Ethics & Compliance
What must tax preparers always do under due diligence?
Ask questions, verify, and document.
What documents should you ask for when claiming EITC or dependents?
School records, medical records, lease, food stamp letters, daycare forms.
A client says, “I don’t have paperwork, but my son lives with me.” What do you do?
Ask for proof like school or medical records. Without documentation, you cannot add him.
Name the 5 filing statuses.
Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Surviving Spouse.
A taxpayer has a child in college and pays $4,000 in qualified tuition expenses. What credit may they qualify for?
The American Opportunity Credit (AOTC).
What should you do if a client asks for a shortcut?
Follow IRS rules, even if the client wants shortcuts.
What documents are required for Head of Household?
Utility bills, lease/mortgage, proof of over 50% support.
A client says, “My homegirl got $10K last year with 3 kids and unemployment.” What do you say?
Every return is different. IRS is cracking down better a smaller safe refund than penalties.
What’s the requirement for filing Single?
Not married on Dec 31; no dependents or doesn’t qualify for HOH.
A taxpayer pays a daycare center so they can work full-time. What credit might they qualify for?
The Child and Dependent Care Credit.
True or False: It’s okay to guess or “help out” a client to boost their refund.
False — Don’t lie, don’t guess, don’t “help out.”
If self-employed, what documentation must clients provide?
1099s, invoices, expense receipts, mileage logs.
A client asks, “Can you just put I have a business? I drove Uber once or twice.”
You can only claim it if real records exist. Receipts and mileage are required.
What’s the requirement for Married Filing Jointly?
Married at year-end, even if only one had income.
A low-income working parent with two children wants to know if they qualify for a refundable credit. Which one applies?
The Earned Income Tax Credit (EITC).
What IRS form documents compliance with due diligence for EITC, HOH, and CTC?
Form 8867.
For college students, what document is NOT enough by itself?
1098-T alone — you also need proof of enrollment or transcript.
Can you file HOH if I lives with my boyfriend who pays most bills?
No. They must pay over 50% of household costs AND have a qualifying dependent.
What’s the rule for Head of Household?
Unmarried, paid over 50% of household costs, qualifying person lived with you.
A taxpayer buys their first home and qualifies for assistance with interest and taxes. What deduction may they claim?
The Mortgage Interest Deduction (Schedule A) (and possibly Property Tax Deduction).
What is the penalty per return for failing due diligence?
$600 per return.
For childcare credit, what specific provider details are required?
Name, address, EIN or SSN, amount paid, and receipts.
If a client refuses to provide enrollment proof for college credits, can you claim them with only a 1098-T?
No. 1098-T does not prove eligibility without enrollment/transcript proof.
When can a taxpayer file as a Qualifying Surviving Spouse?
Within 2 years of spouse’s death, not remarried, dependent child lives with them.
A client says, “I didn’t work but I got unemployment.” Can they still get a refund without earned income?
Yes, if they qualify for a refundable credit (like CTC with dependents), but not EITC since it requires earned income.