The IRS issued regulations in December 2011 that affect all earned income tax credit (EITC) claims filed by paid preparers after December 31, 2011. There are four due diligence requirements, including submission of Form 8867, Paid Preparers’ Earned Income Credit Checklist.
Last month, the IRS sent warning letters to paid preparers who did not submit Form 8867 with 2011 client returns claiming EITC. IRS did not assess penalties as a result of these letters, but placed preparers on notice that any tax year 2012 EITC returns without Form 8867 will result in a $500 penalty per violation. There is no maximum to the number of penalties IRS can impose.
EITC Tax Preparer Toolkit http://www.eitc.irs.gov/rptoolkit/hottopicsrp/