EITC Due Diligence

[MAMalody]

I was wondering if anybody had put together any kind of questionnaire about the EITC Due Diligence that is more extensive than the F8867 and would be willing to share that.

[ChEAr$]

I was wondering if anybody had put together any kind of questionnaire about the EITC Due Diligence that is more extensive than the F8867 and would be willing to share that.

I'm scratching my head trying to figure out why we might need a more... invasive (?)
questionnaire. Why would we want or need to know more?

But no, I'm not advocating playing ostrich either.

[Jiggers]

I'm scratching my head trying to figure out why we might need a more... invasive (?)
questionnaire. Why would we want or need to know more?

But no, I'm not advocating playing ostrich either.

Harlan,
I think there has been some posts, either here or elsewhere, that had a return preparer penalized because the 8867 was not enough, according to the IRS.

[Redneck]

Link

This link might help you !!

http://www.eitc.irs.gov/central/main/

or this one

http://www.eitc.irs.gov/rptoolkit/ddmodule/

[JohnH]

If this continues, IRS will eventually be trying to penalize us for refusing to prepare EITC returns, just because we didn't ask enough questions before saying "NO".

[taxxcpa]

I was wondering if anybody had put together any kind of questionnaire about the EITC Due Diligence that is more extensive than the F8867 and would be willing to share that.

I've developed a questionaire asking all of the required questions for the EIC claimant to answer and sign with Form 4822, for them to list/estimate all personal expenses

I tried to upload Form 4822 but it was too large to upload. It cannot be found on the IRS web site although it is an IRS form.

If you are a member of TaxProExchange you can access and download Form 4822

[Gretel]

Thanks, Taxxcpa. That is a nice short form that surely illustrate more due diligence then just form 8867. Last year a user of Drake was willing to share the blank forms which the preparer has to go through in order to finish the tax return. I also watched the movies the IRS has created, which are very enjoyable by the way.

Here is the problem I see with another form: Each case is different and might require different questions. While the movies and lists were very helpful to steer me in the right direction I still feel I have to ask the right questions in the right situation and cannot just go by any list. The more suspicious one is the more questions need to be ask.

While I only have a handful of EIC clients with children, this number also keep going up because incomes go down and limits go up. I will not send clients away that I have known for years just because they now qualify. I also feel stupid asking any questions if it is a "normal" family, father, mother, and two children.

I kind of go back and forth on this. The IRS also says we can rely on what a taxpayers tells us unless we have reason not to. If I know the family I sure have all the reasons to not ask any additional questions. Can they hit me with the penalty in such case? It's stupid but I am sure they can.

[Dusty2004]

Not sure on the form

I've developed a questionaire asking all of the required questions for the EIC claimant to answer and sign with Form 4822, for them to list/estimate all personal expenses

I tried to upload Form 4822 but it was too large to upload. It cannot be found on the IRS web site although it is an IRS form.

If you are a member of TaxProExchange you can access and download Form 4822

At the IRS site 4822 is Taxpayer Filing Attribute Report - what does that have to do with EITC?

Dusty

[Gary2]

At the IRS site 4822 is Taxpayer Filing Attribute Report - what does that have to do with EITC?

That's Pub 4822, not Form 4822. I was able to locate this page on auditing cash busiensses which describes Form 4822 as "Statement of Annual Estimated Personal and Living Expenses".

It sounds like it's not a form intended for taxpayers, but for IRS examiners.

[Redneck]

Form 4822

The only thing that I have found is a 4822 from the State of Vermont see link below.

http://www.state.vt.us/tax/pdf.word.excel/individual/4822-VT.pdf

[origun]

EIC form

I sometimes use the attached form...when I have concerns about the veracity of the client. A required signature sometimes scares them. I use it most frequently when I have a client claiming a "disabled" adult for EITC.

[joanmcq]

Most of the clients I have that get EIC (very few) are people I've known for years. Had a new couple who get EIC based on an odd set of circumstances: he gets a quite nice disability pension, but none of it is taxable due to him being disabled in the line of duty. She owns her own business (Sch C) and gets 1099s for most of the income, since the products she makes are mostly sold wholesale. BUT- her income does put them into a decent EIC. Not the sweet spot, but close.

So I'm in their home interviewing them while she is making stuff. I have no reason to doubt the numbers, and I know their daughter lives there. But the return does look really wierd, since the mortgage & other itemized deductions zeros out their taxable income.

[taxxcpa]

At the IRS site 4822 is Taxpayer Filing Attribute Report - what does that have to do with EITC?

Dusty

What does it have to do with EIC?
It is not a REQUIRED form, but if someone has $ 60,000 in living expenses and claims an income of only $ 30,000, this form, filled out and signed by the lying client would be useful in deciding whether to prepare an EIC return for him or to tell him that you will not stick your neck out for him.

As I indicated previously, this form is not available on the IRS web site. The IRS sometimes asks people to fill it out in an effort to determine whether the person's reported income is sufficient to justify his cost of living. It is also used in some cases other than for EIC.

I got my copy of it from someone on the Drake Forum who had a client that was asked to fill it out.

[OtisMozzetti]

...
The IRS sometimes asks people to fill it out in an effort to determine whether the person's reported income is sufficient to justify his cost of living.
...

It seems entirely reasonable to me that many people will not have reported taxable income during any particular year that comes up to their apparent cost of living during that year. They may be living off of their own assets or off of current inheritances. They may be supplementing their reported taxable income with various government benefits, EIC being one of those. They may have some of their support paid by other people. They might be in the process of borrowing money, such as student loans or other. They might be living on a bare bones lifestyle.

[DonPriebe]

Two comments ...

First - The Korean Free Trade Bill (HR 3080) increased the penalty for lack of due diligence by an EITC preparer from $100 to $500. The final rules issued yesterday (December 20) also mandate the use of Form 8867 and it's filing as part of the return. http://www.irs.gov/newsroom/article/...251459,00.html

Second - The IRS is presenting a webinar on EIC Due Diligence on January 4.

http://www.visualwebcaster.com/Event.asp?id=84231