Purpose of Form 8867
Form 8867, Paid Preparer’s Due Diligence Checklist, is a crucial document for tax return preparers. Its primary purpose is to ensure that preparers have conducted the necessary due diligence to support claims for specific tax credits on behalf of their clients. By completing Form 8867, preparers can demonstrate that they have taken reasonable steps to verify the eligibility of taxpayers for these credits.
Preventing Fraudulent Claims
Form 8867 plays a vital role in preventing fraudulent claims for tax credits. The due diligence requirements outlined in the form help to deter preparers from submitting inaccurate or inflated claims. By requiring preparers to document their inquiries and the responses received from taxpayers, Form 8867 creates a paper trail that can be used to identify and investigate potential fraud.
Eligible Tax Credits
Form 8867 primarily focuses on three key tax credits: the Earned Income Credit (EIC), Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC), and American Opportunity Tax Credit (AOTC). These credits are designed to provide financial assistance to low-income individuals and families, reduce the tax burden for families with qualifying children, and assist eligible students with educational expenses.
General Instructions
Form 8867 provides general instructions for tax return preparers to accurately complete the form and fulfill their due diligence requirements. These instructions emphasize the importance of gathering accurate information from taxpayers, verifying their eligibility for the claimed credits, and maintaining records of all inquiries and responses. By following these instructions, preparers can ensure that they are meeting their due diligence obligations and helping their clients to claim the tax credits they are entitled to.
Conclusion
Form 8867 is an essential tool for tax return preparers to demonstrate their due diligence in verifying the eligibility of taxpayers for certain tax credits. By completing the form accurately and maintaining proper records, preparers can help to prevent fraudulent claims and ensure that their clients receive the benefits they are entitled to.
References
- Internal Revenue Service: Earned Income Tax Credit
- Taxes for Expats: Where’s My Refund? New IRS Form 8867
- American Bar Association: Get Ready for Form 8867 and Related Due Diligence
FAQs
What is Form 8867?
Form 8867 is the Paid Preparer’s Due Diligence Checklist. It is used by tax return preparers to document their due diligence in verifying the eligibility of taxpayers for certain tax credits, such as the Earned Income Credit (EIC), Child Tax Credit (CTC), and American Opportunity Tax Credit (AOTC).
Why is Form 8867 important?
Form 8867 is important because it helps to prevent fraudulent claims for tax credits. By requiring preparers to document their inquiries and the responses received from taxpayers, Form 8867 creates a paper trail that can be used to identify and investigate potential fraud.
What are the general instructions for completing Form 8867?
The general instructions for completing Form 8867 are as follows:
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- Gather accurate information from the taxpayer.
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- Verify the taxpayer’s eligibility for the claimed credits.
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- Maintain records of all inquiries and responses.
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- Complete Form 8867 accurately and attach it to the taxpayer’s tax return.
What are the consequences of failing to complete Form 8867?
Failure to complete Form 8867 may result in the disallowance of the claimed tax credits. Additionally, preparers may be subject to penalties for failing to meet their due diligence requirements.
Who is required to complete Form 8867?
All paid tax return preparers are required to complete Form 8867 for any tax return that claims the EIC, CTC, ACTC, or AOTC.
What should preparers do if they are unable to verify a taxpayer’s eligibility for a tax credit?
If a preparer is unable to verify a taxpayer’s eligibility for a tax credit, they should not claim the credit on the taxpayer’s return. Instead, they should advise the taxpayer to seek professional tax advice.
Where can I find more information about Form 8867?
More information about Form 8867 can be found on the IRS website: https://www.irs.gov/forms-pubs/about-form-8867