EIC due diligence question

[JenMO]

I know most of my EIC clients. Is it enough to note in the "other" box that I personally know the family?

[ddoshan]

AS I understand it, you don't have to do anything special at all if as far as you know or maybe should know that there is nothing out of the ordinary or unusual in the clients situation. If there is something unusual, or you suspect something is fishy, then you / we are required to ask more in depth questions and document what we asked and the clients answers. In most EIC cases, I don't think we are required to do anything different than what we have done or should have done in the past.
Most important would be to ask - verify as to if anyone else lives in the household. Determine if the child is or could be a qualifying child of anyone else other than your client. If self employed, then be confident the income is sensible and not just some made up figure.

[FEDUKE404]

Dealing with Form 8867

I know most of my EIC clients. Is it enough to note in the "other" box that I personally know the family?

Even if you "know" the clients, the expanded Part IV of the 2012 Form 8867 still has some "must answer" questions that might require some more work on your part.

Were I to have more than a handful of EIC clients, I probably would be extremely careful to do MORE work than is necessary as opposed to what I think might be sufficient.

FE

[geekgirldany]

Like I said in another post, even though I have known my EIC clients for years I am still getting the extra docs this year from them.

[beck]

Like I said in another post, even though I have known my EIC clients for years I am still getting the extra docs this year from them.

I'm with you. I have long time clients that are friends who are eligible for EIC. I am asking for the extra resident documentation in the form of a school report card on the school age kids and a health/doctor report/statement on the lil ones.

Beck

[taxea]

I send the form pages to the client, have them answer the questions and sign/date the final page. When they send the completed form back to me I input the information they supplied. This way I have documentation that all the answers came directly from the TP.

[David1980]

I send the form pages to the client, have them answer the questions and sign/date the final page. When they send the completed form back to me I input the information they supplied. This way I have documentation that all the answers came directly from the TP.

I still wonder what you do when they indicate they relied on records on line 26 and you don't have a copy of those records.

[KBTS]

I send the form pages to the client, have them answer the questions and sign/date the final page. When they send the completed form back to me I input the information they supplied. This way I have documentation that all the answers came directly from the TP.

Sorry, but what you are describing is not "due diligence" unless you are asking further questions about any information which appears "incorrect, inconsistent, or incomplete". The amount of questioning needed is the source of tons of debate on this board, but the fact remains that it is required of the preparer.

[FEDUKE404]

Living dangerously to say the least

I send the form pages to the client, have them answer the questions and sign/date the final page. When they send the completed form back to me I input the information they supplied. This way I have documentation that all the answers came directly from the TP.

Sorry, but "answers" in no way constitute proof, especially not as defined in today's EIC world.

Over the years (at store front place for several years) I've had plenty of folks who likely were lying through their teeth to me. And all those answers "came from the TP." Footnote from FE: PLEASE don't go off on a tangent that I was committing fraud...they knew quite well "how" to answer certain questions I pose, and at that stage I generally had no choice but to proceed based upon their answers. Sound familiar??

Bottom line: If you now want to get into the ring with the EIC crowd, you better tighten up your gloves and be ready for a fight. Otherwise, stay on the sidelines and watch from a distance. While I may well take a few shots to the head from other clients during a tax season, I choose no longer to get into a brawl with the EIC returns. Block, J-H, and Liberty have far deeper pockets than I do!!

(I would love to hear some comments from current Block employees as to what approach they are now having to use to deal with the documentation issues, especially as relates to "new" vs "prior" EIC clients.)

FE

[Gretel]

I only have "normal" family EIC clients, and just a handful. Three of them I know over 10 years, when they were pregnant with the child in question. They bring in this child almost every year. I will use the "other" box and explain. I will not ask for additional documentation. I will stand behind this approach and go to jail if I have to. I decided to not accept any new EIC clients unless they live in "normal" circumstances and my fee will go up considerably to at least $300 for a simple return.

[JohnH]

I will stand behind this approach and go to jail if I have to.

Gretel:
Wait a minute there - Remember Rule # 2

Rule #1 - Keep everybody out of jail.
Rule #2 - If it becomes apparent that SOMEBODY has to go to jail, make sure it's the client...

[ddoshan]

(I would love to hear some comments from current Block employees as to what approach they are now having to use to deal with the documentation issues, especially as relates to "new" vs "prior" EIC clients.)

Maybe I don't understand the new criteria. But as I have indicated before I don't think the preparer has to go to any more great lengths than in the past, assuming one asked proper questions then. If there is some reason to doubt or question something then yes, I believe we have to keep more detail in our records as to just what questions we asked and what responses we got. If I still think there is some reason to question something such as ones income from a Sch C I would document the questions ask, make a copy (and keep in their file) of the paperwork the client provided showing how they arrived at their income, etc.

But the bottom line is at least as I understand it, I really don't see much difference and so far have not done anything I normally would not have done in the past. Mainly just ask the appropriate questions and document their answers.

Maybe I have it all wrong as far as any new requirements. I maintain we are not the police or investigators and are not required to be. Other than to use our knowledge and common sense when preparing the return.