8867 and documentation

[Burke]

I knew it was a requirement, just never could figure out its relevance to a cash basis taxpayer.

[Rapid Robert]

I have never figured out why the amount "billed" is even on the form.

Originally, in 1998 the 1098-T didn't have any dollar amounts reported. Then, this happened:

"Form 1098-T has been revised for 2002 under Proposed
Regulations section 1.6050S-1 that describes rules for choosing
to report either the net amount of payments received (box 1), or
the net amount billed (box 2), for qualified tuition and related
expenses during the calendar year."

[Burke]

I am going to insist on complete paperwork to figure the AOC unless the tuition paid box is used on the 1099-T. This you have to do in order to have a chance to get it correct when tuition billed is used.

Note TTB 1-17 and 11-3 confirm that both the 1098-T AND receipts will be required for due diligence satisfaction. In the past I have used detailed transcripts of the student's account which show dates paid, amounts, and type of transaction/expense, and methods of payment. I would think this would be sufficient as a receipt. I have never figured out why the amount "billed" is even on the form.

[DonB]

Concerning question #3 and the Child Tax Credit; questions must be asked and documented. I would like to work up questions for a worksheet to address this. On other issues later.

Here is my start; comments please--

CTC questions for #3a.

Is Johnnie your qualifying child, not older than 16, and did he live with you for more than 6 months?

Do you have birth records to prove this?

For non-parents: How are you related to the child? Could you prove this if ever required?

#3b.

The only thing I can think of is to review the answers from #3a.


This is silly when you have been preparing returns for years for a given family, but if we are to certify this information--??

[Kram BergGold]

My Take

If your client is not cheating on the credits requiring Form 8867, and you do an amount of due diligence that is commensurate with the fact that you have known the family for 20 years, then I believe there is no downside to not driving them and you nuts for SS cards, drivers licenses etc. To me all of this is only an issue if they are audited, unlikely, and if they are found to be cheating.
I am going to insist on complete paperwork to figure the AOC unless the tuition paid box is used on the 1099-T. This you have to do in order to have a chance to get it correct when tuition billed is used. As for EIC and CTC I am not going to do anything more than I have normally done with my long standing prior clients.

[JenMO]

Some Id, social sec cards we have collected in previous years. Do i need to dig out, or ask again?

[zeros]

Lots of Extra Work this Year!

Social Cards for everyone will be a blast. Alerting them before they come in will be a neccessity and a must.

[TaxGuyBill]

As August pointed out, if we "rely" on documents, we need to keep a copy of it.

If the information we are receiving from the taxpayer seems to be "incorrect, inconsistent, or incomplete", we may need to rely on documents to prove the taxpayer's statements (and therefore need to keep a copy of the documents).

Otherwise, we would only need documentation if the "worksheets" asks for it (I haven't looked at the details of the "worksheets yet", but I don't think they require it).


§1.6695-2T has the "due diligence" requirements, including the "retention of records" requirements. For the "retention of records", it says:

(4) Retention of records. (i) [Reserved]. For further guidance, see §1.6695-2(b)(4)(i).

(A) [Reserved]. For further guidance, see §1.6695-2(b)(4)(i)(A).

(B) A copy of each completed worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section); and

(C) A record of how and when the information used to complete Form 8867 and the applicable worksheets required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section) was obtained by the tax return preparer, including the identity of any person furnishing the information, as well as a copy of any document that was provided by the taxpayer and on which the tax return preparer relied to complete Form 8867 and/or an applicable worksheet required under paragraph (b)(2)(i)(A) of this section (or other record of the tax return preparer's computation permitted under paragraph (b)(2)(i)(B) of this section).

(ii) through (iii) [Reserved]. For further guidance, see §1.6695-2(b)(4)(ii) through (iii).



The "gray area" that I see is what does "the identity of any person furnishing the information" mean? Do we just need to write down their name? Or do we need a driver's license? On the other hand, it appears that the software wants Driver's License information now, so we may want to get the anyways.

http://www.ecfr.gov/cgi-bin/retrieve...15.1_16695_62t

[August @ ADG Financial]

I Believe...

I believe were only to make save copy of documents that clients offer us (SS cards, Birth Certs, etc.). Not force them to them give us. If they don't have them with them at time of interview they don't have to go home and get them. Unless it a tax doc, of course. Just my opinion on what I have read.

[mastertaxguy]

Documentation-due diligence

I know most of my clients, have been in some homes, go to church with some. Do i still have to ask for some type of documentation? Always have been diligent about asking questions on situtions i wasn't sure about, but does personal knowledge count for anything?

I have noticed that the IRS pronouncements on due diligence do not include "personal knowledge" as satisfactory documentation.

Personal knowledge, like a promise to pay later for tax returns today, is generally worth the paper it is written on.

However, you are of course free to do what you want.

[JenMO]

I know most of my clients, have been in some homes, go to church with some. Do i still have to ask for some type of documentation? Always have been diligent about asking questions on situtions i wasn't sure about, but does personal knowledge count for anything?