IRS Due Diligence: Why Tax Pros Must Ask the Right Questions (Not Just More Questions)

Gwennetta Wright
Nov 14, 2025
2 min read

Written by Dr. Gwennetta Wright

That’s right. Outside of Form 8867 and the main tax forms, the IRS doesn’t give you a full checklist of required due diligence questions.

And that’s exactly why so many tax pros get fined—not because they didn’t ask questions, but because they didn’t ask the right ones.

Here’s what you need to know to protect yourself and your business.

1. There’s No Official List of Extra Questions

The IRS gives you the framework—but not the script. Form 8867 outlines the minimum requirements, but it doesn’t tell you all the follow-up questions you’ll need to ask when things don’t quite add up.

During an audit, it’s not about whether you asked “enough questions.”It’s about whether you used your professional judgment to ask the right questions based on your client’s individual situation.

That’s the difference between passing or failing a due diligence review.

2. The Burden Is on You to Prove You Did Enough

If your file simply says:

“Client claimed Head of Household.”“Client stated child lived with them all year.”

That’s not enough to defend your work.

The IRS expects to see documentation that proves you took the time to understand your client’s entire situation—not just the basics.

If your file doesn’t tell the full story, the IRS assumes you didn’t do enough to verify eligibility.

3. Use Your Professional Judgment (and Document It)

As a tax preparer, you’re expected to use your judgment and document your process thoroughly.

That means:

• Asking deeper, situation-specific questions

• Clarifying unclear or inconsistent information

• Documenting exactly what you asked and what the client told you

Even if you’re confident your client qualifies, you need written notes that show how you reached that conclusion.

Your professional judgment is your first defense.

Your documentation is your proof.

4. Don’t Just Fill the Form—Tell the Story

A compliant, audit-proof file should clearly show:

📌 What your client told you

📌 What documents you reviewed

📌 What steps you took to verify information

📌 Why you believed your client qualified

Think like an auditor when preparing each return. If someone reviewed your file tomorrow, could they understand your reasoning without you explaining it?

If the answer is yes, you’re doing Due Diligence right.