EITC Due Diligence
Field of Study:
The Earned Income Tax Credit (EITC) is a refundable tax credit that has a significant impact on United States revenue.
It is also the source of a disproportionately large number of errors in tax returns in which a claim for it is made.
In a recent year, 148.7 million individual federal tax returns were filed, and more than 19% claimed the Earned
Income Credit1. Based on that percentage, it would not be unexpected that, in the years ahead, approximately one
taxpayer in every five will claim the EITC. Approximately 70% of federal income returns claiming the earned income
credit are prepared by professional tax return preparers.
This course briefly summarizes the earned income
credit rules, examines the common errors committed when claiming the credit, discusses the EITC due diligence
requirements imposed on professional tax return preparers, and identifies the sanctions to which preparers and
their employers may be subject for a failure to meet expected due diligence requirements.
After completing this section, you should be able to:
- Recognize the earned income credit eligibility rules that apply to all taxpayers, that apply to taxpayers who have a qualifying child, and apply to taxpayers without a qualifying child;
- List the most common earned income credit errors and their potential problem areas; and
- Identify the additional questions tax preparers need to ask if taxpayer-provided information appears incorrect, inconsistent or incomplete.
- List the due diligence requirements a tax return preparer must meet when preparing a tax return claiming the earned income credit;
- Recognize the records a tax return preparer is required to keep to support a client’s claim for the earned income credit;
- Identify the penalties that may be imposed on a tax return preparer for failing to comply with due diligence requirements when preparing a client’s tax return claiming the earned income credit;
- Recognize the sanctions that may be imposed on an employer whose employee fails to comply with EITC due diligence requirements; and
- Identify the additional requirements imposed on taxpayers claiming the EITC following disallowance and the exceptions to those requirements.
Type of delivery method:
Recommended CPE credits:
Final examination expiration date:
The program participant will have one year from the date of purchase to complete the course and final examination.
Web CPE is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.nasbaregistry.org