The Earned Income Tax Credit (EITC) 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, 148.7 million individual federal tax returns were filed, and more than 19% claimed the Earned Income Credit. Based on that percentage, it would not be unexpected that, in the years ahead, approximately one taxpayer in every five will claim the EITC. Approximately 70% of federal income returns claiming the earned income credit are prepared by professional tax return preparers. This course briefly summarizes the EITC rules, examines the common errors committed when claiming the credit, discusses the EITC 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.
Upon successful completion of this course, participants will be able to:
- Identify the earned income tax credit eligibility rules that apply to all taxpayers, including taxpayers who have a qualifying child and taxpayers without a qualifying child
- List the most common earned income tax credit errors and their potential problem areas
- Identify the additional questions tax preparers need to ask if taxpayer-provided information appears incorrect, inconsistent, or incomplete
- List the due diligence requirements a tax return preparer must meet when preparing a tax return claiming the earned income tax credit
- Identify the records a tax return preparer is required to keep to support a client's claim for the earned income tax credit
- 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 tax credit
- Cite the sanctions that may be imposed on an employer whose employee fails to comply with EITC due diligence requirements
- Identify the additional requirements imposed on taxpayers claiming the EITC following disallowance and the exceptions to those requirements
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