Table of Contents

Course Learning Objectives. v

Introduction to the Course. v

Chapter 1 - Earned Income Credit Rules. 1

Learning Objectives. 1

Introduction. 1

Nature of the Earned Income Credit 1

Earned Income Credit Eligibility. 1

Eligibility Rules Applicable to Everyone. 2

Eligibility Rules Applicable to Taxpayers with a Qualifying Child. 2

Eligibility Rules Applicable if Taxpayer Does Not Have a Qualifying Child. 3

Common Earned Income Credit Errors. 3

Earned Income Credit Errors Involving Qualifying Children. 4

Qualifying Child Requirements. 4

When a Child is Disabled. 5

When Two Taxpayers Claim a Qualifying Child. 5

Tie-Breaker Rules. 6

Earned Income Credit Errors Involving a Client’s Filing Status. 6

Single Filing Status. 7

Head of Household Filing Status. 7

Married Persons Living Apart 8

Earned Income Credit Errors Involving Income Reporting. 8

Earned Income Credit Errors Involving Social Security Numbers. 8

Summary. 9

Chapter 1 Review Questions. 10

Chapter 2 - Due Diligence Requirements. 11

Learning Objectives. 11

Introduction. 11

The Statutory Requirement for Due Diligence – IRC §6695. 11

Specific Requirements Applicable to EIC Due Diligence. 12

Paid Preparer’s Due Diligence Checklist – IRS Form 8867. 12

Due Diligence Questions to Ask to Avoid Qualifying Child Errors. 13

Avoiding Filing Status Errors. 14

Avoiding Income Reporting Errors. 15

Avoiding Social Security Number Earned Income Credit Errors. 15

Paid Preparer’s Due Diligence Checklist Best Practices. 15

Figuring the Amount of the Earned Income Credit 16

Calculating Earned Income for EIC Purposes. 16

Taxpayers Not Self-Employed, Statutory Employees, Clergy or Church Employees. 16

Self-Employed Taxpayers, Statutory Employees, Clergy and Church Employees. 19

Computation Best Practices. 23

Know the Law and the Client 23

When Should a Preparer Ask Additional Questions – Examples. 24

Knowledge Requirement Best Practices. 24

Record Maintenance. 25

Record Maintenance Best Practices. 25

Failure to Meet Due Diligence Requirements. 26

Consequences for the Tax Return Preparer 26

Consequences for the Preparer’s Employer 27

Consequences for the Client of EIC Disallowance. 27

Disallowance Due to Reckless or Intentional Disregard of EIC Rules. 27

Disallowance Due to Fraud. 28

Claiming EIC after Disallowance. 28

IRS Form 8862 Timing. 28

Filing IRS Form 8862. 28

Exceptions. 29

Summary. 29

Chapter 2 Review Questions. 32

Answers to Chapter Review Questions. 34

Chapter 1 Review Questions Feedback. 34

Chapter 2 Review Questions Feedback. 37

Appendix A – Worksheet A.. 40

Appendix B – Worksheet B.. 41

Glossary. 43

Index. 45

CPE Exam Answer Sheet 46

Final Examination. 47

CPASelfstudy.com Course Evaluation. 54