Due Diligence Form 8867

[Kram BergGold]

Question 7 asks “Did you ask the taxpayer if any of these credits were disallowed or reduced in a previous year”.
If I ask this question, 90% of my clients will give me the look of total non understanding. The reality is, if they got a letter taking money away from them, they would have sent a copy to me. So there really is no need to ask this. Any feelings about being honest and answering ""no"?

[TaxGuyBill]

Then the IRS might have full right to say that you did not do your "due diligence" and charge you an enormous penalty.

How would asking all your clients the more generalized question "Did you receive any IRS notices or adjustments?" work? (I have a Yes/No Questionnaire that I have my clients fill out that includes that question.) Then only ask the specific 'disallowance' question to those that answer "yes" to the IRS Notice/Adjustment question.

That way, you may be able to check 'yes' because you asked a more general question that includes the specific 'disallowance' question.


What do you think?

[Rapid Robert]

"If I ask this question, 90% of my clients will give me the look of total non understanding."

In my practice, more than 90% of my clients will not need this form, so I'll probably just ask the few who need it specific questions. While I do have a Yes/No questionnaire for everyone, I also typically have a few template email paragraphs I can paste into a message to specific clients.

[Gretel]

I believe this question is not just asking about the past year (which may be covered in a questionaire) but ever received. Isn't there a 5-year time period of disallowance after that?

[David1980]

I suspect some of the questions aren't speaking to any current preparer requirements but rather data collection that could create future requirements. Like how question 5 starts "Did you satisfy the record retention requirement?" - an actual requirement.

I would look at what the requirements are independent from the form. Then complete the form honestly. It's probably a good idea to meet the requirements but that doesn't mean every question will be answered yes.

That is, does the preparer have a requirement to ask about prior year disallowances?