IRS Begins EITC Due Diligence Audits

The Internal Revenue Service has begun conducting on-site inspections of tax preparers who continue to have problems with verifying their clients’ eligibility for claiming the Earned Income Tax Credit, and warned that the penalty has increased.

In an email to tax professionals last Friday, the IRS said that in keeping with its EITC Compliance Program, which ensures tax preparers practice proper due diligence, the IRS will begin conducting on-site audits of preparers who received pre-filing season warning letters and whose 2015 EITC returns appear not to have improved. 

The IRS said it is also sending acknowledgement alerts to tax preparers who filed two or more tax year 2015 e-filed returns claiming the Earned Income Tax Credit without submitting Form 8867, Paid Preparers’ EITC Checklist.

However, the alerts contained the wrong penalty of $500 per return. The penalty amount has been adjusted to $505 per return as required by Revenue Procedure 2016-11.

More due diligence information can be viewed on the EITC Central page on IRS.gov.