Amendments to the return preparer regulations expand the scope of preparer due diligence. The regulations apply to the due diligence penalty as it applies to
– the Child Tax Credit,
– the Additional Child Tax Credit,
– the American Opportunity Tax Credit, and
– a taxpayer’s eligibility to file as head of household.
The regulations affect tax return preparers and are effective November 7, 2018.
Return Preparer Penalty Expanded
For tax years beginning after December 31, 2015, Congress expanded the due diligence penalty. The penalty expanded to include tax return preparers who were not diligent when determining:
– eligibility for, or
– the amount of,
the child tax credit, additional child tax credit, and the American Opportunity Tax Credit.
Effective for tax years beginning after December 31, 2017, Congress expanded the penalty again. The penalty now includes tax return preparers who fail to comply with due diligence requirements for determining eligibility to file as head of household.
Due Diligence Requirements
The final regulations adopt without substantive changes:
– the 2016 proposed regulations, and
– the entirety of the 2018 proposed regulations
The final rules contain examples that illustrate how the regulations work. And, a detailed explanation of the regulations are in the preambles to the 2016 temporary regulation and the 2018 proposed rules.
Code Sec. 6695
CCH Reference – 2018FED ¶39,968
Tax Research Consultant
CCH Reference – TRC IRS: 6,116