Are we required to see it?

[taxmandan]

In case the client got audited and exposed that he actually does not have the gambling loss record, what consequence might the tax preparer have to face? Does anyone know?

OPR can claim that there is a lack of due diligence by the preparer when only accepting verbal statements and a non-binding signed letter (unlike EITC, the IRS hasn't defined what would be sufficient in the letter to exonerate the preparer). The preparer then goes thru a lengthy process of defending themself to avoid losing their license to practice and changing careers. That can get expensive and worse than handling a tax audit for a client with bad records. You may ultimately prevail and keep your tax license but the process will be painful.

[Questionguy101]

OPR can claim that there is a lack of due diligence by the preparer when only accepting verbal statements and a non-binding signed letter (unlike EITC, the IRS hasn't defined what would be sufficient in the letter to exonerate the preparer). The preparer then goes thru a lengthy process of defending themself to avoid losing their license to practice and changing careers. That can get expensive and worse than handling a tax audit for a client with bad records. You may ultimately prevail and keep your tax license but the process will be painful.

I know it's hard to tell. Based on your experience, how likely is that going to happen?

At least the tax preparer has made an effort to explain the record keeping requirements to the
client. The client has also signed a statement that he had been explained the requirements, he understood the requirements, and he has the requirements in possession.

[Gary2]

OPR can claim that there is a lack of due diligence by the preparer when only accepting verbal statements and a non-binding signed letter (unlike EITC, the IRS hasn't defined what would be sufficient in the letter to exonerate the preparer). The preparer then goes thru a lengthy process of defending themself to avoid losing their license to practice and changing careers. That can get expensive and worse than handling a tax audit for a client with bad records. You may ultimately prevail and keep your tax license but the process will be painful.

What makes this different from asking to see a marriage license, divorce decree, or proof that spouse moved out before June 30?

The EITC due diligence rules only talk about having to ask more questions if there is anything inconsistent, incomplete, or incorrect. It doesn't explicitly ask that you see the proof (though it suggests it in the case of self-employment income). While some numbers being bandied about for losses might make you ask about consistency (you won't have $100K in losses on $30K in income), with more common numbers there's usually no reason to think they're implausible.