Tax Defense Network‘s advice to taxpayers using professional tax preparation to claim EITC credits: Make sure your tax preparer files correctly.

Last year, the IRS paid out more than $11.6 billion in wrongful Earned Income Tax Credit claims. The Earned Income Tax Credit (EITC) is a tax credit available to low to moderate income families which allows them to keep more of their earned income. In 2012, as much as 26% of all EITC claims were submitted with some kind of mistake.

As a part of their effort to crack down on improperly claimed EITC, the IRS requires tax preparers to practice “due diligence” when filing for EITC on behalf of clients. This means that when they claim EITC for a client, they must complete and attach Form 8867, the Paid Preparer’s Earned Income Credit Checklist.

“The IRS expects tax prep professionals to understand EITC and to only use it when appropriate. Yet, in the past few years the IRS has reported an increase in tax preparers wrongfully using EITC,” explains Scott O’Connor at Tax Defense Network. “The checklist is the IRS’ way of making sure the tax preparer has done their due diligence and made sure their client actually qualifies for the EITC.”

Tax preparers now face serious penalties for inappropriately filing EITC claims. The IRS assesses a $500 penalty to for each return that fails to comply with due diligence requirements. There are even costlier penalties if the IRS finds that the tax preparer claimed an EITC with reckless or intentional disregard of rules or regulations.
So what does this matter to every day taxpayers?

Scott O’Connor at Tax Defense Network explains, “You trust that your tax preparer files your taxes correctly, but if they file an illegitimate EITC on your behalf, you may feel the damages. We help many clients who end up with tax debt because of improperly filed Earned Income Tax Credit.”

If the IRS finds reason to deny all or part of an EITC, the taxpayer must pay back the amount erroneously paid out, with interest. In addition, if the EITC was filed wrongfully due to reckless or intentional disregard for the rules or due to fraud, the taxpayer may be banned from using the EITC for 2 or 10 years respectively.

“If you are going to hire a professional to do your taxes, make sure they know their IRS requirements, especially if you think you may qualify for EITC,” says Scott O’Connor at Tax Defense Network. “Improperly filing an EITC is a costly mistake.”

Tax Defense Network is a tax debt relief company that has resolved over $120 million in client tax debt. With headquarters in Jacksonville, Florida, Tax Defense Network’s team of licensed tax professionals, enrolled agents and CPAs has more than 35 years of experience helping individuals and small business across the country with their tax issues.