IRS Due Diligence Audits

The IRS requires tax return preparers to follow strict due diligence requirements when claiming refundable credits for clients. Failure to comply with these requirements can result in substantial penalties. I.R.C. § 6695 establishes four due diligence requirements for tax return preparers: (1) completion and submission of Form 8867; (2) computation of the credit or credits; (3) knowledge; and (4) retention of records.

Results

We are committed to delivering results for our clients. We invite you to review a sample of IRS Due Diligence cases that we have successfully resolved for our clients. All cases are different and the summaries below should not be interpreted as a prediction or guarantee of success or specific results.

Proposed Due Diligence Penalties Reversed

The IRS initiated an audit/examination under I.R.C. § 6695(g) for alleged failure to be diligent in determining eligibility for certain refundable credits, including the Earned Income Tax Credit. The IRS proposed assessing a six-figure penalty against the Taxpayer. DeWitt Law filed an appeal and a hearing was held. All penalties were reversed.

$65,340 Due Diligence Penalty Assessment Reduced to $22,869

The IRS initiated a due diligence audit against a tax return preparer operating as a sole proprietor. The IRS proposed a penalty of $65,340. DeWitt Law filed an administrative appeal with the IRS and a hearing was held. The penalty was reduced to $22,869.