NOTE: This headliner is current through the publication date. Since changes may have occurred, no guarantees are made concerning the technical accuracy after the publication date.
Headliner Volume 244
September 17, 2008
The Internal Revenue Service’s September Tax Talk Today webcast, EITC Due Diligence - It’s Your Responsibility, covered the four due diligence requirements for practitioners who prepare Earned Income Tax Credit claims.
The EITC, a refundable federal income tax credit for low-income working individuals and families, is a $43 billion program originally approved by Congress in 1975 to offset the burden of Social Security taxes and provide an incentive to work. To qualify for the EITC, taxpayers must meet certain requirements and file a tax return even if they are not otherwise required to file one. When the EITC exceeds the amount of taxes owed, it results in a tax refund.
With an estimated 23-28 percent error rate on EITC returns, tax professionals are on the front lines to detect and prevent EITC fraud and abuse.
EITC due diligence requirements include:
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Computation of the credit - complete EITC worksheet or its equivalent
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Knowledge - make additional inquiries if information furnished by the taxpayer is “incorrect, incomplete, or inconsistent”
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Record retention - retain all relevant records and worksheets for three years
New proposed, but not yet finalized regulations published in the June 17, 2008 Federal Register provide additional guidance on meeting the "knowledge" (incomplete, inconsistent, and incorrect) requirement and maintaining a complete and contemporaneous documentation of answers from taxpayers applying for the EITC. This section of the proposed regulations is in direct response to the tax professional community’s request for more specificity around EITC due diligence.
If practitioners fail to meet these due diligence requirements they can be assessed a $100 penalty for each failure.
September’s program also provided information on:
Moderated by Les Witmer, the September program included panelists Debra S. Holland, Earned Income Tax Credit Program director, Wage and Investment Division, Internal Revenue Service; Sue Gaston, CPA and director of Industry Operations, H&R Block; Sherrill L. Gregory, MBA, MST, EA, USTCP; and Bridget E. Tombul, special counsel to Division Counsel (W&I).
Tax Talk Today is a webcast aimed at educating tax and payroll professionals on the most current and complex tax issues. Tax professionals are encouraged to watch and submit questions.
To access the webcast at no charge, viewers can register online. Tax professionals in need of continuing education credits are eligible to receive one CPE credit by viewing the September 9 webcast.
Archived shows and transcripts of all shows are available on the site.
The next Tax Talk Today show is on Election Day, Tuesday, November 4 when the topic will be Preparing for the New Form 990.
References/Related Topics
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