The IRS is sending due diligence letters to paid preparers who may be noncompliant in meeting their Earned Income Tax Credit due-diligence requirements.

These letters are sent to raise awareness of questionable returns and remind paid preparers of their due-diligence requirements. The IRS will continue to monitor the EITC returns prepared in the upcoming filing season to see if the quality of the preparers’ returns improves, the agency said.

The letters, in both English and Spanish, can be seen on EITC Central.

Preparers who completed highly questionable EITC claims may receive one of the following:   

  • Letter 5025: You may not have met your due-diligence requirements on returns with questionable qualifying children and self-employment income.
  • Letter 5025C: You may not have met your due-diligence requirements on returns with self-employment income.
  • Letter 5025Q: You may not have met your due-diligence requirements on returns with questionable qualifying children.
  • Letter 5138: Return Preparer EITC Client Audit Notification.

Effective for tax year 2016, Congress expanded the EITC due-diligence requirements to include two additional refundable credits: the Child Tax Credit/Additional Child Tax Credit and the American Opportunity Tax Credit.
One of four due-diligence requirements is completion and submission of Form 8867, Paid Preparer’s Due Diligence Checklist. Form 8867 requires paid preparers to certify that they have confirmed clients’ eligibility for each of the credits: EITC, CTC/ACTC and AOTC.

The draft Form 8867 and instructions, both now available for public comment, have been modified to include these credits.

Late this month, on the EITC Central tax preparer toolkit, the IRS will offer a free training course about these changes to help preparers meet refundable credits due-diligence requirements and earn one CE credit.

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