Jan 13 ā¢ š¼ Tax Industry Talk
šØ Due Diligence Reality Check: Form 8867 Is Not Your Protection
Most tax pros think due diligence starts and ends with Form 8867.
But hereās the hard truth:
8867 is just the starting point, not your shield.
When preparers get hit with IRS penalties, itās rarely because they forgot to attach a form.
Itās because they couldnāt prove the client actually qualified.
The IRS doesnāt hand you a perfect script of every question to ask. Beyond the basic worksheets, you are responsible for building the proof.
ā
What Due Diligence REALLY Requires
Your job is to create a file that shows:
- Qualifying questions based on tax law
- Documented answers in the clientās file
- Follow-up questions based on their responses and documents
- Notes that show you caught issues, addressed inconsistencies, and resolved them
ā ļø There Is No āOne-Size-Fits-Allā Due Diligence File
Every client situation is different.
Your documentation should clearly show how and why the client qualifies for:
- the credit(s)
- the filing status
- the dependent(s)
- any claim that affects the refund
What gets most tax pros fined isnāt always fraud.
Itās thin documentation:
- No written questions
- No follow-up notes
- Vague āyes/noā answers with no details
- No explanation of mismatched info
š§¾ Your Due Diligence File Should Tell a Story
A clean file should read like this:
āHereās what the client said. Hereās what they provided. Hereās what didnāt add up. Hereās what I asked. Hereās what fixed it. Hereās why they qualify.ā
So if the IRS reviews the return, they can follow the logic without you in the room.
š”ļø Due Diligence Isnāt Busywork
Itās your professional shield.
If you havenāt reviewed how you document client qualification lately, do it now.
Because when due diligence matters mostā¦
itās already too late to recreate it.
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šØ Due Diligence Reality Check: Form 8867 Is Not Your Protection
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