Communications & Liaison Division
Understanding Paid Preparer
Due Diligence Requirements
Media: CL.SL.Web.Conference.Team@IRS.gov
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Welcome to Today’s IRS Webinar
Piper Stevenson
Shanonda Scott-Ray
Denise Helland
UnderstandingPaidPreparer
DueDiligenceRequirements
1
UnderstandingPaidPreparer
DueDiligenceRequirements
Piper Stevenson, Denise Helland,
Shanonda Scott-Ray
January 16, 2020
This Webinar Will Focus On:
Tax Cuts and Jobs Act credits due diligence
requirements
Tax identification number requirements for
CTC/ACTC/ODC and head of household filing
status
Client’s tax return preparation-when to ask for
documents
IRS Due Diligence and compliance activities
Tax Preparers Resources
Tax Cuts and Jobs Act Highlights
Eliminated personal and
dependent exemption
deductions
Increased CTC and
refundable ACTC amounts,
increased AGI limits
Required Social Security
number for CTC/ACTC
qualifying children
Created Credit for Other
Dependents – ODC
2
Child Tax Credit Social Security
Number Requirement
Cannot claim for CTC/ACTC
Can claim for CTC/ACTC
CTC/ACTC Qualifying Child
Requirements
Relationship
Age
Residency
Support
Joint return
Dependent
Citizenship
U.S. Citizen or U.S. National
OR
U.S. Resident Alien – Green Card or meets
Substantial Presence Test
CTC/ACTC
Citizenship Requirements
The child must be:
3
Polling Question
Can the client claim the Child Tax Credit for a
child who is a non-U.S. citizen living in the U.S.?
a.
Yes, the child is a U.S. resident
b.
No, the child is not a U.S. citizen
c.
It depends on the client’s tax identification
number
d.
Both a and c
Credit for Other Dependents (ODC)
Examples of a qualifying
person for ODC…
Dependent child
ov
er age
16
Dependent child or
relative with ITIN or
ATIN
Dependent relative –
including client’s parent
The dependent must be a:
U.S. Citizen
U.S. National
or
U.S. Resident Alien – Green Card or
Substantial Presence Test
Credit for Other Dependents –
cont’d
Citizenship and Tax Identification Number
Requirements
4
In addition, the dependent must have a:
SSN, ITIN or ATIN issued on or before
return
due date, including
extensions
Credit for Other Dependents –
cont’d
Citizenship and Tax Identification Number
Requirements
Polling Question
Can the client claim ODC for a sister, who
is a dependent with an ITIN, lives in
Canada, and is a Canadian citizen?
a. Yes, the sister has ITIN
b. Yes, the sister lives in Canada
c. No, the sister is not a U.S. Citizen, National or
Resident Alien
d. Both a and b
CTC/ACTC/ODC
Taxpayer Identification Number & Citizenship Requirements
Dependent for
CTC/ACTC
Dependent for
ODC
SSN
Valid for employment
Issued before return due date (including extensions)
SSN, ITIN or ATIN
Issued on or before return due date (including
extensions)
Must be either:
U.S. Citizen
U.S. National
or
U.S. Resident Alien
5
Head of Household Requirements
Your Client Must:
Be unmarried or considered
unmarried at the end of the year
and
Pay over half the cost of keeping up
A home in which the client lived
with qualifying person or
A home for a dependent parent
(can include a parent living in a
separate home in the U.S.,
Canada, Mexico or abroad)
Dependent & HOH Requirements
U.S. Citizen, U.S. National, U.S. Resident
or…
Mexico
Canada
Polling Question
Can the client living in New York claim Head of
Household status with a dependent parent who
lives in Guatemala?
a. No, the parent doesn’t live with the client
b. No, the parent doesn’t live in Canada or Mexico
c. No, because the parent is not living in the U.S.
d. It depends whether the parent is a U.S.
