Per IRS guidelines, a paid tax return preparer can face potential consequences for not meeting the due diligence requirements listed on Form $8867.$ A firm employing a preparer can also be subject to consequences for an employee$$s failure to follow these due diligence rules. You must meet specific due diligence requirements if you are paid to prepare a tax return or to claim a refund on any of these tax benefits:

Earned Income Tax Credit $($EITC$)$

Child Tax Credit $($CTC$),$ Additional Child Tax Credit $($ACTC$),$ Credit for Other Dependents $($ODC$)$

American Opportunity Tax Credit $($AOTC$)$

Head of household $($HOH$)$ filing status

Directions

Locate and read through Form $8867,$ Paid Preparer$$s Due Diligence Checklist, found in the Supporting Materials section. You will be asked to specifically address items on the form and to expand on the expectations of the tax preparer in meeting the due diligence requirements outlined in Form $8867.$

Specifically, you must address the following rubric criteria:

Introduction

Describe the requirements of tax practitioners relating to due diligence in $12$ paragraphs.

Knowledge Requirement

Explain how a tax practitioner can satisfy the knowledge requirement discussed on Form $8867.$

Document Retention Record Keeping Requirement

Describe the type of documentation relied upon to complete Form $8867$ and any accompany worksheets relating to applicable tax credits or HOH filing status.

Inquiry Level $$ Reasonable Inquiries

Explain the types of inquiries that should be made to complete Form $8867$ with proper due diligence.

Consider discussing the credit$-$specific $($and filing status$-$specific$)$ questions noted on Form $8867.$

Consequences

Explain the potential consequences of not meeting due diligence requirements.

Discuss any monetary or nonmonetary consequences.

Conclusion

Discuss the importance of Form $8867$ and due diligence required of tax practitioner in $12$ paragraphs.