Due diligence is the responsibility of a paid tax preparer. The Internal Revenue Service (IRS) created Form 8867 Paid Preparer’s Due Diligence Checklist for paid tax preparers to certify,
to the best of their knowledge, that the answers to the form questions are true, correct, and complete. Preparers are required to submit this form with every tax return they prepare
that contains one of the following tax benefits. Failure to comply with these requirements may result in a monetary penalty for violation.
Per IRS guidelines, a paid tax return preparer can face potential consequences for not meeting the due diligence requirements listed on Form 8867. A firm employing a preparer can also
be subject to consequences for an employee’s failure to follow these due diligence rules. You must meet specific due diligence requirements if you are paid to prepare a tax return or to
claim a refund on any of these tax benefits:
Earned Income Tax Credit (EITC)
Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), Credit for Other Dependents (ODC)
American Opportunity Tax Credit (AOTC)
Head of household (HOH) filing status
Directions
Locate and read through Form 8867, Paid Preparer’s Due Diligence Checklist, found in the Supporting Materials section. You will be asked to specifically address items on the form and
to expand on the expectations of the tax preparer in meeting the due diligence requirements outlined in Form 8867.
Specifically, you must address the following rubric criteria:
1. Introduction
A. Describe the requirements of tax practitioners relating to due diligence in 1–2 paragraphs.
2. Knowledge Requirement
A. Explain how a tax practitioner can satisfy the knowledge requirement discussed on Form 8867.
3. Document Retention Record Keeping Requirement
A. Describe the type of documentation relied upon to complete Form 8867 and any accompany worksheets relating to applicable tax credits or HOH filing status.
4. Inquiry Level – Reasonable Inquiries
A. Explain the types of inquiries that should be made to complete Form 8867 with proper due diligence.
B. Consider discussing the credit-specific (and filing status-specific) questions noted on Form 8867.
