IRS Sending Earned Income Tax Credit (EITC) Warning Letters

Theresa FerroneBlog

Preparers who’ve submitted returns with sketchy claims for the Earned Income Tax Credit, the Child Tax Credit Tax/Additional Child Tax Credit, and the American Opportunity tax Credit will soon receive IRS Letter 5025. This letter is designed to inquire “about questionable tax returns” and let preparers know that they have been identified, and they must meet EITC due-diligence requirements.

During 2019, 25 million workers and families received about $61 billion in EITCs nationwide, according to the IRS.  The average EITC nationwide was about $2,504.

The IRS sent similar letters in 2015.  In recent years, returns claiming an EITC were audited more than two times often as all other individual income tax returns.

The letter also says; “A review of the 2018 returns you prepared shows you may not have met your due diligence requirements and may have prepared inaccurate returns for your clients.  This letter is to give you information and make you aware of the due diligence requirements that all paid preparers must follow.”

It is very likely that if your tax preparer is getting this letter and does not meet the EITC (and other credits mentioned above) or due diligence requirements, both you and your preparer will be hearing from the IRS.

So how do you know if your preparer is meeting the EITC requirements?

The IRS provides a lengthy list of questions and comments for preparers to review with their clients, and they should discuss many of the items on the list with you.  If you are claiming any of the credits and you are not having this discussion with your preparer, it is a good indication that your income tax return is not being prepared accurately.   

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