Which tax credits require due diligence from paid tax preparers?

The requirement for due diligence from paid tax preparers applies to multiple tax credits due to the complexities and eligibility stipulations involved in these credits. The Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and American Opportunity Tax Credit (AOTC) are all designed to reduce the tax burdens on eligible individuals and families.

For the EITC, preparers must verify that clients qualify based on income, filing status, and number of eligible dependents. Under tax law, due diligence necessitates that preparers ask specific questions and retain documentation to substantiate that they have verified the taxpayer's eligibility.

The Child Tax Credit also requires a similar level of scrutiny, as it pertains to qualifying children and specific income thresholds. This ensures that only those eligible for the credit benefit from it and helps prevent fraudulent claims.

The American Opportunity Tax Credit, which applies to qualified education expenses, also demands due diligence. Preparers must ensure that the taxpayer meets the criteria related to enrollment, income level, and the number of years for which the credit has been claimed.

Thus, due diligence is required for all these credits to promote compliance with tax laws, safeguard against error or fraud, and protect both taxpayers and preparers. This reasoning underscores why