IRS Form 8867: Paid preparer's due diligence checklist (2026)

IRS Form 8867 is the Paid Preparer’s Due Diligence Checklist – generally required whenever a paid tax return preparer determines eligibility for the Earned Income Credit (EIC), Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), American Opportunity Tax Credit (AOTC), or Head of Household (HOH) filing status.

In some cases, multiple Forms 8867 may be required for the same return.

For 2025 tax year returns filed during the 2026 filing season, a paid preparer who fails to meet the due diligence requirements faces a $650 penalty per covered credit or HOH filing status, per return under IRC §6695(g), as adjusted by Rev. Proc. 2024-40.

IRS Form 8867: key facts (2025–2026)

• Form version: Form 8867 (Rev. November 2024); Instructions: Rev. November 2025
• Required when: a paid tax return preparer determines eligibility for EIC, CTC/ACTC/ODC, AOTC, or HOH on a federal return; multiple Forms 8867 may be required if more than one preparer is involved
• Penalty per violation: $650 per covered credit or HOH filing status, per return for returns filed in 2026
• Penalty increase for 2027: rises to $665 per covered credit or HOH filing status (Rev. Proc. 2025-32)
• Maximum penalty per return: $2,600 – a return involving multiple covered credits and/or Head of Household filing status may result in multiple §6695(g) penalties if the preparer fails the applicable due diligence requirements
• Record retention: three years from the latest applicable date under the Form 8867 instructions, which varies by the preparer’s role and filing method
• Document storage: paper or electronic under Treas. Reg. §1.6695-2(b)(4)
• Expat note: a taxpayer who excludes income under Form 2555 (FEIE) is disqualified from EIC on the same return
• Filing: submitted with the return – attached to e-filed or paper return, not mailed separately

Understanding Form 8867

Form 8867 documents that the paid preparer met the IRS due diligence requirements when preparing a return that claims EIC, CTC/ACTC/ODC, AOTC, or Head of Household status.

The purpose of Form 8867 is to create a verifiable record that the preparer determined eligibility through appropriate inquiries, completed the form accurately, filed it with the return, and maintained the required records.

The instructions for the Form 8867 due diligence checklist require every paid preparer who claims any of the covered credits or HOH on a client’s return to satisfy the following requirements:

1. Knowledge requirement. The preparer must know – or have reason to know – the tax law applicable to each credit claimed and must apply it correctly to the client’s facts.
2. Inquiry and consistency requirement. The preparer must make reasonable inquiries to determine eligibility, including asking additional questions when information appears incorrect, inconsistent, or incomplete.
3. Completion and filing requirements. The preparer must complete Form 8867 accurately and submit it with the return – attached to the e-filed or paper return, not mailed separately.
4. Record-retention requirement. The preparer must keep a copy of the completed Form 8867, all relevant worksheets, and any documents used to determine eligibility.

Together, these requirements make up the Form 8867 framework that the IRS uses to hold paid preparers accountable for the credits they claim on a client’s behalf.

Eligible tax credits

Form 8867 covers four credit types and one filing status. Each has its own section on the form, its own eligibility rules, and its own $650 penalty if due diligence is not met.

The amounts below apply to the 2025 tax year, filed during the 2026 filing season.

1. Earned Income Credit (EIC)

The Earned Income Credit is a refundable credit worth up to $8,046 (2025) for taxpayers with three or more qualifying children. It is the credit most frequently flagged in Form 8867 due diligence reviews because eligibility turns on income limits, filing status, and the SSN status of each qualifying child.

To qualify, you must have earned income from employment or self-employment and meet income limits that vary by filing status and number of qualifying children.

Each qualifying child must have an SSN valid for employment – an ITIN does not count. If none of the taxpayer’s qualifying children has a valid SSN, the taxpayer may still qualify for the Earned Income Credit under the rules for taxpayers without a qualifying child if all of the childless EIC requirements are met.

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

The Child Tax Credit is worth up to $2,200 per qualifying child for 2025 under the One Big Beautiful Bill Act (OBBBA). Up to $1,700 of that amount may be refundable as the Additional Child Tax Credit, subject to the ACTC calculation and other eligibility requirements. Both amounts are unchanged for 2026.

Each qualifying child must have a valid SSN – a requirement in force since TCJA. Beginning in tax year 2025, OBBBA also requires the taxpayer to have a valid SSN. On a joint return, only one spouse needs a valid SSN; the other may use an ITIN.

For dependents with an ITIN who do not qualify for CTC, the $500 Credit for Other Dependents may apply instead.

3. American Opportunity Tax Credit (AOTC)

The American Opportunity Tax Credit provides up to $2,500 per eligible student per year for the first four years of post-secondary education.

