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Proposed Due Diligence Checklist Requirement

The due diligence requirement, which was passed by Congress over a decade ago, was designed to reduce errors on returns claiming the Earned Income Tax Credit (EITC).  Form 8867, the Paid Preparer’s Earned Income Credit Checklist, is designed to help preparers meet the due diligence requirement as it aids them in obtaining eligibility information from their clients.  As many as one in five eligible taxpayers fail to claim EITC, and some of those who do claim it either compute it incorrectly or are indeed, ineligible. 

The IRS believes a new regulation will help ensure the correct credit is given to taxpayers who qualify and has issued a proposition that will require paid tax preparers to file Form 8867 with any federal return claiming the EITC.  This is the same form tax professionals who prepare returns that claim the EITC are already required to complete and retain in their records.

If the proposition is passed, the effective date will be January 1, 2012.

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