Due Diligence Protection System
Complete Form 8867 interview scripts, documentation checklists per credit type, client intake questionnaires, record retention workflows, and a penalty defense letter. At $650/failure, this pays for itself on a single return.
One Failed Due Diligence Check = $650 Penalty. Per Return.
These are real risks tax professionals face every single season — and most are completely preventable.
Per-Return IRC §6695(g) Penalty
For TY2025, the IRS penalizes $650 for EACH return where you fail to meet due diligence requirements on EITC, CTC, AOTC, or HOH. Just 10 returns = $6,500 out of your pocket.
Max Penalty Per Return (4 Credits)
If one return claims EITC + CTC + AOTC + HOH and you fail due diligence on all four, that's $2,600 in penalties on a single return. The IRS stacks these.
EITC Improper Payment Rate
The IRS estimates 39% of EITC payments are improper. They're watching. Preparers who can't prove they asked the right questions are first in line for penalties.
Required — But Not Sufficient
Checking boxes on Form 8867 isn't enough. The IRS requires you to document the actual questions asked, client responses, and the records you reviewed. A checklist alone won't save you.
Record Retention Requirement
You must keep due diligence documentation for at least 3 years (4 recommended). If audited, you need to produce interview notes, worksheets, and supporting docs for every credit claimed.
Defensible With Proper System
A structured interview script + documentation checklist for each credit type = bulletproof defense. If the IRS asks, you hand them the file. Case closed.
The solution? Professional-grade templates you can deploy today. ↓
What's Inside
Everything You Get
EITC Interview Script (28 Questions)
Comprehensive interview script covering all EITC requirements: earned income verification (W-2, self-employment, gig income), investment income limit ($11,600 for TY2025), qualifying child tests (age, relationship, residency, joint return, SSN), filing status verification, and tie-breaker rules when multiple people claim same child. Each question includes follow-up prompts for inconsistent answers and documentation notes. Directly maps to Form 8867 questions for EITC.
CTC/ACTC/ODC Interview Script (22 Questions)
Updated for TY2025: Child Tax Credit increased to $2,200/child (newly indexed for inflation). Covers qualifying child tests (under 17, SSN requirement — NEW: at least one taxpayer must have SSN, not ITIN), ACTC earned income floor ($2,500), and ODC for dependents who don't qualify for CTC. Phase-out thresholds: $200K single, $400K MFJ (made permanent by TCJA extension). Each question maps to Schedule 8812 lines.
AOTC Interview Script (18 Questions)
Covers Form 8863 requirements: enrollment status verification (at least half-time), qualified education expenses (tuition, fees, books — not room/board), 4-year limit on claiming AOTC, no felony drug conviction, Form 1098-T reconciliation, and scholarship/grant offset calculations. Includes questions about multiple students on same return and coordination with Lifetime Learning Credit.
HOH Interview Script (15 Questions)
Head of Household verification: unmarried or "considered unmarried" test (lived apart from spouse for last 6 months of year), qualifying person identification, relationship test, residency test (>6 months in taxpayer's home), and cost of maintaining household test (>50% of household expenses). Includes "considered unmarried" worksheet for married taxpayers who may qualify.
Documentation Checklists & Record Retention
Per-credit checklist of what documents to collect and retain: birth certificates, school records, lease/mortgage for residency, utility bills, childcare records, W-2s, 1099s, bank statements. Plus: a complete record retention workflow showing what to keep, how long (3 years from latest applicable date per IRC §6695(g)), storage requirements, and destruction protocols. Includes both paper and electronic retention guidelines.
Penalty Defense Letter & Compliance Audit
If the IRS does assess a §6695(g) penalty, this template letter requests abatement based on demonstrated due diligence procedures. Includes: statement of your standard due diligence process, reference to your retained records, citation of IRM 20.1.1.3.6.1 (reasonable cause), and request for penalty reconsideration. Plus: an annual self-audit checklist to run before each tax season to verify your procedures are current.
“I got hit with a $3,900 penalty two years ago for 6 EITC returns. It was devastating. After implementing this system, I passed my IRS review with zero findings. The interview scripts alone are worth 10x the price.”
Marcus T.
Tax Preparer, Atlanta GA
Questions?
Is this based on actual IRS requirements?
Every question and checklist maps directly to IRS Form 8867 instructions, IRS Publication 4687, and IRC §6695(g) requirements. We cite the specific IRS references throughout.
How is this different from the free Due Diligence Checklist tool?
The free tool tells you WHERE your gaps are. This system gives you the complete SCRIPTS, FORMS, and WORKFLOWS to close those gaps — plus the defense letter if penalties are ever assessed.
Can my staff use these too?
Yes. The staff training outline is designed so you can train preparers in your office to follow the same due diligence procedures. One purchase covers your entire office.
What if IRS requirements change?
This version covers TY2025-2026. The core due diligence requirements (4 requirements under IRC §6695(g)) have been stable since 2017. Credit-specific thresholds are updated to current amounts.
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