Form 8867 Instructions: Checklist, Records, and Penalties

If you’re a paid preparer filing a return that claims the Earned Income Credit, Child Tax Credit, Additional Child Tax Credit, Credit for Other Dependents, American Opportunity Tax Credit, or Head of Household filing status, the Form 8867 instructions require you to complete the Paid Preparer’s Due Diligence Checklist and submit it with the return.¹ The form itself is a certification; what it certifies is that you actually did the four things Treasury Regulation section 1.6695-2 requires. Skip any of them and the penalty is $650 per credit or filing status on returns filed in 2026.²

The Four Requirements Behind the Checklist

Form 8867 documents compliance with four separate obligations. Every one has to be met, and each applies independently to each credit and to HOH status on the return. Doing the work for the EIC does not carry over to the CTC or AOTC on the same return.³

Complete and submit Form 8867. Fill it out based on information from the client or information you otherwise reasonably obtain, then submit it electronically with the e-filed return or attach it to a paper return.
Compute each credit using the applicable IRS worksheets, or your own worksheets that capture the same information, and keep them.
Meet the knowledge requirement. You cannot know or have reason to know that information used to determine eligibility or credit amounts is incorrect. If something looks off, ask follow-up questions and document them.
Retain records for three years.

Walking Through the Six Parts of Form 8867

The form has six parts. Complete Part I on every return, then only the parts covering the credits or filing status your client is claiming, plus the certification at the end. One Form 8867 covers all applicable items on a single return: an EIC and AOTC return means Parts I, II, IV, and VI.⁴

Part I: Due Diligence Requirements

Questions 1 through 8 apply regardless of which credits are on the return. They ask whether you interviewed the taxpayer, completed the applicable worksheets, reviewed adequate information, and resolved any inconsistencies. A “No” answer to any of them signals a failure to meet due diligence. Part I also asks whether you confirmed with the taxpayer that they could provide documentation to support their claims if the return is audited.⁵

Part II: Earned Income Credit

Part II is where you certify that you verified earned income, filing status, and the qualifying child tests. For 2026, the maximum EIC ranges from $664 with no qualifying children up to $8,231 with three or more, and the investment income limit is $12,200.⁶ Ask about interest, dividends, and capital gains during the interview; many taxpayers do not think of ordinary bank interest as “investment income” that could disqualify them.

Part III: CTC, ACTC, and ODC

Part III covers the child-related credits. Certify that you confirmed the relationship, age, residency, and support tests for each dependent. For 2026, the maximum CTC is $2,200 per qualifying child under age 17, with a refundable ACTC portion of up to $1,700 per child. The ODC provides up to $500 for dependents who do not qualify for the CTC. The age cutoff is the pivot: under 17 for CTC, ODC for those who do not qualify.

Part IV: American Opportunity Tax Credit

Part IV addresses the AOTC, worth up to $2,500 per eligible student for qualified tuition and related expenses during the first four years of postsecondary education.⁷ You must confirm you reviewed Form 1098-T or alternative documentation and verified enrollment. If the taxpayer claims expenses beyond what appears on the 1098-T, you need receipts or other proof of payment. A missing 1098-T does not automatically disqualify a student if the school was not required to issue one or has closed; gather proof of enrollment and payment and document in your notes why the form was unavailable.⁸

Part V: Head of Household Filing Status

Part V is the section preparers most often overlook as a due diligence item. Verify that the taxpayer was unmarried or considered unmarried on the last day of the tax year and paid more than half the cost of maintaining a home for a qualifying person. The qualifying person must have lived with the taxpayer for more than half the year, with one exception: a parent who can be claimed as a dependent does not have to live with the taxpayer.⁹

HOH is one of the most frequently misclaimed filing statuses, and the IRS specifically looks for it during compliance visits. Ask for documentation of household expenses. If the taxpayer says they are unmarried but the prior-year return you have in front of you is a joint filing, that is exactly the kind of inconsistency you have to investigate and document.

