The Internal Revenue Service announced that it is issuing proposed
regulations that would require paid tax return preparers, beginning in 2012, to
file a due diligence checklist, Form 8867, with any federal return claiming the
Earned Income Tax Credit (EITC). It is the same form that is currently required
to be completed and retained in a preparer’s records.
The due diligence requirement, enacted by Congress over a decade ago, was designed
to reduce errors on returns claiming the EITC, most of which are prepared by
The IRS created Form 8867, Paid Preparer’s Earned Income Credit Checklist, to help preparers meet the
requirement by obtaining eligibility information from their clients. Preparers
have been required to keep copies of the form, or comparable documentation,
which is subject to review by the IRS. To help ensure compliance with the law
and that eligible taxpayers receive the right credit amount, the proposed
regulations would require preparers, effective Jan. 1, 2012, to file the Form
8867 with each return claiming the EITC.
Further details can be found in REG-140280-09. Comments on the proposed
regulations are due by Nov. 10, 2011, and a public hearing on the proposed
regulations is scheduled for Nov. 7, 2011.
The EITC benefits low-and moderate-income workers and working families and
the tax benefit varies by income, family size and filing status. Unlike most
deductions and credits, the EITC is refundable –– taxpayers can get it even if
they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.
Although as many as one in five eligible taxpayers fail to claim the EITC,
some of those who do claim it either compute it incorrectly or are ineligible.
The IRS is proposing this step as part of its efforts to ensure that the credit
is afforded to taxpayers who qualify. For 2009, over 26 million people received
nearly $59 billion through the EITC. Tax professionals prepare close to 66
percent of these claims.