Why due diligence exists and what it costs to skip it

Form 8867 is the IRS's answer to improper refundable credit claims. The penalty is $500 per claim — not per return — so a single family return with EITC, CTC, and AOTC claims can expose a preparer to thousands of dollars for one sloppy intake.

What satisfies the requirement:

• Knowledge: you must know (or reasonably determine) the eligibility rules for each credit you claim.
• Inquiry: you must not know something you reasonably should know — ask until the picture is complete and consistent.
• Documentation: keep the completed 8867 and supporting records with the return file.

Everything in this course serves those three pillars.