
January 16, 2019