Course Description

Individual Income Tax Credits and Due Diligence Requirements examines the income tax credits available to individual taxpayers. In so doing, this 5 chapter course looks at both the refundable and nonrefundable credits and discusses the nature of the credits, their eligibility requirements, timing, limitations, phase-outs (where appropriate), whether the credit may be carried over, the nature of any qualified expenses, and how they are calculated.

The tax credits considered include the:

The final chapter focuses on the due diligence requirements applicable to tax preparers and examines the:

• Four basic principles of due diligence;
  • Having the appropriate knowledge,
  • Computing the credit(s),
  • Preparing and submitting Form 8867, Paid Preparer’s Due Diligence Checklist, and
  • Keeping appropriate records;
• Most common errors encountered;
• Tips on addressing incomplete, inaccurate and inconsistent client claims;
• Penalties on taxpayers for reckless and fraudulent claims;
• Sanctions that may be applied for a failure to be diligent; and
• IRS Education and Compliance Actions.

Of the 161,336,659 federal income tax returns received in 2023 (2022 income) by the IRS, 61,831,870 taxpayers—about 38%—claimed one or more federal income tax credits amounting to a total of $154.8 billion. For a tax preparer that prepares 150 to 200 tax returns in a season, the numbers indicate that he or she is likely to encounter between 55 and 75 returns claiming income tax credits that average approximately $2,500.

Learning Objectives

• Identify the requirements for claiming the various income tax credits available to individual taxpayers;
• List the due diligence requirements a tax preparer must meet when preparing a tax return claiming the Earned Income Tax Credit (EIC), American Opportunity Tax Credit (AOTC), Child Tax Credit, Additional Child Tax Credit, and Other Dependent Credit (CTC, ACTC, ODC);
• Recognize the records a tax return preparer is required to keep to support a client’s claim for the EIC, AOTC, CTC, ACTC and ODC; and
• Identify the penalties that may be imposed on a tax preparer and his or her employer for failing to comply with due diligence requirements when preparing a client’s tax return claiming the EIC, AOTC, CTC, ACTC or ODC.

Prerequisites

• None