Part VI: Eligibility Certification

Part VI is mandatory on every Form 8867 no matter which credits are on the return. Your signature certifies that you satisfied all four due diligence requirements for each item claimed. Include your Preparer Tax Identification Number and the date.⁴

The Knowledge Requirement Is Where Most Failures Happen

The knowledge requirement carries most of the enforcement weight. You must interview the taxpayer, ask enough questions to determine eligibility for each credit or HOH status, and document both the questions and the responses as you go.⁴

You cannot simply accept what a client tells you if the information seems off. If something appears incorrect, incomplete, or conflicts with a prior-year return or other document in front of you, you have to ask follow-up questions and document those too. The standard is what a reasonable, well-informed preparer who knows the law would do in the same situation. Treasury Circular 230 layers on a “reasonable inquiries” standard: you may rely on client-furnished information, but you cannot ignore the implications of information you already have or that the client volunteers.¹⁰

Completing Form 8867 alone does not satisfy this requirement. You also have to complete the applicable IRS worksheets to compute each credit, or your own equivalent worksheets. The EIC Worksheet and the CTC/ODC Worksheet are in the Form 1040 instructions; the AOTC Worksheet is in the Instructions for Form 8863. If you use tax software that generates its own computations, make sure you can produce and retain those computations. The IRS wants to see the math, not just the final number on the return.

Records You Have to Keep for Three Years

You must retain your due diligence records for three years from whichever is later: the return’s due date without extensions, or the date you submitted the return. The retention set covers the completed Form 8867, all worksheets used to compute the credits, documentation the taxpayer provided, interview notes, and a record of how and when you received the information.³

Paper or electronic is fine. If you store records electronically, you have to maintain the hardware and software needed to access them for the full three years. Losing access because you switched systems or let a software subscription lapse is treated the same as destroying the records, and the IRS considers a retention failure a separate due diligence violation with its own penalty.⁴

What Noncompliance Costs

The base penalty under 26 U.S.C. section 6695(g) is $500 per failure, adjusted annually for inflation.¹¹ For returns filed in 2026, the inflation-adjusted amount is $650 per failure.²

A separate penalty applies to each credit or filing status where you fell short. A return claiming both the EIC and HOH filing status where you failed due diligence on both is $1,300 on that one return. EIC, CTC, AOTC, and HOH with failures on all four is $2,600. These penalties come out of the preparer’s pocket, not the taxpayer’s, and they apply per return, not once per filing season. If the IRS reviews 25 of your client files and finds due diligence failures in 15 of them, each with two credits, that is 30 separate penalties totaling $19,500.

How the IRS Checks

The IRS conducts due diligence compliance visits both before and during filing season. You will typically receive Letter 6199 for an in-person visit or Letter 6222 for a correspondence review, either one asking you to schedule an appointment within 14 days. During filing season, visits may happen without advance notice if you have already been notified of a potential examination.¹²

An IRS employee will review a minimum of 25 client returns and files. They look at your due diligence records, the questions you asked and the answers you received, your worksheets and checklists, and the documents you relied on to determine eligibility. If problems appear in those 25 returns, the review expands to another 25. The IRS has reported that over ninety percent of preparers selected for these examinations had penalties proposed against them, with most failures tied to the knowledge and record retention requirements.¹²

Letter 5025-F is the pattern-warning letter. It tells preparers they have prepared inaccurate returns and face potential penalties from an audit.¹³ If one arrives, the IRS is already watching your filing patterns, and the time to tighten your interview notes and record retention was before it showed up.

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Internal Revenue Service. About Form 8867, Paid Preparer’s Due Diligence Checklist
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Internal Revenue Service. Consequences of Not Meeting the Due Diligence Requirements
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Internal Revenue Service. Due Diligence Law, Regulations and Requirements
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Internal Revenue Service. Instructions for Form 8867 (Rev. November 2025)
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Internal Revenue Service. Form 8867, Paid Preparer’s Due Diligence Checklist
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Internal Revenue Service. Revenue Procedure 2025-32
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Internal Revenue Service. American Opportunity Tax Credit
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Internal Revenue Service. Education Credits: Questions and Answers
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Internal Revenue Service. U.S. Citizens and Residents Abroad – Head of Household
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Internal Revenue Service. Treasury Department Circular No. 230 (Rev. 6-2014)
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Office of the Law Revision Counsel. 26 USC 6695
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Internal Revenue Service. Auditing for Due Diligence Compliance
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Internal Revenue Service. Letters or Phone Calls About Due Diligence and Filing Errors