EITC Due Diligence - 2021 (Text Based)

The Earned Income Credit (EIC) 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, 150.3 million individual federal tax returns were filed, and more than 27.4 million-18.2% claimed the Earned Income Credit[1]. Based on that percentage, it would not be unexpected that, in the years ahead, approximately one taxpayer in every five will claim the EIC. 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 EIC due diligence requirements imposed on professional tax return preparers, and identifies the sanctions to which preparers and their employers may be subject to a failure to meet expected due diligence requirements.

1. 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

2. Identify  the most common earned income credit errors and their potential problem areas

3. Identify the additional questions tax preparers need to ask if taxpayer-provided information appears incorrect, inconsistent or incomplete

4. Recall the due diligence requirements a tax return preparer must meet when preparing a tax return claiming the earned income credit

5. Recognize the records a tax return preparer is required to keep to support a client's claim for the earned income credit

6. 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

7. Recognize the sanctions that may be imposed on an employer whose employee fails to comply with EIC due diligence requirements

8. Identify the additional requirements imposed on taxpayers claiming the EIC following disallowance and the exceptions to those requirements