Where are you documenting the questions you ask, and answers given from clients for Due Diligence?

[Just-Lisa-Now-]

Ive been using the due diligence worksheets within ProSeries, but they dont have much space to write things, you just check the boxes, so I did just get one from a preparer in another group that I'll be trying out this year.

It wont let me attach it in here.....I can copy/paste not sure how screwy the formatting will be though  LOL  yes, the spacing is rough, but if you copy and paste into Word you can fix it

Due Diligence Questionnaire for returns with Earned Income Tax Credit, Child Tax Credit, Other Dependent Credit or Head of Household filing status

1. Client name
2. Child or Adult Dependent’sName(s):

3. What is your relationship to the individual(s)?

4. Where and with whom is the child’s or adult dependent’s main home?

5. How long, if at all, did the child live with you last year (number of months)?

6. Did the child live or spend a significant number of overnights with anyone else during the year?                                                                                                                                                                                                      Yes              No

If yes, please list, the name, address and approximate number of nights spent with that individual and the dependent’s relationship to that individual

7. If the child(ren) is/are not your biological child(ren), are/were you ever married to the child(ren)’s mother/father?                 Yes         No
8. If the child(ren) is/are adopted, is the adoption pending                final? If pending, do you have a letter from an authorized adoption agency or social services organization?       Yes       No
9. If the child(ren) is/are foster child, do you have a letter from the authorized foster care or social services agency or applicable court document? Yes         No
10. Is/are the child(ren) a citizen(s) or national(s) of the United States? Yes         No

If not, is the child or adult dependent a lawful, permanent resident (green card holder)?          Yes         No

Please list the names of any child or adult dependent who is not a US citizen and their green card status:

11. If requested by the IRS, can you provide a birth and/or marriage certificate that verifies your relationship to each child or adult dependent? Yes         No
12. What was each child or adult dependent’s marital status on December 31?

13. Will or did any of the claimed children or adult dependents file a joint return for this year?    Yes      No

If so, please list names

14. Are you, and your spouse if married, a citizen of the United States? Yes         No
15. Did the child or adult dependent receive any income last year, including but not limited to scholarships or grants, student loans, wages, child support, alimony, public assistance, Social Security or disability benefits? Yes No

If yes, please provide details

16. Did any other person provide more than 1/2 of your or your spouse’s support last year? Yes         No
17. List the names and relationship of everyone who lived in your home last year:

18. What was your marital status on December 31?

Never Married

Married and live with spouse

Married but lived apart from spouse for the last six months of the year (July 1 – December 31)

Divorced or separated                                    

Separated under a legal separation agreement

19. If you are divorced or legally separated, can you provide the IRS with any of the following documents if requested?

Divorce decree                                                                Separate maintenance agreement

                                                                                              or separation agreement

20. If you are legally married but did not reside with your spouse for the last six months of the tax year, if required to do so can you provide the IRS with any of these supporting documents verifying that your spouse did not live with you for the full six months:

                   Not applicable                                                                Letter from Social Services

Lease agreement                                                             Other (please describe)

Utility bills

Letter from clergy member

21. What school(s) did the children/adult dependent attend last year?

What address does the school(s) list for the children/adult dependent?

22. Do you have daycare expenses for the child or adult dependent? Yes         No

If so, what address does the facility list for the children/adult dependent?

23. Did anyone else contribute to the support of the child or adult dependent? Yes         No

If so, please provide details

24. Is there an active Form 8332 – Release/Revocation of Exemption to Claim Child by Custodial Parent, or similar document, in place which states who can claim any of the children listed above? Yes         No

If yes, please provide a copy of the signed form/agreement.

25. Is there a written custody, divorce or separation agreement or court order regarding the child(ren)?

Yes         No          If yes, please provide a copy of the document

26. If claiming a disabled adult, what is that disabled adult’s income?
    1. Has a licensed medical practitioner determined that this individual has a disability?
       1. What is the nature of thedisability?
       2. How long will disability last?

