Form 8867 due diligence: what to ask and what to keep, by credit

Form 8867 is the paid preparer’s due diligence checklist for four benefits: the EIC, the CTC group (CTC, ACTC and ODC), the AOTC, and head of household status (Form 8867 instructions). It travels with the return. The work behind it stays in your file.

The instructions list what complying looks like (Form 8867 instructions). You complete Form 8867 truthfully and submit it, you compute the credits with the worksheets, you meet the knowledge requirement, and you keep the records. The knowledge requirement is the duty to interview the client, ask adequate questions, write down the questions and answers at the time, and review enough information to judge eligibility (Form 8867 instructions).

One point is easy to misread. In general, due diligence rules do not require you to request specific documents from clients (IRS EITC Central, knowledge and recordkeeping). But any document you do rely on must be copied and kept, so the checklist below is a list of what to ask for when a fact needs support.

You keep five records for each return, for 3 years from the latest of the dates set in the instructions (Form 8867 instructions). For an e-filing signing preparer, the clock starts at the later of the return’s due date without extensions and the date it was filed (Form 8867 instructions).

On a return with children, the questions turn on the qualifying child. For the EITC, a qualifying child is one who passes four tests, namely relationship, age, residency and joint return (IRS, EITC qualifying child rules). Residency means the child lived with the client in the United States for more than half the year (IRS, EITC qualifying child rules).

Relationship is usually settled once. The IRS’s own interview examples note that a relationship verified in a prior year generally need not be checked again, but residency should be asked every year (IRS EITC Central, knowledge and recordkeeping). Ask who else lived in the home, because another adult may be able to claim the same child.

For a client with self-employment income, ask how the business runs. Ask what they sell, who pays them, and how they track income and costs. Where records are thin, note how the client reached the figures and keep anything they show you, such as bank deposits or invoices.

• Identity: a Social Security card or ITIN letter for each person, matching the names on the return.
• Relationship: birth certificates, adoption or agency placement papers, a marriage certificate for a stepchild.
• Residency: records that show the child at the client’s address, such as school, medical or childcare records, or a lease naming the child.
• Custody: the divorce decree and, when the other parent claims the child tax credit, Form 8332.
• Client’s own SSN for the CTC or ACTC: from tax year 2025 the taxpayer needs a valid SSN too, and on a joint return one spouse’s SSN is enough (Form 8867 instructions).
• A prior denial for a reason other than a math or clerical error: Form 8862 must be attached (Form 8867 instructions).

For the AOTC, do not take Form 1098-T at face value. The amounts on it may not match what was actually paid for qualified expenses in the year, so the instructions tell you to verify them (Form 8867 instructions). Ask for the school’s billing statement and proof of payment, and receipts for required course materials.

For head of household, two facts need support. The client was unmarried or considered unmarried, and paid more than half the cost of keeping up a home for a qualifying person (Form 8867 instructions). A divorce decree, a separation agreement or proof the spouse lived elsewhere covers the first. Rent or mortgage, utility and grocery records cover the second.

The penalty is per failure, and its amount follows the year the return is filed. For a return filed in 2026, such as a 2025 Form 1040, it is $650 for each credit or status where due diligence was not met, so $2,600 for a return claiming all four (Form 8867 instructions). For a return filed in 2027, such as a 2026 Form 1040, it rises to $665 per failure (Rev. Proc. 2025-32), or $2,660 for all four (Rev. Proc. 2025-32).

A routine keeps each file defensible. Use the same interview notes for every client, store them with the return, and send a document request only for the facts that need proof. The due diligence questionnaire guide covers how to word the questions.

1. Confirm which of the four benefits the return claims.
2. Interview the client and write the date, method and answers in your notes.
3. Ask for documents where a fact is unclear, and copy the ones you rely on.
4. Run the worksheets and complete Form 8867.
5. File the form, notes, worksheets and copies together, and set a destroy date.

• Form 8867 instructions: Credits and HOH status covered, the taxpayer SSN rule for the CTC and ACTC from tax year 2025, the knowledge requirement, the five records kept for 3 years, Form 1098-T verification, HOH substantiation, Form 8862, and the $650 penalty per failure for returns filed in 2026.
• Rev. Proc. 2025-32: For a return or refund claim filed in 2027, the section 6695(g) due diligence penalty is $665 per failure.
• IRS EITC Central, knowledge and recordkeeping: Due diligence rules do not generally require requesting specific documents; relationship verified in a prior year need not be repeated, residency should be asked each year.
• IRS, EITC qualifying child rules: A qualifying child meets relationship, age, residency and joint return tests, and lived with the taxpayer in the United States more than half the year.