Paid preparer’s checklist expands to include head-of-household, other tax credit questions

By Robert M. Caplan, CPA, and Donald J. Zidik Jr., CPA

The IRS expanded Form 8867, Paid Preparer’s Due Diligence Checklist, for 2018 individual income tax returns to include questions for both head-of-household filing status and the credit for other dependents. For 2017 tax returns this form needed to be included by the preparer on any Form 1040, U.S. Individual Income Tax Return, that claimed the earned income tax credit, the American opportunity tax credit, and/or the child tax credit.

Form 8867 consists of a series of questions verifying the paid preparer’s due diligence in requesting information from clients regarding a series of credits and deductions that have been subject to substantial tax fraud. This form transfers the burden of responsibility from the taxpayer to the paid preparer.

The new question for head-of-household status is, “Have you determined that the taxpayer was unmarried or considered unmarried on the last day of the tax year and provided more than half of the cost of keeping up a home for the year for a qualifying person?”

The other dependent credit is new for 2018. It provides a credit of up to $500 for dependents who are not qualifying children for purposes of the child tax credit. The due-diligence questions for the other tax credit are the same as for the child tax credit or the American opportunity tax credit.

The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, expands the penalties for failure to prepare the due-diligence checklist. Under prior law the penalty was imposed on each failure and could expose a practitioner to a potential $1,560 penalty on each return (see Rev. Proc. 2017-58). Under the TCJA, the penalty is increased to a maximum of $2,080 on a single tax return for returns and refund claims filed in 2018 ($2,120 for 2019).

Section VI of Form 8867 provides preparer requirements for attestation needed to sign the form. These include:

  • Interviewing the taxpayer, asking adequate questions, and documenting the taxpayer’s responses on the return or in their notes;
  • Completing Form 8867 truthfully and accurately;
  • Submitting Form 8867; and
  • Keeping the following five records for three years after the due date of the form:
    • Copy of Form 8867;
    • Worksheets used in completing the form;
    • Copies of any documents provided by the taxpayer used to prepare the form;
    • Records of how this information and the worksheets were obtained; and
    • Records of additional questions the preparer may have asked to determine eligibility to claim the credits and/or head-of-household filing status.

The retained records must be kept for three years from the latest of the following dates:

  • The due date of the tax return (not including extensions);
  • The date the return was filed (if the signing tax return preparer electronically filed the return);
  • The date the return was presented to the taxpayer for signature (if the signing tax return preparer did not electronically file the return);
  • The date the practitioner submitted to the signing tax return preparer the part of the return for which the practitioner was responsible (if the practitioner is a nonsigning tax return preparer).

Careful consideration and due diligence for these new requirements is essential, as the burden of responsibility is again shifted from the taxpayer to the paid preparer.

Robert M. Caplan, CPA, is the managing partner of Caplan & Wong CPAs LLP in California. Donald J. Zidik Jr., CPA, is a partner with Waldron H. Rand & Company in Massachusetts and an adjunct professor of taxation at Suffolk University in Boston. To comment on this article or to suggest an idea for another article, contact Alistair M. Nevius, J.D., the JofA’s editor-in-chief, tax, at


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