The Earned Income Tax Credit (EITC) is a refundable credit for low to moderate income households. It is a very desirable form of tax relief because it actually puts money back in their pockets . . . if they qualify. The problem is that over the years the IRS has also paid out in circumstances where the taxpayer doesn’t really qualify. In fact, in 2009 over 26 million people received nearly $59 billion through the EITC.
In an effort to promote more accuracy (and less fraud) in connection with EITC, the IRS is likely going to make it a requirement that all paid tax preparers include Form 8867 with all returns that include the credit. Right now it is a proposed regulation still awaiting public comment and final approval. In years past, tax preparers were required to complete this form (to prove their due diligence) and retain it in case of audit. But under the proposed regulation, paid tax preparers would be required — beginning January 1, 2012 — to actually file the form along with the return.