The IRS Tax Preparer Toolkit brings together guidance, training, forms, and examples for paid preparers. Much of it centers on the Earned Income Tax Credit, or EITC, and the responsibilities involved in preparing returns claiming certain benefits.

It also points to information about child tax credits, education credits, and head of household filing status. Although it’s written for tax professionals, it helps explain the work happening behind a client’s return.

Think of it as a reference shelf. It could help a client understand why seemingly small details can change their return in a big way sometimes.

The EITC supports eligible workers with low to moderate income. A client’s income, filing status, and number of qualifying children, if any, affect the amount. Some workers qualify without a qualifying child.

A change in wages, business profit, or family circumstances can change a result. This is why a previous refund isn’t a reliable estimate of this year’s credit.

The IRS publishes EITC income limits and credit tables by tax year. Make sure the year on the table is correct by making sure it’s the same year as the return you’re preparing. Income limits are only part of the eligibility review, and meeting a dollar threshold doesn’t settle every requirement.

Paid preparers have specific due diligence duties for returns involving the EITC, child tax credit and related credits, American Opportunity Tax Credit, or head of household status.

The preparer must complete and submit Form 8867, calculate applicable credits using the required worksheets or equivalent records, meet the knowledge requirement, and retain required records.

The knowledge requirement means following up when information appears incomplete, inconsistent, or incorrect. A signed questionnaire doesn’t remove that responsibility. The IRS explains these obligations in its due diligence requirements.

The takeaway is, Have the client explain the situation instead of having the client guessing what answer the you the preparer needs. If you’re unsure, say so. That gives you both a chance to resolve the question before the return goes out.

For the EITC, a qualifying child must meet relationship, age, residency, and joint return tests, along with applicable Social Security number requirements. Generally, the child must have lived with you in the United States for more than half the year, subject to special rules.

Temporary absences, such as school attendance, matters. So can a child moving between households. The IRS qualifying child rules explain these in detail.

Here’s a common trap. Assuming that an agreement to alternate claiming a child on a tax return automatically alternates every child-related tax benefit.

For divorced or separated parents, a qualifying release can allow the noncustodial parent to claim certain benefits, such as the child tax credit. It does not transfer the EITC or head of household status. Those benefits have separate requirements. Review the IRS guidance for divorced and separated parents before assuming the agreement answers the tax question.

If you conduct freelance work, deliveries, repairs, or another small business activity, your business records can affect the EITC calculation. The toolkit’s due diligence training includes examples involving missing expenses, false income, overstated expenses, and rounded figures. Those examples show why a preparer may ask how you arrived at your Schedule C totals.

For instance, imagine a repair business reporting sales but no supplies or other expenses. That doesn’t automatically prove something is wrong, but it calls for a conversation. Were expenses overlooked? Were supplies purchased by customers? The explanation matters.

If records are incomplete, ask the client to reconstruct them from available resource evidence rather than them choosing a number that feels reasonable.

First, suggest to the client that they create one secure folder for credit-related records. Include relevant income statements, business summaries, education records, and information about household changes. If a child moved during the year, write a timeline while the dates are fresh.

This is an organizing suggestion, not a universal IRS document checklist. You should help the client identify what their situation requires. Use a secure portal for sensitive documents rather than ordinary email.

Second, have the client prepare a short “what changed” note before their appointment. For instance, changes in marital status, living arrangements, children’s schooling, employment, and business activity. Include prior IRS correspondence about credits.

These steps give you the preparer a clearer starting point and help you spot missing information early. The Form 8867 instructions show why current facts and follow-up answers matter.

The first mistake is treating tax software as proof of eligibility. A program can calculate a credit from entered information, but it cannot make an incorrect living arrangement or incomplete income figure accurate. Form 8867 itself is not a substitute for the underlying due diligence work, as the IRS explains in its completion guidance.

The second mistake is leaving explanations undocumented. A conversation is useful, but a clear record helps preserve what was discussed. Paid preparers must keep specified records, including relevant worksheets, information sources, and follow-up questions and answers, for three years measured from the latest applicable date. See the IRS recordkeeping requirements.

You don’t need to memorize the toolkit. Start with the client’s records. Have them explain what changed, and ask about anything you don’t understand. A little preparation now can make the filing conversation much easier.

If you’re unsure how a family change or self-employment income could affect your return, The Smith Advisory can help you identify the questions and records to review before filing. Feel free to contact us at [email protected]. We’ll help you understand your next steps so you can approach tax season with more confidence.

This article provides general educational information and is not individualized tax, legal, or financial advice. Eligibility depends on your circumstances and the law applicable to the tax year involved. IRS resources and requirements may change; consult a qualified tax professional before acting.