The IRS is starting this year's Earned Income Tax Credit due diligence compliance audits of return preparers.
To select preparers for audits, the service will "look at returns with a high chance of errors competed by the same preparer," according to the EITC Central sectionof IRS.gov.
The audits review at least 25 EITC returns for the preparer's due-diligence records, the "probing questions asked" and the client's responses, and all questionnaires, checklists and worksheets.
Audit visits will also include a review of EITC claims for compliance with Revenue Code Section 6695(g). Compliance requirements include:
- Completion and submission of Form 8867;
- Completion of the EITC worksheet;
- Compliance with the "knowledge" requirement; and,
- Compliance with record-keeping requirements.
Non-compliant return preparers face penalties of $500 per return and other consequences.
IRS auditors will also review a preparer's PTIN registration status and personal federal tax filing requirements.
The service's EITC Central contains more information on preparer EITC due diligence training resources.
The IRS estimates that between 21 percent and 25 percent of EITC payments were issued improperly during fiscal 2012, or approximately $11.6 billion to $13.6 billion. Those estimates may be understated.
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