Citizen or National
6
Citizenship Requirements
CTC/ACTC/ODC & HOH
Dependent for
CTC/ACTC
Dependent for
ODC
Dependent for HOH Filing Status
Must be either:
U.S. Citizen
U.S. National
or
U.S. Resident Alien
Must be either:
U.S. Citizen
U.S. National
or
U.S. Resident Alien
Must be either:
U.S. Citizen
U.S. National
or
Resident of U.S., Canada or
Mexico
Most Important Points: TCJA
Eligible child for
the CTC must
have the
required Social
Security
number
Head of Household
returns need Form
8867 to meet Due
Diligence
Requirements
Credit for Other
Dependents
(ODC) can have
an ITIN, can be
over age 16
The Tax
Preparer Toolkit
offers free
training,
webinars,
publications
and other
resources
Polling Question
Can the client claim Credit for Other Dependents
for his parent who is a dependent, has a TIN and
lives in Japan?
a. Yes, the parent is a qualifying relative
b. Yes, the parent’s residency is not an issue
c. No, the parent must reside in Canada, Mexico
or the U.S.
d. It depends on the parent’s TIN
7
Due Diligence Overview and Common Errors
When to Document
Educational Letters
Education Calls
Knock and Talk Visits
Office Exam
Correspondence Exam
IRS Due Diligence Compliance
Focused and Tiered
Due Diligence Requirements
Review
Ask all the
right
questions
Compute
the credits
based on
the facts
Keep all
required
records
Complete
and
submit
Form 8867
Due Diligence Most Common
Errors
Failing to meet
the knowledge
requirement
Failing to keep
records and
documentation
8
Form 8867 & Penalties
Request documentation when
additional information is
needed to verify a claim for:
EITC
CTC/ACTC
ODC, or
AOTC
When are Client
Documents Needed?
Be sure to keep a paper or electronic copy
Polling Question
Should a paid tax preparer require documentation
if the client is a grandparent claiming Earned
Income Tax Credit for her qualifying grandchild?
a. Yes, documentation is always required
b. No, if responses to probing questions are
documented and appear to be correct, consistent
and complete
c. No, if the grandparent has or can get the supporting
documents if requested by
IRS
d. Both b and c
9
Contact Methods
Letter 5025 – You may not have
met due diligence requirements
Letter 4858 - Alert to
Return Preparers
10
Letter 5364 - Missing Form 8867
Don’t ignore!
Review your procedures
Additional steps
If you receive one of these letters…
IRS caller will provide IRS ID number
IRS caller will refer to previous written
correspondence
IRS caller will ask security questions to confirm
appropriate preparer on the line
IRS caller will provide educational information
Is it really the IRS?
Educational Phone Calls
11
Educational Office Visit
Preparer Notification
Preparer Office Visit Exam
12
Exam Closing – Letter 1125
Exam Closing –
Penalties and Next Steps
Correspondence Due Diligence Exam
13
Remember to do your due diligence!
The IRS uses various methods
to contact paid
tax preparers.
There are consequences for failing to meet
your due diligence requirements.
Most Important Points:
DD Compliance
Preparer Due Diligence
Online Due Diligence Training
Education Training Videos
Preparer Compliance Information
Hot Topics Update
Paid Preparer Resources
Tax Preparer Toolkit
www.eitc.irs.gov
IRS.gov
Webinars
Publications and Videos
Contact U.S. – EITC
Program Mailbox
Preparer Additional Resources
EITC.program@irs.gov
14
Key Points
Eligible child for the CTC must have the
required Social Security Number
Head of Household returns need Form 8867 to
meet Due Diligence Requirements
Credit for Other Dependents (ODC) can have
an ITIN and can be over age 16
The Tax Preparer Toolkit offers free training,
webinars, publications and other resources
Key Points
Remember to do your Due Diligence
The IRS uses various methods to contact paid
tax preparers
There are consequences for failing to meet
your due diligence requirements
Upcoming Webinars
For information on future webinars,
visit IRS.gov and use keyword search
“webinars.”
Visit the IRS Video Portal for a variety
of video and audio topics.
www.irsvideos.gov
15
Certificates & Continuing Education
Certificates of Completion will be emailed
within the next few weeks.
If you are eligible for Continuing Education
from the IRS, the credit will be posted in your
PTIN account.
If you have
not received
your certificate
and/or credit by
February 6th, please email
us:
SBSE SL Web Conference Team@IRS gov
. . . . .
Thank You!
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