IRS 8867 Explained

What is IRS 8867?

IRS 8867, also known as the Paid Preparer's Due Diligence Checklist, is a tax form used to ensure that tax preparers comply with due diligence requirements when claiming certain tax credits. Specifically, it is used for the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and American Opportunity Tax Credit (AOTC). This form is mandated for professional tax preparers, helping to safeguard both the taxpayer and the IRS by encouraging accuracy and compliance during the tax preparation process.

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Purpose of IRS 8867

The primary purpose of IRS 8867 is to promote thoroughness and accuracy in the preparation of tax returns claiming various credits. By requiring preparers to document their compliance with due diligence standards, the IRS aims to reduce instances of fraud and errors in tax filings. This checklist serves as a guide, helping tax preparers confirm they have taken necessary steps to verify the eligibility of clients for specific tax credits, thereby protecting taxpayers and ensuring fair application of tax laws.

Where is IRS 8867 used and by whom?

IRS 8867 is primarily utilized by professional tax preparers, including accountants and tax advisors. It is relevant in various scenarios, such as:

1.

When an individual qualifies for the EITC based on income and family situation.
2.

When claiming the CTC or ACTC, helping families with dependent children.
3.

For students or their parents applying for the AOTC for qualified education expenses.
4.

Tax preparers who want to ensure compliance with IRS due diligence requirements.

Individuals filing for these credits may not fill out the form directly but should ensure their preparer is using IRS 8867 to validate the claims being made on their behalf.

Step-by-step: how to fill out IRS 8867

Completing IRS 8867 can be straightforward if done step by step. Here’s how to fill it out:

1.

Prepare necessary documentation: Gather all relevant documents related to the credits being claimed, such as income statements, SSNs, and any necessary proof of eligibility.
2.

Section A: Identify the claims: This section requires you to check the appropriate credits being claimed.
3.

Section B: Eligibility Verification: Complete questions about the eligibility criteria for the credits you’re claiming. This includes verifying income thresholds and dependent status.
4.

Section C: Due Diligence Information: Input any additional information that supports the due diligence required for the claims.
5.

Signature: Finally, sign and date the form to acknowledge that you have completed it accurately and in good faith.

Using a platform like pdfFiller can streamline the completion process, allowing users to edit, save, and submit their information easily.

Who is required to complete IRS 8867?

IRS 8867 is required to be completed by tax preparers who are filing returns that claim any of the relevant tax credits, including:

1.

Individuals who prepare taxes professionally (such as CPAs and tax advisors).
2.

Tax return preparers employed by financial institutions or agencies.
3.

Any preparer that receives compensation for preparing tax returns claiming EITC, CTC, ACTC, and AOTC.

In essence, if you're a tax preparer and your client is seeking any of these credits, you're obligated to complete IRS 8867 to meet IRS due diligence requirements.

Information you need to complete IRS 8867

To accurately fill out IRS 8867, the following information is required:

1.

Client's Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
2.

Details on all dependents being claimed.
3.

Income documentation to support claims for tax credits.
4.

Proof of residency and relationship for dependents.
5.

Any other relevant paperwork that supports the credit claims.

Gathering all necessary information before starting will make the completion process more efficient.

How to submit IRS 8867

Once IRS 8867 is completed, there are several ways to submit it:

1.

Online Filing: Many tax software programs integrate IRS 8867 for electronic submissions along with the tax return.
2.

Mail: If filing by paper, attach IRS 8867 to the tax form being submitted to the IRS.
3.

IRS Systems: Form submission through IRS systems requires adherence to IRS protocols and online access.

Remember to check for deadlines regarding tax submissions and ensure all elements of the tax return are in order before sending.

When to update or refile IRS 8867

There are several instances when you might need to update or refile IRS 8867:

1.

If there is a change in dependent status.
2.

If the client's income fluctuates and affects credit eligibility.
3.

For any updates or corrections made to the original tax return.
4.

If there are changes in residency or qualifying criteria for dependents.

Always keep documentation updated to reflect any changes to support the claims made on the form.

What happens if you don’t file IRS 8867?

Failure to file IRS 8867 can lead to serious consequences, including:

1.

Penalties for the tax preparer for not exercising due diligence.
2.

