The Internal Revenue Service is reminding tax preparers to include complete Earned Income Tax Credit checklists with any tax returns they file claiming the tax credit.
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The IRS is also asking software companies to remind preparers that they could be assessed a penalty if they fail to comply with the due diligence requirements.
The IRS said in an email to tax preparers Monday that it has noticed a large number of returns with the Form 8867, “Paid Preparer’s Earned Income Credit Checklist,” have incomplete information. The IRS added that it will not reject a return if the information is missing on Form 8867, but these returns will be suspended, causing a potential delay in refunds if the information is missing.
The IRS also wants tax software companies and electronic filers to ensure that the checklists are complete and remind tax preparers that they could face stiff penalties without the information.
“We are asking software developers and transmitters to communicate the Form 8867 information requirements through their software and other communication channels,” it said. “Specifically, when Form 8867 is present in a return and Earned Income Credit is claimed, entries for lines 22, 23, 24, 25, both parts of 26, and 27 must be present. We recommend that the software ensures these lines on Form 8867 have entries in order to avoid processing delays that could impact refunds. We also ask that you remind preparers that they could be assessed a penalty if they fail to comply with the due diligence requirements.”
The IRS has been promoting awareness of the EITC while also working to cut down on the high incidence of fraudulent tax returns claiming the EITC and other refundable tax credits (see IRS Promotes EITC Awareness Day and IRS to Tighten Controls over Refundable Tax Credits). Last year, the IRS sent letters to preparers who were suspected of filing inaccurate EITC claims (see IRS Fires off EITC Warnings).