Form 8867 – Document Retention Requirements for Paid Preparers

A paid tax return preparer is required to exercise due diligence when preparing a client’s tax return or claim for refund. As part of exercising due diligence, the preparer must

1. interview the client,
2. ask adequate questions, and
3. obtain appropriate and sufficient information to determine the correct reporting of income, claiming of tax benefits (such as deductions and credits), and compliance with the tax laws.

For three (3) years from the latest of

1. when the return was due (not including extensions), or
2. when the return was actually filed (if you are a signing tax preparer and e-filed the return), or
3. when the return was presented to the taxpayer for their signature (if you are a signing tax return preparer and not e-filing the return), or
4. when the non-signing tax preparer submitted to the signing tax preparer the part of the return for which they were responsible,

the following five (5) records must be kept, either on paper or electronically:

1. A copy of Form 8867;
2. The applicable worksheet(s) or your own worksheet(s) for any credits claimed;
3. Copies of any documents provided by the taxpayer on which you relied to determine eligibility for, and the amount of, the credit(s), and/or HOH filing status;
4. A record of how, when, and from whom the information used to prepare Form 8867 and worksheet(s) was obtained; and
5. A record of any additional questions you may have asked to determine eligibility for, and amount of, the credits, and the HOH filing status, along with the taxpayer’s answers.

The following are examples of documents that can be relied on to determine taxpayers’ eligibility for a credit, the amount of the credit, and/or the HOH filing status. This list is not all-inclusive.

Qualifying Child’s Residency

• School records or statement
• Landlord or a property management statement
• Health care provider statement
• Medical records
• Child care provider records
• Placement agency statement
• Social service records or statement
• Place of worship statement
• Indian tribal official statement
• Employer statement

Qualifying Child’s Disability

• Doctor statement
• Other health care provider statement
• Social services agency or program statement

Schedule C

• Business license
• Forms 1099
• Records of gross receipts provided by taxpayer
• Taxpayer’s summary of income
• Records of expenses provided by taxpayer
• Taxpayer’s summary of expenses
• Income and expenses as shown on bank statements

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As a tax preparer, you will have complied with your due diligence requirements if you do the following:

1. Keep a copy of the five records listed above;
2. Meet the knowledge requirement by
   • interviewing the taxpayer,
   • asking adequate questions,
   • contemporaneously documenting the questions and the taxpayer’s responses on the return or in your notes,
   • reviewing adequate information to determine if the taxpayer is eligible to claim the credit(s) and/or HOH filing status as well as determine the amount(s) of the credit(s) claimed.
3. Complete Form 8867 truthfully and accurately and complete the actions described on the form for any applicable credit(s) claimed and, if claimed, the HOH filing status.

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NOTE: This is a guide on due diligence and document retention requirements. This is not intended as tax advice. Preparers are encouraged to review the underlying resources under Additional Information below.

Additional Information:

Form 8867 Instructions

IRS Rev. Proc. 97–22, guidance on electronic storage systems