The Form 8867 due diligence checklist is the paid preparer's record that they interviewed the client, completed the credit worksheets, asked follow-up questions where answers looked wrong, and kept the supporting documents. It is required when a return claims the EIC, CTC, ACTC, ODC, AOTC or head of household status, and each failure can carry a penalty.
Which credits trigger the Form 8867 due diligence checklist?
Form 8867, the Paid Preparer's Due Diligence Checklist, is triggered when a paid preparer works on a return that claims the earned income credit (EIC), the child tax credit (CTC), the additional child tax credit (ACTC), the credit for other dependents (ODC), the American opportunity tax credit (AOTC), or head of household (HOH) filing status.
The IRS Instructions for Form 8867 group these into four benefits: the EIC, the CTC/ACTC/ODC, the AOTC and HOH. The form itself has a checkbox for each at the top of Part I, and the preparer completes the parts that match what the return claims. A return claiming the EIC and HOH status completes Part I, Part II (EIC questions), Part V (HOH question) and Part VI (the certification). It skips Part III (CTC/ACTC/ODC) and Part IV (AOTC) unless those are claimed too.
The form goes with the return. The current Form 8867 (Rev. November 2024) says it is filed with Form 1040, 1040-SR, 1040-NR or 1040-SS. More than one preparer can be responsible for a covered claim on the same return. The instructions say each paid preparer with that responsibility completes a Form 8867, a nonsigning preparer gives the completed form to the signing preparer, and e-file accepts up to four Forms 8867 with one return.
Two edges are easy to miss:
- HOH alone triggers the form. A return with no credits at all still needs Form 8867 if it claims head of household status.
- The credit rules change. The instructions note that, beginning in tax year 2025, a taxpayer claiming the CTC or ACTC must have a valid SSN, and on a joint return only one spouse needs one. A firm's interview sheet built before that change asks the wrong identity questions.
The four Form 8867 due diligence requirements
The four Form 8867 due diligence requirements, as Part VI of the form lists them, are: meet the knowledge requirement, complete Form 8867 truthfully and accurately along with the actions it describes, submit the form in the manner required, and keep five kinds of records for three years. Computing each credit on the applicable worksheet sits inside the second requirement.
Completing the form and computing the credit. Question 2 on the form asks whether the preparer completed the applicable worksheets: the EIC and CTC/ACTC/ODC worksheets in the Form 1040 or Schedule 8812 instructions, the AOTC worksheet in the Form 8863 instructions, or the preparer's own worksheet that gives the same information. A credit figure typed straight into software, with no worksheet behind it, leaves this question unanswered. Answering "Yes" to every line without doing the work behind it fails the "truthfully and accurately" part.
Knowledge. Question 3 defines the knowledge requirement as two actions. The preparer interviews the taxpayer, asks questions and contemporaneously documents the answers, and the preparer reviews information to decide eligibility and figure the credit amount. The next section covers how firms run that interview.
Submitting the form. The form goes with the return as described in the first section. For a paper return every Form 8867 is attached; for an e-filed return it travels in the electronic submission.
Record retention. Question 5 asks whether the preparer kept the required records, and Part VI lists all five. The records section below covers what they are and how long to keep them.
Questions 6 to 8 add three more actions: asking whether the client could provide documents if the return is audited, asking whether any of these credits were disallowed or reduced in an earlier year (which brings in Form 8862 for recertification), and asking enough questions to prepare a complete and correct Schedule C when the client reports self-employment income.
Knowledge requirement questions for Form 8867
The Form 8867 knowledge requirement means the preparer asks the client follow-up questions whenever information looks incorrect, incomplete or inconsistent, and writes down the questions and answers when they happen. Question 4b on the form says the note should record what was asked, whom, when, what the client said and how it changed the return.
The examples in the IRS instructions show the shape of a good follow-up. For a client claiming children who may not be their own, a preparer might ask "Are these your foster or adopted children?" For a client reporting lawn-care income on Schedule C, the instructions show questions such as how many lawns the client cared for and whether they had expenses for equipment, fuel or supplies. The instructions also show that a relationship confirmed in a prior year may not need the same questions again this year.
The part-specific questions on the form shape the interview further:
- EIC (Part II). Whether the client is eligible for the number of qualifying children claimed, whether each child lived with the client for over half the year, and whether the preparer explained the tiebreaker rules for a child who is the qualifying child of more than one person.
- CTC/ACTC/ODC (Part III). Whether each qualifying person is the client's dependent and a U.S. citizen, national or resident, and whether the preparer explained the rules for children of divorced or separated parents, including any Form 8332.
- AOTC (Part IV). Whether the client provided substantiation, such as a Form 1098-T or receipts for qualified tuition and related expenses.
- HOH (Part V). Whether the client was unmarried or considered unmarried on the last day of the year and paid more than half the cost of keeping up a home for a qualifying person.
Checks on filing status and dependents that happen before data entry are a broader topic. The section on filing status and dependents checks in tax preparation covers what to confirm before the return is opened.
