The Core of Due Diligence: What the IRS Is Really Looking For

By Dr. Gwennetta Wright, Tax Coach

If no one tells you anything else about due diligence, understand this, the IRS is not just checking forms. They are checking you. Your systems. Your documentation. Your knowledge. And whether you understand how to apply the law, not just fill in boxes.

Let’s start here: If you collect documents, you are required to verify the information. That means if something does not add up—income, expenses, dependents, filing status—you must address it. Most tax professionals fail right here. They list documents on line 5 of Form 8867 but do not have those documents in the file or do not address inconsistencies.

You should always ask standard qualifying questions for EITC, CTC, AOTC, and Head of Household. But here is where many tax pros go wrong: they stop there. Your additional inquiries should never be the same across every client file. Every client’s situation is unique, and your follow-up questions must reflect that.

The IRS expects you to use your judgment like a well-informed tax preparer would. That means tailoring your questions based on the client’s answers and documenting those interactions in detail. Not just yes or no responses. Not generic forms. You need clear, detailed notes that walk through your thinking and why you made the decisions you did.

If you want to stay compliant and protect your business from costly fines, here is your roadmap:Ask better questions.Tailor your inquiries.Take notes.Keep everything in the file.

This is what audit-ready looks like.

You have just a few more days to register for my Virtual Due Diligence Masterclass. If you are confused about what to ask, how to document, or how to actually think through a client’s return, this is where you need to be.

Let me help you stop that from happening.

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