Paid Preparer’s Due Diligence Checklist

We keep you updated with the latest news from Martin Hood and helpful information whenever there is a change to employment or tax laws.

Paid Preparer’s Due Diligence Checklist

February 9, 2017

Paid Preparer’s Due Diligence Checklist

In a recent tax meeting, the firm discussed Form 8867 – formerly called the “Paid Preparer’s Earned Income Credit Checklist,” it is now known as the “Paid Preparer’s Due Diligence Checklist.”

The checklist’s name revision is indicative of new requirements for the paid preparer vis-à-vis due diligence. The form is to be completed if the taxpayer is claiming one or all of the following credits: the Earned Income Credit, the Child Tax Credit/Additional Child Tax Credit, and the American Opportunity Tax Credit.

This change is multifaceted, as it will affect both the taxpayer and the preparer regarding the preparation of the return. MHFA is requiring all preparers to acquire and file certain documents that determine the taxpayer’s eligibility for the credit; additionally, if one of these credits is claimed and it impacts the tax return, the preparer (in our case, the firm) will be subject to a $510 penalty for each credit claimed if Form 8867 is not properly filed.

Furthermore, taxpayers will need to provide more information to their preparer in order to determine their eligibility for the above-mentioned credits. For example, residency of a qualifying child may be documented by means of medical records, childcare provider statements, or school records. Similarly, the disability of a qualifying child may be documented through a doctor’s statement, a social services agency or program statement, or another health care provider statement.

As always, we are happy and eager to provide client-specific guidance concerning these new documentation requirements — just give us a call.