• Can you provide documentation of the extent and nature of the disability? Yes         No

27. Did another resident in the home earn more than you or your spouse? Yes         No
28. If requested, can you provide the IRS with receipts and bills verifying you paid more than one-half of the cost of keeping up the home in which you and your qualifying child(ren) or your parent lived during the tax year? Examples of documentation that may be required by the IRS include:

Utility bills                                                                       Rent receipts or mortgage interest statement

Property tax bills                                                           Maintenance and repair bills

Grocery receipts                                                             Other household bills

29. Did you receive any non-taxable support or income during the tax year?

Family support                                                               Childcare assistance

Child support                                                                  Food stamps

Housing assistance                                                       Other (please describe)

30. Have you ever been notified by the IRS that the Earned Income Tax Credit or Child Tax Credit claimed on a return filed by you was denied or reduced? Yes      No
31. Any additional information you feel would be helpful for your tax preparer:

The information provided on this form is true and correct to the best of my knowledge. I understand that providing incorrect information may result in denial of credit(s) both for the current tax year, and future tax years.

______________________________________                                                  __________________

Signature                                                                                            Date

______________________________________

Printed Name

[The-Tax-Lady]

I have always used the Preparer Notes, which is located at the very end of the all form list (F6).

It is believed that it transmits with the e-filed 1040, but no one has stated that as a fact here yet. Lots of opinions but a clarification from an Intuit Monitor would be appreciated.

I use a Q & A format, especially for new clients, on EITC, ACTC, HOH and Education Credits. I was advised many years ago to write the answer, given by the Taxpayer, exactly as it was stated to me. This can create an issue for some preparers who would like it to sound more professional, but don't fix it. It is more believable and what the Taxpayer is going to say at a later date, if asked, so let it be their words, poor grammar, slang, whatever. If they are referring to an ex spouse or partner, it can get quite colorful so use *****.

I give a copy to the client with the tax return and I believe it is reviewed, initially, by the IRS, if the return is selected for review. I know they have been received with the 1040 in the past because I have referred to the Preparer notes when speaking with an IRS agent.

However, no matter what notes you make, be sure you have the backup documents you claim to have reviewed for Due Diligence. Even if the return is correct as filed, if for some reason documents are requested by the IRS, you're either scrambling to get them, if missing, or you're facing fines and the possibility of more files being reviewed. Due Diligence is a minefield so tread carefully.

Personally, I believe the IRS has dumped the Due Diligence they could and should be doing, onto the Tax Practitioner with severe penalties for non-compliance. I really don't like asking my long time clients to prove their children are still theirs every year, but this is a major CYA event so I set up a system & use it. Fortunately I'm in a small town & have a good working relationship with the local schools & Village Hall for verification of Enrollment, Residence & HOH utility bills etc.. Have the parent sign a Release of Information for the School and get those letters.

[Skylane]

Thanks for the form Lisa... looks pretty comprehensive and will certainly help justify the fees. 🙂 

[kgudgel]

I agree that I I would like someone from Intuit to let us know what does or does not get transmitted to the IRS with an electronically filed tax return.

I am trying to figure out whether the notes (that are indicated with the pencil) are transmitted if you don't have the box checked that indicates that they are indeed transmitted.  Can a preparer use those comment fields to record (directly) the answers to the questions in the Due Diligence 8867 without having the notes (with all of the colorful language) transmitted to the IRS?

[George4Tacks]

IRS offers training for the AARP and VITA tax preparers. Here is part of their resource for Due Diligence with many links in it. https://www.eitc.irs.gov/tax-preparer-toolkit/tools-and-tips/form-886-can-assist-you/forms-886-can-a...

[Just-Lisa-Now-]

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@George4Tacks wrote:

IRS offers training for the AARP and VITA tax preparers. Here is part of their resource for Due Diligence with many links in it. https://www.eitc.irs.gov/tax-preparer-toolkit/tools-and-tips/form-886-can-assist-you/forms-886-can-a...

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Im in a FB group where several of the members went to the IRS Due Diligence training webinar last week and all were extremely disappointed in the lack of specific information the IRS was willing to give on "what do we need to have, ask, etc".

[taxprochristine]

Thank you