IRS Letters and Visits - Letter 5271
Note: The following is the text of Letter 5271 the IRS sent out to selected tax return preparers nationwide in December 2013.
Our data indicates you prepared income tax returns for tax year [year] claiming the Child Tax Credit and Additional Child Tax Credit. The procedures for claiming these credits were modified for 2012 with the creation of Form 1040, Schedule 8812, Child Tax Credit. As a paid preparer, you're responsible for ensuring your clients' returns comply with IRS requirements.
The purpose of this letter is to provide you with educational assistance and promote awareness of the new Schedule 8812 requirements, which will help you prepare accurate returns when claiming the credits mentioned above. Schedule 8812 has four parts and your clients' circumstances will determine which parts to complete. Please pay special attention to the requirements for each part next filing season.
Child Tax Credit reminders
To prepare an accurate Schedule 8812, you must ask your clients relevant and probing questions to help you determine if the credit is allowable. Taxpayers may not fully understand the tax laws and may incorrectly believe they can claim the credit for ineligible dependents. In general, to be a qualifying child for purposes of the child tax credit, the child must be a citizen, national, or resident of the United States. If the child isn't a U.S. citizen or national, you should ask your clients questions to identify whether the child meets the substantial presence test for establishing residency.
Due diligence responsibilities
A paid tax return preparer must take multiple steps to prepare accurate tax returns on behalf of clients. These steps are a preparer's due diligence and include reviewing the applicable tax law to establish the relevance and reasonableness of income, credits, expenses, and deductions on a return. In general, you can rely in good faith without verification on information your client provides. However, you can't ignore the implication of the information you have. You must ask reasonable questions if the information appears to be incorrect, inconsistent, or incomplete.
You can find more information about the Schedule 8812 on our website at www.irs.gov, keywords: Child Tax Credit. You can also get Form 8967, Paid Preparer's Child Tax Credit Checklist, on our website which you can use and keep for your records to assure you've taken due diligence. You're not required to file the Form 8967 with the return and no penalties apply for the use or non-use of the form. In addition, we recommend you review:
- Schedule 8812 instructions
- Circular 230, Section 10.22, Diligence as to accuracy
- Circular 230, Section 10.34, Standards with respect to tax returns and documents, affidavits, and other papers
I hope this letter increased your awareness of your responsibilities as a paid tax return preparer and provided you with information on preparing accurate Child Tax Credit claims for your clients.
Thank you for your attention to this matter.
Carol A. Campbell
Director, Return Preparer Office