New page 4 -- revised form 8867

[Black Bart]

http://www.irs.gov/pub/irs-pdf/f8867.pdf

I should have quizzed that IRS seminar speaker about what's best on this. He mentioned the new additional page four on the 8867 EIC checklist, but didn't go over it at all. They want the kid's pedigree and it looks like it's going to be a pain in the neck -- about all the proof anybody usally has with them about their kids is a social security card which does not prove where they lived.

Guess we could check the "Did not rely on any documents, but made notes in file" box. But...notes saying what? Maybe "John Doe swears on his honor as a Southern gentleman that these kids live with him!" Or Jane Doe says "I promise you that I really, really, really, sure-enough did do housework for ten ladies who pay me cash and refuse to see/hear/speak of a W2 and/or Schedule H."

[Kram BergGold]

My understanding

If you prepare a handful of EIC returns and you know your clients from working with them for years I think page 4 can be filled out without to much hassle. The IRS is going after preparers who do mnay, many EIC returns.

[taxxcpa]

Going after preparers

It is more efficient, from the IRS standpoint, to go after the preparers rather than the EIC claimants themselves.

Since I only do two or three EIC returns, I am probably not worth the IRS's time to check the EIC returns I do.

[Nashville]

Answer the Question

With all due respect to the people who have responded with sound logic, the question has not been answered.

How do you substantiate the requirements on Page 4 of 8867?

[taxxcpa]

One method that might work is school records showing the child's residence.

[FEDUKE404]

Dealing with Part IV

With all due respect to the people who have responded with sound logic, the question has not been answered.

How do you substantiate the requirements on Page 4 of 8867?

It would appear the instructions printed below line 24 of Form 8867 and the comments at the bottom of Page 4 in addition to the instructions on page 2 of the instructions ( http://www.irs.gov/pub/irs-pdf/i8867.pdf ) for lines 24/25 would answer your question.

You may also wish to look around Circular No. 230.

Of course, as many here have stated, "Plan B" is simply to let someone else handle those EIC returns..... To quote a good friend of mine who is an attorney: "I would NEVER want to be a criminal attorney, because you have to......work with criminals!!"

FE

[Redneck]

NSTP seminar

Just back from a NSTP seminar, one of the questions in the back of the book:

PREPARER QUESTION: What are the new record keeping requirements?

IRS ANSWER: You have to keep any document your client gives you that impacts or supports how you determined eligibility for or the amount of EITC. The new requirements DO NOT REQUIRE YOU TO ASK FOR OR REVIEW ANY MORE DOCUMENTS than you would have under the old requirements, but now you are required to keep a COPY OF ANY DOCUMENT YOU RECEIVED FROM THE CLIENT AND RELIED ON to determine EITC eligibility or the amount of EITC.

[JohnH]

So much for the paperless office concept if you handle lots of EIC returns...

[Black Bart]

...Since I only do two or three EIC returns, I am probably not worth the IRS's time to check the EIC returns I do.

Very likely true and probably only people like mlinderEA (doing 2K+ EICs in DC) need to worry, but at $500 a pop who wants to take a chance?

It would appear the instructions printed below line 24 of Form 8867 and the comments at the bottom of Page 4 in addition to the instructions on page 2 of the instructions ( http://www.irs.gov/pub/irs-pdf/i8867.pdf ) for lines 24/25 would answer your question.

You may also wish to look around Circular No. 230.

If you think this IRS boilerplate is the answer, then you haven't done many EIC returns. The question is, how to satisfy an IRS agent if he shows up and, at the same time, not run off customers with what they'll see as new/burdensome demands. Say I've been doing Jack's return a couple of years and maybe I know he's got three kids, but suddenly I say go back home (maybe a mile, maybe 20), go to the school, have 'em dig up records on everybody (probably an all-day job), and bring 'em back here. Yeah, some people will; some people won't -- there are always preparers to be found who will do the return with NO records. I've had people come back and say "Preparer Billy Bob said 'No problem' -- you must not know as much about taxes as he does!"

