Keys to Mastering Due Diligence Requirements and

Audits

Today our seminar will:

• Review paid preparer due diligence requirements • Discuss due diligence documentation requirements • Describe IRS due diligence contact methods • Explain the due diligence audit process • Provide paid preparers online educational resources

Poll Question 1

Are you aware of the paid preparer due diligence requirements?

a) Yes b) No

Preparer Due Diligence As a paid tax return preparer, you must:

Complete Compute Ask all and the credits Keep the right submit based on records questions Form the facts 8867

Preparer Due Diligence

Ask all the right questions

Request documentation when additional information is needed to verify a claim for: • EITC • CTC/ ACTC/ ODC • AOTC • HOH

When are Client Documents Needed?

Be sure to keep a paper or electronic copy

Poll Question 2 Should a paid tax preparer request documentation if the client is a grandparent claiming Earned Income Tax Credit for her grandchild?

a. Yes, documentation is always required

b. No, if responses to probing questions are documented and appear to be correct, consistent and complete

c. No, grandparents are never required to provide supporting documents

Poll Question 2 Answer Should a paid tax preparer request documentation if the client is a grandparent claiming Earned Income Tax Credit for her grandchild?

a. Yes, documentation is always required

b. No, if responses to probing questions are documented and appear to be correct, consistent and complete

c. No, grandparents are never required to provide supporting documents

Preparer Due Diligence Compute the credits based on the facts

Complete and

Submit Form 8867

Preparer Due Diligence

Keep records

Poll Question 3

To satisfy due diligence when clients claim certain tax benefits, should a paid tax preparer list documents to substantiate the claim on the completed Form 8867?

a. Yes, if documents were provided by the client and relied on to determine credit eligibility, list them on the Form 8867

b. Yes, if documents were requested by the paid preparer and relied on once received to determine credit eligibility, list them on the Form 8867

c. No, documents relied on should not be listed on the Form 8867

d. A and B only

Poll Question 3 Answer

To satisfy due diligence when clients claim certain tax benefits, should a paid tax preparer list documents to substantiate the claim on the completed Form 8867?

a. Yes, if documents were provided by the client and relied on to determine credit eligibility, list them on the Form 8867

b. Yes, if documents were requested by the paid preparer and relied on oncereceived to determine credit eligibility, list them on the Form 8867

c. No, documents relied on should not be listed on the Form 8867

d. A and B only

Contact Methods

Letter 5025 – You may not have met duediligence requirements

Letter 4858 - Due diligence requirements may not have been met

Letter 5364 - Missing Forms 8867 Alert

• Don’t Panic

• Take action

• Review due diligence requirements

• Review your office procedures

What Should You Do if You Receive a Letter?

Is it really the IRS? Educational Phone Calls

IRS representative will:

• not demand any payments • provide an IRS employee ID number • refer to previous IRS contact • ask security questions to confirm appropriate preparer

on the line • provide educational information

Educational Office Visit

Video Placeholder – Part I

Preparer Notification

Video Placeholder – Part II

The Exam

Video Placeholder – Part III

Examination Report - Letter 1125

Due Diligence Penalties and Next Steps

Correspondence Exam

Credits subject to recertification...

• Earned Income Tax Credit (EITC)

• Child Tax Credit (CTC)/Additional Child Tax Credit (ACTC)/Credit for Other Dependents (ODC), and

• American Opportunity Tax Credit (AOTC)

Recertification

Poll Question 4 If a client was denied a credit and is now required to file an additional form (Form 8862) with the IRS to claim the credit, does this apply to HOH as well?

a. No, Form 8862 is only required to recertify when EITC, CTC/ACTC/ODC or AOTC is disallowed

b. Yes, Form 8862 is required to recertify all benefits

c. Yes, only if EITC is required for recertification

d. No, Form 8862 is required to recertify EITC only

Poll Question 4 Answer If a client was denied a credit and is now required to file an additional form (Form 8862) with the IRS to claim the credit, does this apply to HOH as well?

a. No, Form 8862 is only required to recertify when EITC, CTC/ACTC/ODC or AOTC is disallowed

b. Yes, Form 8862 is required to recertify all benefits

c. Yes, only if EITC is required for recertification

d. No, Form 8862 is required to recertify EITC only

Online Educational Resources

Tax Preparer Toolkit: https://www.irs.gov/toolkit

Thank you for attending

Keys to Mastering Due Diligence Requirements and Audits