Preparer: Stuart. Welcome aboard. Glad I found you at the last minute.
Stuart: Thank you, Sir. I’m ready to shine.
Preparer: Well, we have a full day, but before we begin, did
you go over those EITC training materials I sent?
Stuart: Oh yeah, those were a breeze, for me.
Preparer: So, you feel up to speed on conducting a thorough interview to establish head of household status, and EITC eligibility? And you know the four qualifying child tests—relationship, age, joint return and residency?
Stuart: I am all over this.
Preparer: What about proper documentation?
Stuart: Did I mention I have a college degree?
Preparer: What are you looking at?
Stuart: You can’t, you don’t, you can’t see the… people?
Preparer: No… Look let’s get going. Your first client will be here any minute.
Stuart: It’s looking pretty good, huh?
Preparer: Stuart, I’ve been spot checking your files.
Stuart: As you can see, I got this down.
Preparer: That’s not what I’m seeing. I’m wondering if you’ve done your due diligence. You know, the IRS now has a $500 penalty, so if you don’t practice due diligence, Stuart, you could be fined. As your employer I can be fined for your negligence. And our clients could face penalties too. So, let’s go over a few things to keep our finances and reputations intact.
Preparer: Mrs. Romero.
Stuart: Ah, lovely. You know I really think she liked me.
Preparer: Where is the proof that her daughter lived with her more than 6 months last year? No records, no residency requirement, no EITC.
Stuart: Well, I got distracted, you understand.
Preparer: And Alice Jackson. Where’s the documentation that proves her adjusted gross income is greater than her son’s. She’s the grandparent. What’s the dad’s income?
Stuart: She qualified last year, so obviously she’s good to go this year.
Preparer: You know, Stuart, I shouldn’t have taken it for granted that you truly understood those training materials. EITC eligibility is complicated. Let’s go over Form 8867, the paid preparer’s checklist. It’s been updated, so it’s worth a careful look.
Preparer: We must complete and submit the 8867 with each tax return. If you work the form and document as you go, that’s due diligence.
Stuart: C’mon, you’d have to spend like an hour with every client!
Preparer: Whatever it takes to get it right. Now the law requires that we make a copy of the 8867, and all the documentation we relied on to determine EITC eligibility. We’re also responsible for keeping this record a minimum of…
Stuart: I know, one whole year.
Preparer: THREE years, Stuart. From the date the return was e-filed; or from the date you gave it to the client for signature; or from the due date of the return, whatever is later. And the IRS prefers not paper files, but secure electronic storage to reduce the chance of identity theft.
Stuart: Wow, this IS sort of hard!
Preparer: Yes, Stuart. due diligence is hard, but worth it for our protection and our clients.