The Internal Revenue Service issued proposed regulations Thursday that would require tax preparers to file a due diligence checklist with any federal tax return claiming the Earned Income Tax Credit, starting next year.
The IRS has created Form 8867, “Paid Preparer's Earned Income Credit Checklist,” to help preparers meet the new requirement by obtaining eligibility information from their clients. It is the same form that is currently required to be completed and retained in a preparer’s records, but under the proposed requirements, the form would need to be filed with the IRS accompanying the tax return. The due diligence requirement was enacted by Congress over a decade ago in an effort to reduce errors on returns claiming the EITC, most of which are prepared by tax professionals.
Paid tax return preparers have been required to keep copies of the form, or comparable documentation, 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.
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, so taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.
As many as one in five eligible taxpayers fail to claim the EITC, but 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. The Justice Department has also prosecuted a large number of tax preparers and taxpayers who have filed fraudulent claims for the tax credit.
For 2009, over 26 million people received nearly $59 billion through the EITC. Tax professionals prepare close to 66 percent of these claims.
More information about the EITC and the due diligence requirement for tax return preparers is available on IRS.gov.
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.
10 Comments
WBCFSU, they have done away with the RAL. Another loan product is out there slightly different but available. But payday loans are available, bad credit car loans are everywhere, pawn shops and many unwise choices are still available and usually the poorest tend to make unwise financial choices in every aspect of there lives. You cannot legislate away people making unwise choices. I know I run multiple franchise offices and that the percentage of loan products over last 3 years have dropped severely and it is a very small percentage of our business. People have gotten used to not fearing the IRS and it will take a couple years of strict enforcement to put the fear back into everyone. Go figure the IRS stopped any kind of real enforcement in the 90s and just recently has started to enforce there own rules again. Fast forward several years and you will see an different industry and a different mindset for the American Taxpayer. There will still be those who choose to risk it but they will be a very small percentage of the whole unlike no where they are in the majority in most cases.
Posted by: louisvilleliberty | January 8, 2013 10:40 AM
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I Agree with comment #1 & #2. Reasons being that it is a form of welfare. There are jobs out there if people want to work. I'am almost 64 years old and retirement life is not what it is kicked up to be. I went out there in the work force and I guess I was kinda of lucky and found a job within 45 days. If it wasn't for the back ground check and drug test, I probabbly would have been working in 30 days. EIC is good for people that are out there and trying to make a run of things such as jobs and etc. but on the other hand child care isn't cheep either. If someone tries and has a couple of children and dosen't make that much, at least he or she is trying. I know that EIC has its guide lines and thank goodness for that. As commenter said about big Tax Prepairer Companies such as Block, Liberty that they get paid for every thing that they do and charge a fortune for getting someone's taxes prepared. There should be a stopping point or a limit on how much these companys charge. I, myself get business from them because of what they charge. I don't offer the rapid refund, but if someone cannot wait no longer than two weeks to receive there refund, this world is in much worse shape than I think it is. I hope the ecomony turns around quickly, or quicker than the ecominist thinks it is going to get better and let it be a good thing for everyone, and let everyone pay there fair share acording to there income and do away with EIC reguardless of what individuals make.
Posted by: Bernard | December 21, 2011 9:55 AM
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What ?? Just get rid of EIC and give tax rebates to all.
Well I guess the IRS website will get more activity. Cuz I can cheat and they will never find out.. LOL
Posted by: JDAVIS | October 8, 2011 11:03 AM
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The biggest offender of this problem is Larger corporate companies H & R Block, Liberty Tax Service, Jackson Hewitt Tax Services. Because they charge cliets by the form and they prey on this people. Also people that don't sign returns and say they are self prepared
Posted by: DVELEAS | October 7, 2011 7:24 PM
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From my point of view the regulation to claim the earned income credit (EITC), should be like it was many years ago, you must verification of citizenship or residency (Green Card). The EITC will be given only on earned wages not self employment income. The only qualifying children must be son/daughter or grandchildren, no one else. Since the EITC it is a welfare tool , if the parent(s) let their child to be claimed on another person's tax return because they did not work or are illegal, all they welfare including claiming the EIC will be rescind for life. In order to curtail the illegal claims of EIC preparer by so called tax preparers, the Internal Revenue Service could help by limiting any electronic filing to license accountants like: CPA's, CMA's, EA's and perhaps attorneys.
Posted by: aglorsky | October 7, 2011 3:57 PM
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THIS IS ABSURD... ANOTHER MEANINGLESS "REG" DESIGNED TO OBFUCATE THE PROBLEM... AND YES, THERE WILL ALWAYS BE BOOTLEGGING.
Posted by: JFKEQUAL | October 7, 2011 2:24 PM
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The EITC is a federal welfare program and I bet one of the most expensive ones to. Just by sending in form 8867 instead of keeping it in your files only, will not stop this fraud magnet...
Instead of adding layer and layer of regulations on tax preparers, what the head of the IRS should be doing is telling Congress that the EITC does not belong in the tax code and to take it out and have the appropriate welfare agency deal with it.
Posted by: taxking | October 7, 2011 1:17 PM
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Asking question and getting answer to taxpayer's tax information would give me a clue if there is something out of legitimate facts. I usually tell the taxpayer the consequences, but still insists he/she will pay back the refund if caught. As a result, a client is lost because he will be told to look for another tax preparer who will do return.
This more information about the EITC is much welcome. The form needs to be signed by the taxpayer.
fintax
Posted by: Unknown | October 7, 2011 11:47 AM
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As usual the IRS uses the shotgun approach to dealing with a problem. I agree with Comment 1, not all taxpayers are duped by a shyster preparer. Most of the ineligible claims are filed by taxpayers who know how to play the system. Why not do away with the RALs that allows the taxpayers to get this illegal refund in seventy-two hours or less? If I am going to work for the IRS, I want their benefits too.
Posted by: WBCFSU | October 7, 2011 11:17 AM
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Here's a novel idea. Why not make the TAXPAYER provide all this information directly in a separate filing? Why load the TAXPAYER'S burden onto the PREPARER? If the taxpayer is too lazy, or wants to provide false information, let the penalties and punishment fall directly on him.
Posted by: dague | October 7, 2011 10:39 AM
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