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tax benefits (such as deductions and credits), and compliance with

for Forms 1040SS and 1040PR. You can find the AOTC worksheet

the tax laws.

in the instructions for Form 8863. Completion of these forms,

schedules, and worksheets assists you in determining the

As a paid tax return preparer, you also must meet specific due

taxpayer’s eligibility for the credit and the correct amount of the

diligence requirements set forth in Treasury Regulations when you

credit and is required under the due diligence requirements set forth

prepare returns and claims for refund involving the EIC, the CTC/

in Treasury Regulations.

ACTC, or the AOTC. To meet these due diligence requirements, you

may need to ask additional questions and obtain additional

Lines 3 and 4

information to determine eligibility for, and the amount of, the EIC,

As a paid tax return preparer, when determining the taxpayer’s

the CTC/ACTC, or the AOTC. Failure to meet the EIC, CTC/ACTC,

eligibility for, or the amount of, a credit claimed on a return or claim

or the AOTC due diligence requirements could result in a $510

for refund, you must not use information that you know, or have

penalty for each failure. See section 6695(g) and Regulation section

reason to know, is incorrect. You may not ignore the implications of

1.6695-2(b).

information provided to, or known by you, and you must make

reasonable inquiries if the information provided to you appears to be

You have complied with the due diligence requirements set

incorrect, inconsistent, or incomplete. You must make reasonable

forth in Treasury Regulations for the EIC, the CTC/ACTC or the

inquiries if a reasonable and well-informed tax return preparer,

AOTC claimed on a return or claim for refund if you:

knowledgeable in the tax law, would conclude that the information

1. Complete Form 8867 truthfully and accurately and complete

provided to you appears to be incorrect, inconsistent, or incomplete.

the actions described on Form 8867 for each credit claimed for

You must also contemporaneously document in your files any

which you are the paid tax return preparer.

reasonable inquiries made and the responses to these inquiries.

2. Submit Form 8867 in the manner required.

You must know the tax law for each credit claimed on a return or

3. Meet the knowledge requirement by interviewing the

claim for refund you prepare and use that knowledge to ask your

taxpayer, asking adequate questions, contemporaneously

client the right questions to get all the relevant facts to determine

documenting the questions and the taxpayer’s responses in your

your client’s eligibility for the credit(s) and the correct amount of the

notes, reviewing adequate information to determine if the taxpayer is

credit(s).

eligible to claim the credit(s) and in what amount(s), and

Example. Taxpayer X engages Preparer C to prepare his

4. Keep all five of the following records for three years from the

federal income tax return. During the intake interview, Taxpayer X

latest of the dates specified later, in

Document

Retention:

states he is 25 years old, has never been married, and has two sons

a. A copy of Form 8867,

ages 12 and 10. X also states that he was self-employed, earned

b. The applicable worksheet(s) or your own worksheet(s) for

$12,000 from his lawn care business, and had no business

any credits claimed (see

Due Diligence

Requirements, later),

expenses or other income. Preparer C believes that X may be

eligible for the EIC and ACTC. However, in order to meet the

c. Copies of any documents provided by the taxpayer on which

knowledge requirement, Preparer C must make additional inquiries.

you relied to determine eligibility for, and the amount of, the credit(s),

The ages of the children seem inconsistent with the age of the

d. A record of how, when, and from whom the information used

taxpayer. Additionally, the taxpayer's claim that he has no business

to prepare Form 8867 and worksheet(s) was obtained, and

expenses seems inconsistent with his income. Reasonable inquiries

e. A record of any additional questions you may have asked to

could include:

determine eligibility for, and amount of, the credits, and the

Are these your foster sons, adopted sons? If so, were the children

taxpayer’s answers.

placed in your home by an adoption or foster care agency?

How long did the children live with you during 2016?

Specific Instructions

If the taxpayer is not the parent, did any other relative also reside

with these children for more than half the year in 2016?

How much did you charge to do each lawn?

Enter the taxpayer’s name as it appears on the return and enter the

Do you have records of the amount of money you received from

taxpayer identification number (TIN) for the taxpayer (primary TIN, if

lawn work?

filing a joint return).

Did you have any expenses for lawn mowing equipment, fuel or

other supplies for your business? If not, how did you provide lawn

Enter the name and preparer tax identification number (PTIN) of the

care services?

paid tax return preparer who determined the taxpayer's eligibility for,

How many lawns did you take care of?

or the amount of, the credit(s) for which Form 8867 is being

completed, even if that preparer is not the tax return preparer

Line 5

signing the tax return.

Keep copies of any documents provided by the taxpayer on which

Due Diligence Requirements

you relied to determine the taxpayer’s eligibility for the credit(s) and

to compute the amount of the credit(s) and list the documents in the

Complete the appropriate column for each credit for which you were

space provided. See

Document

Retention, for more information on

the paid tax return preparer determining the taxpayer’s eligibility for,

the due diligence recordkeeping requirements.

and amount of, the credit. Columns for credits for which you were

not the paid tax return preparer should be left blank.

The following are examples of documents that you may rely on to

determine taxpayers' eligibility for the credits or the amount of the

Line 1

credit. This list is not all-inclusive.

You should prepare the 2016 return based on information related to

Residency of a Qualifying Child

the 2016 tax year only, as situations may change from year to year.

School records or statement

If you are preparing a late or amended return or claim for refund, you

Landlord or a property management statement

should prepare the return based on the information related to the tax

Health care provider statement

year of the return or claim for refund.

Medical records

Child care provider records

Line 2

Placement agency statement

You must complete the applicable IRS worksheet for the EIC, the

Social service records or statement

CTC/ACTC, and/or the AOTC (or your own worksheet that provides

Place of worship statement

the same information), as well as all required forms and schedules

Indian tribal official statement

for each credit claimed on the return for which you are the paid tax

Employer statement

return preparer. You can find the worksheets for the EIC and the

CTC/ACTC in the instructions for Forms 1040, 1040A, 1040EZ, and

Disability of Qualifying Child

1040NR. The ACTC worksheet can also be found in the instructions

Doctor statement

-2-

Instructions For Form 8867 - Paid Preparer'S Due Diligence Checklist For The Earned Income Credit (Eic), The Child Tax Credit (Ctc)/additional Child Tax Credit (Actc), And/or The American Opportunity Tax Credit (Aotc) - 2016 Page 2

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