The credit phases out starting at:

• $80,000 MAGI for single filers
• $160,000 MAGI for married filing jointly

Up to $1,000 of the credit is refundable. The student must be pursuing a degree or recognized educational credential and must not have completed four years of post-secondary education before the start of the tax year.

4. Head of Household (HOH)

Form 8867 Section V requires the preparer to confirm three conditions for HOH status:

• The client is unmarried or considered unmarried
• paid more than 50% of household maintenance costs
• housed a qualifying person for more than six months of the year (a dependent parent does not have to live with the client)

Head of household due diligence trips up preparers most often when the client’s marital status changes mid-year, or when the qualifying person is not a child but a parent for whom the “lived with you” rule works differently.

General instructions for Form 8867

The Form 8867 instructions require every paid preparer – CPA, enrolled agent, attorney, or PTIN holder – to complete and submit the form with any return that claims a covered credit or HOH.

The current instructions (Rev. November 2025) apply to all 2025 tax year returns filed in 2026.

Importance of due diligence

Due diligence is not optional. A paid preparer who claims EIC, CTC, AOTC, or HOH without meeting the due diligence requirements faces a $650 penalty per covered credit or HOH filing status, per return – even if the taxpayer provided the incorrect information.

The IRS audits preparer due diligence separately from the taxpayer’s return, meaning the preparer can be penalized even when the taxpayer’s return is otherwise correct.

Tax return preparer’s responsibility

As a tax return preparer, you are responsible for knowing the current eligibility rules for EIC, CTC/ACTC, AOTC, and HOH – and for applying them to each client’s facts.

You must also communicate with clients to collect the information needed to support each credit claimed. If a client’s answers appear inconsistent, you must ask follow-up questions and document the exchange.

Record retention

Paid preparers must keep all due diligence records for three years from the latest applicable date under the Form 8867 instructions.

The starting date depends on the preparer’s role and filing method – for example, the date the return was e-filed, the date it was presented to the taxpayer for signature, or, for a nonsigning preparer, the date the relevant portion was provided to the signing preparer.

Records may be stored in paper or electronic format under Treas. Reg. §1.6695-2(b)(4).

Specific instructions for completing Form 8867

Form 8867 (Rev. November 2024) is structured into six sections. Each section covers a different credit type or filing status, and the preparer completes only the sections that apply to the return being filed.

The current Form 8867 instructions are in the Rev. November 2025 instructions document.

Section I: due diligence requirements

Check the relevant boxes to indicate which credits or HOH filing status you are claiming. This section sets the scope for the rest of the form – the preparer completes only the sections that correspond to the credits checked here.

Questions 1–8 in Section I document the core due diligence requirements:

1. Whether the return was prepared using information for the applicable tax year provided by the taxpayer or reasonably obtained by the preparer.
2. Whether the preparer completed the applicable EIC, CTC/ACTC/ODC, and/or AOTC worksheets – or equivalent worksheets providing the same information – along with all related forms and schedules.
3. Whether the preparer satisfied the knowledge requirement by interviewing the taxpayer, asking questions, contemporaneously documenting responses, and reviewing information to determine eligibility and figure credit amounts.
4. Whether any information provided by the taxpayer, a third party, or reasonably known to the preparer appeared incorrect, incomplete, or inconsistent – and if so, whether reasonable inquiries were made and contemporaneously documented.
5. Whether the preparer satisfied the record retention requirement – keeping a copy of Form 8867, applicable worksheets, taxpayer-provided documents, and a record of how, when, and from whom all information was obtained.
6. Whether the preparer asked the taxpayer if he or she could provide documentation to substantiate eligibility and credit amounts if the return is selected for audit.
7. Whether the preparer asked the taxpayer if any of these credits were disallowed or reduced in a previous year – and if so, whether the required recertification Form 8862 was completed.
8. If the taxpayer reports self-employment income, whether the preparer asked questions to prepare a complete and correct Schedule C.

Section II: EIC specific questions

This section confirms the taxpayer’s eligibility for the Earned Income Credit based on the number of qualifying children – or verifies eligibility for the childless EIC. The preparer must document living arrangements and explain tiebreaker rules when a child qualifies for more than one person.

Each qualifying child must have an SSN valid for employment – an ITIN does not count.

Section III: CTC/ACTC/ODC specific questions

Section III covers the Child Tax Credit, Additional Child Tax Credit, and Credit for Other Dependents. The preparer must confirm that each qualifying person is a dependent who meets residency criteria and that each qualifying child has a valid SSN.

