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Claiming The Earned Income Credit

 U.S. taxpayers who file a Form 1040 and claim the Earned Income Credit (“EIC”) that is prepared by Powers & Company will be required to provide documentation to support their eligibility for this credit. This includes but is not limited to:

  • Any income documents other than W-2 forms
  • Income or expense documents that support Schedules C or F income including client prepared records of income and expenses
  • Interest income statements
  • Social Security cards
  • Guardianship records
  • Court placement records, etc.

The IRS requires that we make adequate inquiries and examine documentation and complete Form 8867 that is required to be submitted with the tax return, regardless of if it is filed electronically or manually. In addition we are required to keep a copy on file for at least three years and provide you with a copy with your copy of the income tax return. Failure to exercise adequate due diligence and submit this form will result in a $500 preparer penalty. Claiming an EIC subsidy to which you are not entitled would also subject you to substantial accuracy related penalties.

Obviously this new requirement will result in additional work and time on our part which may likely result in increased tax return preparation fees as well as additional document procurement on the part of our clients. Also all tax returns prepared that claim an EIC will require that tax preparation fees be paid in advance of filing the return and at the time the return is prepared. Unfortunately this is an IRS mandate and it is beyond our control.

You also need to be advised that in addition to these requirements the IRS may contact you directly to enquire regarding your eligibility without our knowledge, and you will be required to answer their questions. In addition they may contact us regarding our due diligence process.

We apologize for this inconvenience and assure you that although our job is to represent you as our client and do not work for the IRS, these expanded rules and preparer penalties are government mandated in order to mitigate fraud and abuse.

Copyright © 1999-2015 IRS CIRCULAR 230 NOTICE:  To ensure compliance with recently enacted U.S. Treasury Department regulations, we hereby advise you that any and all tax information contained in this website should not be considered as tax advice nor intended for the use of any taxpayer for the purpose of evading or avoiding tax penalties that may be imposed pursuant to U.S. law. Furthermore, the use of any tax information contained in this communication has neither been written nor intended for the purpose of promoting, marketing, or recommending a partnership or other entity, investment plan or arrangement to any taxpayer, and such taxpayer should seek advice on the taxpayer’s particular circumstances from an independent tax advisor. The information contained throughout this web site is provided without charge, and although all efforts have been made to ensure the reliability of the information contained in this internet web site, the information contained herein should be used for general understanding only and should not be relied upon exclusively as the basis of any tax or financial decisions or for any positions taken on any tax return. Advice should only be obtained directly through the retention of a competent tax advisor. Tax Power is an established trademark of Powers & Company, Inc. and Powers Tax Services since 1999. Unauthorized use of the phrase Tax Power without expressed permission of Powers & Company, Inc. will be prosecuted to the fullest extent of the law. Last modified: January 15, 2015 The articles, guides and published information contained in this website is protected by U.S. copyright laws and cannot be reproduced in any form without the expressed permission.

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