eitc

IRS Proposed Regulations to File Due Diligence Checklist with All EITC Claims in 2012

IRS Issues Proposed Regulations That Would Require Tax Preparers to File Due Diligence Checklist with All EITC Claims Submitted in 2012

WASHINGTON —The Internal Revenue Service announced today that it is issuing proposed regulations that would require paid tax return preparers, beginning in 2012, to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC). It is the same form that is currently required to be completed and retained in a preparer’s records.

The due diligence requirement, enacted by Congress over a decade ago, was designed to reduce errors on returns claiming the EITC, most of which are prepared by tax professionals.

The IRS created Form 8867, Paid Preparer’s Earned Income Credit Checklist, to help preparers meet the requirement by obtaining eligibility information from their clients. Preparers have been required to keep copies of the form, or comparable documentation, which is subject to review by the IRS. To help ensure compliance with the law and that eligible taxpayers receive the right credit amount, the proposed regulations would require preparers, effective Jan. 1, 2012, to file the Form 8867 with each return claiming the EITC.

 

IRS Proposed Regulations to File Due Diligence Checklist with All EITC Claims in 2012

Further details can be found in REG-140280-09. Comments on the proposed regulations are due by Nov. 10, 2011, and a public hearing on the proposed regulations is scheduled for Nov. 7, 2011.

The EITC benefits low-and moderate-income workers and working families and the tax benefit varies by income, family size and filing status. Unlike most deductions and credits, the EITC is refundable –– taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.

Although as many as one in five eligible taxpayers fail to claim the EITC, some of those who do claim it either compute it incorrectly or are ineligible. The IRS is proposing this step as part of its efforts to ensure that the credit is afforded to taxpayers who qualify. For 2009, over 26 million people received nearly $59 billion through the EITC. Tax professionals prepare close to 66 percent of these claims.

EIC Eligibility Checklist

You may claim the EIC if you answer “Yes” to all the following questions.*

Yes No
1. Is your AGI less than:

  • $12,590 ($14,590 for married filing jointly) if you do not have a qualifying child,
  • $32,241 ($35,241 for married filing jointly) if you have one qualifying child, or
  • $37,783 ($39,783 for married filing jointly) if you have more than one qualifying child?

    (See Rule 1.)

X X
2. Do you, your spouse, and your qualifying child each have a valid SSN? (See Rule 2.) X X
3. Is your filing status married filing jointly, head of household, qualifying widow(er), or single? (See Rule 3.)

Caution: If you or your spouse is a nonresident alien, answer Yes only if your filing status is married filing jointly. (See Rule 4.)

X X
4. Answer “Yes” if you are not filing Form 2555 or Form 2555-EZ. Otherwise, answer “No.” (See Rule 5.) X X
5. Is your investment income $2,900 or less? (See Rule 6.) X X
6. Is your total earned income at least $1 but less than:

  • $12,590 ($14,590 for married filing jointly) if you do not have a qualifying child,
  • $32,241 ($34,241 for married filing jointly) if you have one qualifying child, or
  • $37,783 ($39,783 for married filing jointly) if you have more than one qualifying child?

    (See Rules 7 and 15.)

X X
7. Answer Yes if you (and your spouse if filing a joint return) are not a qualifying child of another person. Otherwise, answer No. (See Rules 10 and 13.) X X
STOP: If you have a qualifying child, answer questions 8 and 9 and skip 10-12. If you do not have a qualifying child, skip questions 8 and 9 and answer 10-12.*
8. Does your child meet the age, residency, and relationship tests for a qualifying child? (See Rule 8.) X X
9. Is your child a qualifying child only for you? Answer Yes if your qualifying child also meets the tests to be a qualifying child of another person, but the other person is not claiming any child-related tax benefits using that child. Answer No if you do not know whether the other person is claiming any child-related tax benefits using that child. X X
10. Were you (or your spouse if filing a joint return) at least age 25 but under age 65 at the end of 2007? (See Rule 11.) X X
11. Answer Yes if you (and your spouse if filing a joint return) cannot be claimed as a dependent on anyone else’s return. Answer No if you (or your spouse if filing a joint return) can be claimed as a dependent on someone else’s return. (See Rule 12.) X X
12. Was your main home (and your spouse’s if filing a joint return) in the United States for more than half the year? (See Rule 14.) X X
*PERSONS WITH A QUALIFYING CHILD: If you answered Yes to questions 1 through 9, you can claim the EIC. Remember to fill out Schedule EIC and attach it to your Form 1040 or Form 1040A. You cannot use Form 1040EZ. If you answered Yes to questions 1 through 8 and No to question 9, see Rule 9 to help you determine whether you can claim the EIC. If you answered Yes to questions 1 through 7 and No to question 8, answer questions 10 through 12 to see if you can claim the EIC without a qualifying child.
PERSONS WITHOUT A QUALIFYING CHILD: If you answered Yes to questions 1 through 7, and 10 through 12, you can claim the EIC.
If you answered “No” to any question that applies to you: You cannot claim the EIC.