Denial of the tax credits being claimed, potentially resulting in a higher tax liability for the client.
3.

Increased scrutiny from the IRS during audits of the preparer’s activities.
4.

Reputational damage for the tax preparer, affecting future business prospects.

To avoid these consequences, it is crucial to file IRS 8867 accurately and on time when claiming eligible tax credits.

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Frequently Asked Questions About the IRS 8867

What is the IRS 8867 form and why is it important?

The IRS 8867 form, also known as the Paid Preparer's Due Diligence Checklist, is crucial for tax preparers who are assisting clients with claiming the Earned Income Tax Credit (EITC). This form helps ensure that tax preparers meet their due diligence requirements by documenting the eligibility of the taxpayer for the credit. Failure to comply with the IRS 8867 can lead to penalties for the preparer, making it vital for accurate tax filings.

Who needs to fill out the IRS 8867 form?

Tax preparers who are assisting clients in claiming the Earned Income Tax Credit must fill out the IRS 8867 form. This includes both individual tax preparers and firms providing tax preparation services. It's particularly important for those working with clients whose eligibility for the EITC may be in question, ensuring compliance with IRS regulations.

What are the consequences of not filing IRS 8867 when required?

If a tax preparer fails to file the IRS 8867 form when required, they may face significant penalties from the IRS. These penalties can accumulate quickly, especially if multiple clients are affected. Additionally, a lack of due diligence may result in a higher risk of audits and disputes with the IRS, stressing the need for proper documentation.

What information is required when completing the IRS 8867 form?

When completing the IRS 8867 form, tax preparers must provide specific information about the taxpayer's eligibility for the Earned Income Tax Credit. This includes details on the taxpayer's income, family situation, and any documentation supporting their claims. Gathering and accurately reporting this information is essential to demonstrate due diligence and compliance with IRS expectations.

How can I ensure I comply with IRS regulations regarding the IRS 8867 form?

To ensure compliance with IRS regulations regarding the IRS 8867 form, tax preparers should maintain thorough documentation for each client's eligibility for the EITC. Training staff on due diligence requirements and using reliable software can aid in capturing necessary information. Regularly reviewing IRS guidelines will also help stay current with any changes affecting the IRS 8867 requirements.

What should I do if I submit the IRS 8867 form but realize I made an error?

If an error is made on the submitted IRS 8867 form, it is crucial to address the mistake as soon as it's discovered. Tax preparers can submit an amended return or contact the IRS for guidance on correcting the information. Resolving errors quickly can help mitigate potential penalties and ensures your client’s tax filing is accurate.

Are there any exemptions when it comes to completing the IRS 8867 form?

Certain circumstances may exempt a tax preparer from completing the IRS 8867 form. For example, if a taxpayer has claimed the EITC in prior years under similar circumstances, the IRS 8867 may not be necessary. However, it’s essential to review each case individually and to document any exemptions thoroughly to avoid penalties.

How does the IRS 8867 support tax compliance?

The IRS 8867 plays a significant role in supporting tax compliance by encouraging tax preparers to perform due diligence when claiming credits like the EITC. By documenting the eligibility criteria and ensuring proper verification, the form promotes accurate tax reporting. This, in turn, helps protect both the taxpayer and the preparer from audits and penalties.

What resources are available to help with completing the IRS 8867 form?

Numerous resources can help tax preparers complete the IRS 8867 form accurately. The IRS website provides detailed instructions and guidelines for filling out the form, including examples of acceptable documentation. Additionally, tax preparation software often includes tools and prompts to ensure all required information is collected and documented correctly.

Is the IRS 8867 form the same every year, or does it change?

The IRS 8867 form can change from year to year based on updates to tax laws and regulations. It's important for tax preparers to stay informed about any modifications to the form or its requirements. Regularly checking the IRS website for updates ensures that you have the most current information and can file accurately.

Author:

by Iryna Marchuk

Lead Writer/Blogs Manager at airSlate

Disclaimer: This content is for informational purposes only. It is not legal or other professional advice. airSlate provides this material on an "as-is" basis and disclaims all representations, guarantees, or warranties, whether express, implied, or statutory, including but not limited to warranties of merchantability, fitness for a particular purpose, or accuracy.