2025 IRS Due Diligence
Compliance Checklist

Complete Form 8867 for EVERY return claiming EITC, CTC/ACTC/ODC, AOTC, or HOH

⚠️ IRS REQUIRED — $650 penalty per failure

Answer ALL questions on Form 8867 — no blanks or N/A where answer is required

⚠️ IRS REQUIRED — $650 penalty per failure

Base Form 8867 answers on information from the taxpayer, NOT assumptions

⚠️ IRS REQUIRED — $650 penalty per failure

Submit Form 8867 with the filed tax return (paper or electronic)

⚠️ IRS REQUIRED — $650 penalty per failure

Complete a SEPARATE Form 8867 for each applicable credit/status on the return

Complete EIC Worksheet (or equivalent) for EITC claims

⚠️ IRS REQUIRED — $650 penalty per failure

Complete Schedule 8812 for CTC/ACTC/ODC claims

⚠️ IRS REQUIRED — $650 penalty per failure

Complete Form 8863 for AOTC claims

⚠️ IRS REQUIRED — $650 penalty per failure

Verify HOH qualifying person meets residency and relationship tests

⚠️ IRS REQUIRED — $650 penalty per failure

Verify taxpayer SSN is valid (not ITIN) for CTC/ACTC claims — NEW for TY2025

⚠️ IRS REQUIRED — $650 penalty per failure

Verify income thresholds: EITC phase-outs, CTC $2,200/child (indexed for 2025)

Document basis for any estimated or reconstructed income figures

Interview the taxpayer (in person, phone, or virtual) — not just collect documents

⚠️ IRS REQUIRED — $650 penalty per failure

Ask about ALL income sources, including cash/gig/side income

⚠️ IRS REQUIRED — $650 penalty per failure

Ask about filing status — who lived in the home, for how long, and relationship

⚠️ IRS REQUIRED — $650 penalty per failure

For EITC: Verify earned income, investment income limit ($11,600 for 2025), residency

⚠️ IRS REQUIRED — $650 penalty per failure

For CTC: Verify child's age (<17), SSN, residency (>6 months), and support

⚠️ IRS REQUIRED — $650 penalty per failure

For AOTC: Verify enrollment status, qualified expenses, and 4-year limit

⚠️ IRS REQUIRED — $650 penalty per failure

For HOH: Verify unmarried/considered unmarried status and >50% household costs

⚠️ IRS REQUIRED — $650 penalty per failure

Document follow-up questions when information seems incorrect or inconsistent

⚠️ IRS REQUIRED — $650 penalty per failure

Do NOT ignore information that is inconsistent, incorrect, or incomplete

⚠️ IRS REQUIRED — $650 penalty per failure

Ask about prior year credits — were any denied or reduced by IRS?

Retain copy of Form 8867 for 3 years from latest of: due date, filing date, or date presented for signature

⚠️ IRS REQUIRED — $650 penalty per failure

Retain copies of all applicable credit worksheets/computations

⚠️ IRS REQUIRED — $650 penalty per failure

Retain copies of documents provided by taxpayer that you relied upon

⚠️ IRS REQUIRED — $650 penalty per failure

Document HOW information was obtained (interview, documents, prior returns)

⚠️ IRS REQUIRED — $650 penalty per failure

Document WHEN information was obtained (dates of interviews, document receipt)

⚠️ IRS REQUIRED — $650 penalty per failure

Document FROM WHOM information was obtained (taxpayer, spouse, third party)

⚠️ IRS REQUIRED — $650 penalty per failure

Records are organized and retrievable if IRS requests them during examination

Verify taxpayer identity with government-issued photo ID

Verify Social Security cards for all persons on the return

Compare W-2/1099 documents to IRS records when available (e.g., Wage & Income transcript)

Keep a log of returning vs. new clients for pattern detection

Check IRS e-Services for prior year return information (if authorized)