What are the 4 due diligence requirements for tax return preparers?
The treasury regulations explain the due diligence rules. The regulation state that there are four due diligence requirements tax the preparer must meet to avoid a penalty. The penalty is asserted against each tax return file.
The four basic due diligence requirements are:
1. Aquire and demonstrate a working knowledge of each of the refundable credits;
2. Complete the Due Diligence Check List, Form 8867;
3. Compute the credits and keep your computation worksheets;
4. Ask relevant questions and write down the client's answers as well as requesting relevant supporting documents and keeping a copy of the records for a minimum of three years.