Answering Question 15 on Form 8867 Correctly

Paid tax preparers use Form 8867, the Paid Preparer’s Due Diligence Checklist, to document their compliance with IRS requirements when certain tax benefits are claimed. The questions on the form guide the preparer through a series of checks to ensure a taxpayer is eligible for the credits or filing status being claimed. This article focuses on Question 15, exploring its meaning and the steps preparers must take to answer it correctly.

The Purpose of Form 8867 and Due Diligence

The IRS requires paid tax preparers to exercise due diligence, a standard of reasonable care, to prevent errors on returns claiming certain tax benefits. Filing Form 8867 is how preparers certify they have met this standard. The form must be completed and submitted with any tax return claiming:

• The Earned Income Tax Credit (EITC)
• The Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), or the Credit for Other Dependents (ODC)
• The American Opportunity Tax Credit (AOTC)
• Head of Household (HOH) filing status

These tax benefits have complex eligibility rules, making them susceptible to incorrect claims. The due diligence process, documented on Form 8867, compels the preparer to ask specific questions and review client-provided information. For example, this inquiry helps ensure a taxpayer claiming Head of Household status is unmarried and pays for more than half the home’s upkeep for a qualifying person. The form acts as a formal record that the preparer took steps to confirm eligibility before filing the return.

Analyzing the “Knowledge” Standard in Question 15

Question 15 on Form 8867 asks the preparer: “Do you certify that all of the answers on this Form 8867 are, to the best of your knowledge, true, correct, and complete?” The phrase “to the best of your knowledge” is a legal standard that includes not only what the preparer knows, but also what a reasonable preparer should have known.

This standard means a preparer cannot ignore the implications of information provided by the taxpayer. If information appears “incorrect, incomplete, or inconsistent,” the preparer must investigate further. For instance, incorrect information could be a dependent’s Social Security number that doesn’t match IRS records. Incomplete information might be a Form 1098-T for the AOTC without receipts for required course materials.

Inconsistent information might arise if a client claims two children but only mentions one during an interview, or if their stated income seems too low for their described household expenses. The “knowledge” standard requires the preparer to recognize these red flags and probe deeper, rather than simply accepting a client’s initial statements.

Applying the Standard in Practice

To satisfy the knowledge standard and answer “Yes” to Question 15, a preparer must engage in proactive fact-finding, not just transcribe numbers into software. The preparer must interview the taxpayer to understand their situation and ask open-ended questions to uncover inconsistencies. For instance, instead of asking “Did your child live with you all year?” a better question is “Can you tell me where your child lived each month of last year?”

Certain red flags should trigger more intensive questioning, such as round numbers for self-employment income, altered documents, or a client who is evasive. When these issues arise, the preparer must make reasonable inquiries to resolve them. This could mean asking for bank statements, utility bills, or a lease agreement to verify a taxpayer’s address for Head of Household status.

These inquiries and the taxpayer’s responses must be documented at the time they occur, which is known as contemporaneous documentation. Notes should detail the questions asked, the date, the taxpayer’s answers, and any documents reviewed. This record is the preparer’s evidence of due diligence if the IRS later questions the return.

Consequences Related to Answering Question 15

Answering Question 15 has consequences for the tax preparer. If a preparer identifies an issue and cannot answer “Yes” because they know or have reason to know information is incorrect, they are prohibited from signing the tax return. The preparer must first resolve the issue by obtaining sufficient information to believe the claims are legitimate.

Answering “Yes” without performing the required due diligence exposes the preparer to penalties. The IRS can assess a penalty for each failure to meet the due diligence requirements for the specified credits and Head of Household filing status. For returns filed in 2025, this penalty is $635 per failure, and multiple errors on one return can lead to larger penalties. These can be assessed even if the taxpayer was ultimately entitled to the benefit.