The Treasury Department has issued T.D. 9570, effective for tax years ending on or after 12/31/11, promulgating final regulations relating to preparer due diligence requirements in determining taxpayer eligibility for the earned income credit. The final regulations mark the IRS’ latest attempt to improve compliance with credit rules which have long been a hot-button issue for the Service.
Under the regulations, return preparers that prepare EIC claims and fail to satisfy the due diligence requirements are subject to a $500 penalty. Preparers are required to complete and submit Form 8867, a preparer checklist for the credit, and to retain any documents furnished by the taxpayer and relied upon to determine eligibility and credit amount.