I'll probably do between fifteen and fifty EICs; none of them riff-raff that I know of, but many low-salaried, decent people. I certainly can't say I'm refusing their business this year because some of my colleagues equate EIC receipt with criminality. So there's a balance to be maintained between the more important (to me) customer satisfaction and IRS red tape.

P.S. (self-deleted this intemperate political rant -- no reason boarders should suffer zealotry).

[Y2KEA]

Line 26 of form 8867 page 4 and your duty as an IRS "Auditor"

I do less than 10 EIC returns per year. Not a big deal for me and I have prepared the returns for those clients for some time. None of them are schedule C filers. I know them personally & have no doubt they are legit claims.

That said, I can see the trickle down fallout from the page 4 requirements. After I (and the big box/EIC mills) advise my clients of the needed documentation, the documenting institutions/providers will now be inundated with requests for various forms/verification. Schools, landlords, HC providers, day care providers, ad nauseum will get dumped on for acknowledgments to support the TP claims. These third party documentariens will have increased costs. They will not be happy. The ripple effect will be immense.

Will these providers be prepared, forewarned or blindsided? Time will tell.

Page 4 is not all that ugly. It is quite simple for a QC only. A tax pro may want to let the TP know in advance that certain supporting doc(s) are needed. If you let them know what is required, it will save you time. Assuming they show up.

Line 26 for the QC part only is as follows:

Which documents below, if any, did you rely on to determine EIC eligibility for the qualifying child(ren) listed on Schedule EIC? Check all that apply. Keep a copy of any documents you relied on. See the instructions before answering. If there is no qualifying child, check box a. If there is no disabled child, check box o.
Residency of Qualifying Child(ren)
a
No qualifying child
b
School records or statement
c
Landlord or property management statement
d
Health care provider statement
e
Medical records
f
Child care provider records
g
Placement agency statement
h
Social service records or statement
i
Place of worship statement
j
Indian tribal official statement
k
Employer statement
l
Other (specify)
.
m
Did not rely on any documents, but made notes in file
n
Did not rely on any documents

[taxxcpa]

Black Bart wrote: " I certainly can't say I'm refusing their business this year because some of my colleagues equate EIC receipt with criminality."

I don't think it is equating EIC receipt with criminality. I refuse to do audits, not because I think someone who needs an audit is a criminal. There are several good reasons. For one thing there is a risk if you slip up which could put your license in jeopardy. Also there is the added expense of peer reviews. There is the extra hassle of keeping up-to-date on the constantly-changing rules promulgated by the AICPA which are adopted by the State Boards.

If I did a lot of audits, I could justify these risks, but if I only did one or two, it would not be worthwhile. If I did a thousand EICs, I could probably justify all the extra hassle, but for just two or three--or even a dozen or so, it just is not worth the risk and the hassle, and I can see why many preparers just refuse to do them.

I will still do them for long-time clients that pre-date all of the extra "due diligence" that the IRS keeps adding, but, as George HW Bush might say, "Read my lips, no new EIC clients."

[Gretel]

I do less than 10 EIC returns per year. Not a big deal for me and I have prepared the returns for those clients for some time. None of them are schedule C filers. I know them personally & have no doubt they are legit claims.

Great post with a follow up question since I am in the same situation as you. Having done these returns for 10 years and knowing parents and children personally I refuse to ask any additional question, why would I if the proof hops in front of my eyes? I would fight any IRS to the blood any this. I am not doing any EIC returns for clients any more that do not live in a "classical" father, mother, child(ren) situation.

[taxxcpa]

Once I had a man and his wife come in, but after I did their joint return they found that two head-of-households got more EIC. So the husband came back and told me they were divorced and he wanted to claim one child and his wife would claim the other one.

[taxea]

give the client a blank copy; have them fill it out and sign it; input the info into the tax return and retain the signed copy in your client file

[Gretel]

???

give the client a blank copy; have them fill it out and sign it; input the info into the tax return and retain the signed copy in your client file

????? ?????