An example client interview sheet
The sheet below maps each Form 8867 question to the document that supports the answer. The client, firm and figures are fictional examples: Dana Whitfield, a client of Example Tax Partners, claiming the EIC, CTC and HOH status with one child.
| Form 8867 question | What was asked | Client answer | Supporting document | Date and initials |
|---|---|---|---|---|
| 1: Information for the tax year | Confirmed all income documents are for the year on the return | Yes | W-2 from Example Logistics; 1099-NEC box 1a $3,400 (example) | Feb 10, ETP-JR |
| 2: Worksheets | EIC worksheet and Schedule 8812 completed | n/a | Worksheets saved to client file | Feb 10, ETP-JR |
| 4a/4b: Inconsistent information | Child's address differs from client's on school letter; asked why | Child moved in March; school records not updated | Lease showing both names, signed March 2 (example) | Feb 10, ETP-JR |
| 6: Documents if audited | Asked if school and medical records could be produced | Yes | Note in file | Feb 10, ETP-JR |
| 7: Prior disallowance | Asked about any earlier disallowed credit | None | Note in file | Feb 10, ETP-JR |
| 8: Schedule C | Asked about expenses and number of jobs for side income | 14 jobs; mileage log kept | Mileage log summary (example) | Feb 10, ETP-JR |
| 9b: Child lived with client over half the year | Asked months the child lived in the home | 10 months | Lease; school enrollment letter | Feb 10, ETP-JR |
| 14: HOH | Asked about marital status at year end and household costs | Divorced; pays rent and utilities | Divorce decree page; rent ledger account XXXX-4821 (example) | Feb 10, ETP-JR |
A sheet like this answers question 4b and question 5 at the same time, because the documents column is the list of taxpayer documents relied on that the form asks the preparer to write down.
Records to keep for the Form 8867 due diligence checklist
The Form 8867 due diligence checklist requires five records, kept for three years: a copy of Form 8867, the credit worksheets, copies of the client documents relied on, a record of how, when and from whom the information was obtained, and a record of any other information relied on, including questions asked and answers given.
The three years run from the latest of several dates, according to the IRS Instructions for Form 8867: the return's original due date (without extensions), the filing date if the signing preparer e-files, the date the return went to the client for signature if the signing preparer does not e-file, or, for a nonsigning preparer, the date they handed their part to the signing preparer.
The instructions say records may be kept on paper or electronically, pointing to Rev. Proc. 97-22 for electronic storage. In practice the hard part is the third and fourth records. The documents relied on must be the documents themselves, not a note saying they were seen. And "how, when and from whom" means the file shows that the lease came from the client by upload on February 10, not just that a lease exists.
Firms that receive client files through many channels struggle with that last record. Schema CPA gives each client a single upload link and classifies every page it receives by document type, issuer and period, so the firm sees what arrived instead of a pile of attachments. The document categories it reads include W-2s, the 1099 series and 1098s.
A short checklist for each covered return:
- Form 8867, every part that applies, signed off.
- The worksheet for each credit claimed.
- A copy of each client document listed on the form.
- The interview sheet, with dates and the staff member who asked.
- Notes on any follow-up, including the client's answer and the effect on the return.
What happens when Form 8867 due diligence is missed?
Missed Form 8867 due diligence can bring a section 6695(g) penalty for each failure, meaning each credit or HOH claim where the requirements were not met. The IRS instructions give an example of $650 per failure for a return filed in 2026, or $2,600 for one return claiming four benefits, and say the amount is adjusted for inflation yearly.
The per-failure structure matters. A return claiming the EIC, the CTC and HOH status with poor documentation is not one failure. It can be three. The Form 8867 instructions direct preparers to IRS.gov/Form8867 for the current amount, so a firm's training sheet should take the figure from there each season rather than carry last year's number forward.
The edge cases preparers get wrong most often:
- Treating the form as a box-ticking exercise. The certification in question 15 says the answers are true, correct and complete. "Yes" on question 3 with no interview notes in the file is the gap an examiner finds first.
- Forgetting HOH. Because HOH is a filing status rather than a credit, some preparers skip the form when no credit is claimed.
- Relying on a prior year without checking. The instructions show that a relationship confirmed in an earlier year may not need new questions, but that example does not cover a client whose household changed. A new child, a move or a divorce is a reason to ask again.
- Using last year's interview sheet. The CTC and ACTC SSN rule that began in tax year 2025 is one example of a change that makes an old sheet incomplete.
- Losing the documents. Notes saying "saw lease" do not meet the record requirement if the lease itself is not in the file.
Due-diligence sheets belong on the list of forms a firm refreshes before the season opens. The tax season checklist for CPAs covers that preseason work, and the tax return review checklist covers what a reviewer checks before signing, including whether Form 8867 is complete. How client files are stored and shared is covered in the client portals and security category.
This post describes what Form 8867 and its instructions say. It is not tax advice about any client's eligibility for a credit.