Tax Pros: Are You Really Documenting Your Due Diligence the Right Way?

By Dr. Gwennetta Wright, Tax Coach

Tax professionals often believe that due diligence is simply about completing Form 8867 and attaching it to the return. But here is the truth, that form is just the beginning.

The IRS does not provide a full list of required due diligence questions. Aside from the worksheets attached to credits like the Earned Income Tax Credit or American Opportunity Credit, it is up to you to ask the right questions, evaluate the answers, and use your professional judgment.

When tax preparers face penalties, it is rarely because they forgot the form. It is usually because they failed to do enough to prove the client actually qualified.

Here is what the IRS is really looking for:

• Qualifying questions based on the tax law

• Documented answers in the client file

• Additional inquiries based on client responses and documentation

• Notes that show inconsistencies were addressed and resolved

  
  

There is no one-size-fits-all file. Every client situation is unique, and your documentation should reflect that. What gets many tax pros fined is a lack of detail — no written questions, no follow-up notes, or vague “yes” and “no” answers.

Your job is to clearly document how and why your client qualifies for each credit or status. Due diligence is your protection. Treat it like it matters , because it does.

---

✅ Follow me @gwennettawright on Facebook, Instagram, and TikTok✅ Visit www.xpertbusinesssolution.com for tools and training