Child Tax Credit (CTC) and Additional Child Tax Credit (ACTC)

The Child Tax Credit (CTC) provides up to $2,000 per qualifying child under age 17, with phase-outs based on income levels. The Additional Child Tax Credit (ACTC) allows eligible families to claim a refundable credit of up to $1,400 per child. To qualify, children must meet age, relationship, and residency requirements, and have a valid Social Security number. Form 8867 ensures tax preparers verify these criteria and calculate the credits accurately, adhering to IRS guidelines for eligibility and documentation to avoid errors or delays in processing.

Other Dependent Credit (ODC)

The Other Dependent Credit (ODC) is a non-refundable tax credit of up to $500 for qualifying dependents who do not meet the criteria for the Child Tax Credit. This includes elderly parents, disabled relatives, or other dependents living with the taxpayer. To claim the ODC, the dependent must have a valid Social Security number, and the taxpayer must provide documentation proving the dependent’s eligibility. Form 8867 ensures preparers verify these requirements, helping taxpayers avoid errors and ensure accurate credit claims. Proper documentation and compliance with IRS guidelines are essential for a smooth filing process.

American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit (AOTC) is a partially refundable tax credit up to $2,500 per eligible student for higher education expenses. It applies to the first four years of undergraduate education and covers tuition, fees, and course materials. Income limits apply, and the credit is subject to phase-out based on filing status and adjusted gross income. Form 8867 ensures preparers verify eligibility, including the student’s enrollment status and qualified expenses, and requires documentation such as Form 1098-T. This credit provides significant tax savings for qualifying taxpayers, and accurate completion of Form 8867 helps ensure compliance with IRS requirements.

Head of Household (HOH) Filing Status Requirements

Form 8867 requires verification of Head of Household (HOH) filing status eligibility. To qualify, taxpayers must be unmarried or considered unmarried, pay more than half the household expenses, and have a qualifying dependent living with them for over six months. The dependent must be related and meet specific IRS guidelines. Additionally, the taxpayer must maintain a home as their primary residence for the entire tax year, except for temporary absences. Form 8867 ensures preparers accurately determine HOH eligibility, as this status provides significant tax benefits, including higher standard deductions and favorable tax rates.

Structure of Form 8867

Form 8867 is divided into six detailed sections, covering client information, tax year, eligibility questions, and documentation verification to ensure accurate credit claims and compliance.

Sections of Form 8867

Form 8867 consists of six structured sections designed to guide tax preparers through the due diligence process. The first section collects client information and tax year details. The second section includes questions specific to each tax credit, such as EITC, CTC/ACTC, and AOTC. The third section focuses on verifying documentation, ensuring eligibility requirements are met. The fourth section requires a checklist review of all credits claimed, while the fifth section confirms compliance with due diligence standards. The final section includes the preparer’s signature and date, confirming the form’s accuracy and completion.

Client Information and Tax Year

The first section of Form 8867 requires the taxpayer’s name, Social Security number, and the tax year being claimed. This section ensures accurate identification of the taxpayer and confirms the specific tax year for which the credits or HOH filing status is being claimed. Providing this information is essential for processing the return and verifying eligibility for the credits. The tax preparer must ensure all details are accurate and align with IRS standards for proper submission and compliance. This section sets the foundation for the rest of the form, ensuring all subsequent information is correctly associated with the taxpayer.

Credit-Specific Questions and Checklists

Form 8867 includes detailed questions and checklists tailored to each credit, ensuring tax preparers verify eligibility criteria for EITC, CTC, ACTC, ODC, and AOTC. These sections prompt preparers to confirm income, family relationships, education expenses, and filing status. The checklists help ensure accurate documentation, such as Social Security numbers, birthdates, and school enrollment records. This step-by-step approach minimizes errors and ensures compliance with IRS requirements, making it easier to substantiate claims during audits or reviews.

Documentation Verification

Form 8867 requires tax preparers to verify eligibility documents for credits, such as Social Security numbers, birthdates, and school records. Preparers must ensure all information is accurate and complete. This includes reviewing income statements, family relationships, and educational expenses. Proper documentation helps prevent errors and supports claims during audits. Maintaining detailed records for at least three years is essential for compliance with IRS regulations. This step ensures transparency and accountability in the preparation process, protecting both the taxpayer and the preparer. Accurate verification is critical to avoiding potential penalties or delays.

Completing Form 8867

Completing Form 8867 involves gathering necessary documentation, entering client information, answering credit-specific questions, and signing the form to ensure compliance and accuracy in the preparation process.

Gathering Necessary Documentation

To complete Form 8867 accurately, tax preparers must gather essential documentation for each credit claimed, such as proof of income, residency, and family relationships. For EITC, this includes W-2s, 1099s, and Social Security cards. For CTC/ACTC, birth certificates or adoption papers may be required. AOTC requires Form 1098-T and receipts for education expenses. HOH status necessitates documents proving eligibility, such as divorce decrees or dependency records. Ensuring all documents are authentic and relevant is crucial for compliance and avoiding delays.

Step-by-Step Instructions for Each Section

Begin with Section 1 by entering the taxpayer’s name, Social Security number, and tax year. In Section 2, check the boxes for the credits claimed, such as EITC or CTC. Section 3 requires detailed questions specific to each credit, ensuring eligibility criteria are met. Section 4 involves verifying documentation, like W-2s for income or birth certificates for dependents. Section 5 ensures the preparer confirms all information is accurate; Finally, sign and date the form, acknowledging completion of due diligence. This structured approach ensures compliance and accuracy.

Reviewing and Signing the Form

After completing all sections, carefully review Form 8867 to ensure accuracy and completeness. Verify that all questions are answered and documentation is properly verified. The paid preparer must sign and date the form, acknowledging due diligence. Include Form 8867 with the taxpayer’s return or claim for refund. Maintain a copy in the preparer’s records for at least three years, as required by the IRS. This step ensures compliance and accountability, preventing potential penalties for incomplete or inaccurate submissions.

Due Diligence Requirements

Form 8867 ensures tax preparers verify eligibility for credits like EITC, CTC, and AOTC, maintaining accurate documentation and records to comply with IRS standards and avoid penalties.