For 2025 tax year returns, confirm a valid SSN is on file for:

• the taxpayer (one spouse on a joint return), and
• each qualifying child

The taxpayer SSN requirement is new for tax year 2025 under OBBBA. For the Credit for Other Dependents, a dependent with an ITIN qualifies.

Section IV: AOTC specific questions

Section IV asks whether the preparer obtained substantiation for the AOTC claim – such as Form 1098-T when applicable, tuition receipts, or other supporting documentation used to determine eligibility – and whether the student meets the degree-seeking and four-year enrollment limits.

Section V: HOH specific questions

Section V verifies that the taxpayer qualifies for Head of Household filing status based on marital status, financial contributions to household maintenance, and the presence of a qualifying person.

The preparer must confirm all three conditions and document any mid-year marital status changes.

Section VI: eligibility certification

Section VI summarizes the due diligence process. In Question 15, the preparer certifies that all responses on Form 8867 are accurate and complete – finalizing the due diligence record for that return.

Form 8867 penalties and consequences

A paid preparer who fails to complete Form 8867, fails to make required inquiries, or claims credits without a reasonable basis faces a penalty for failure to complete Form 8867 of $650 per covered credit or HOH filing status, per return under IRC §6695(g), at the rate set for returns filed in 2026 by Rev. Proc. 2024-40.

The penalty applies per covered credit or HOH filing status claimed, not once per return.

The following three scenarios trigger a Form 8867 penalty:

1. The preparer fails to complete and attach Form 8867 to the return.
2. The preparer does not make reasonable inquiries when client information appears inconsistent.
3. The preparer does not retain due diligence records for three years.

Penalty amounts by credit (returns filed in 2026)

Each covered credit and HOH status carries an identical $650 penalty – a return involving multiple covered credits and/or HOH filing status may result in multiple §6695(g) penalties if the preparer fails to meet the applicable due diligence requirements.

 

How many Form 8867 penalties per return?

One $650 penalty per covered credit or HOH filing status claimed without proper due diligence. A return involving multiple covered credits and/or HOH filing status may result in multiple §6695(g) penalties if the preparer fails to meet the applicable due diligence requirements.

For returns filed in 2027, the penalty rises to $665 per covered credit or HOH filing status under Rev. Proc. 2025-32.

Form 8867 for US expat returns

US expats who file with a paid preparer are subject to the same Form 8867 due diligence requirements as domestic filers.

Two expat-specific scenarios require particular attention:

• foreign income and EIC eligibility
• AOTC eligibility for dependents enrolled in eligible educational institutions abroad

The preparer must verify whether the client filed Form 2555 before completing the EIC section and must verify that any foreign institution claimed for AOTC is an eligible educational institution for purposes of the American Opportunity Tax Credit.

TFX handles both checks as part of every expat return we prepare.

Does foreign income affect EIC eligibility?

A US expat who excludes foreign earned income under Form 2555 (Foreign Earned Income Exclusion) cannot claim the Earned Income Credit on the same return.

IRC §32(c)(1) defines earned income for EIC purposes as income not excluded under §911. A preparer must verify whether the client filed Form 2555 before completing Form 8867 Section II.

TFX client scenario: A US consultant based in Singapore excludes $95,000 under Form 2555. Because all of this client’s earned income is excluded under §911, the client has no earned income for EIC purposes and does not qualify for the credit, regardless of family size. If a taxpayer has other earned income not excluded under §911, different rules may apply.

AOTC for dependents studying abroad

The American Opportunity Tax Credit is available only if the student attends an eligible educational institution for purposes of IRC §25A.

Some – but not all – foreign institutions qualify if they are eligible to participate in the US Department of Education’s federal student aid programs.

A preparer claiming AOTC for an expat client’s dependent must:

• verify that the foreign institution is an eligible educational institution for purposes of IRC §25A, and
• retain copies of the documents relied upon to substantiate the AOTC claim, such as Form 1098-T when applicable and any other supporting documentation used to determine eligibility

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Additional tips and reminders

Errors on Form 8867 that result in an improper credit claim trigger the §6695(g) penalty of $650 per covered credit or HOH filing status, regardless of whether the taxpayer intentionally misrepresented information.

The penalty falls on the preparer, not the taxpayer.

Double-check every entry on the form before submission. Pay particular attention to SSN validation for EIC and CTC – a mismatched or expired SSN is one of the most common reasons the IRS rejects a credit claim and initiates a preparer penalty review.

Keep all supporting documents for the full retention period:

• interview notes
• printed third-party documents
• software audit logs
• correspondence with the client about eligibility

The IRS accepts both paper and electronic formats, provided the records are complete and retrievable within the three-year window.

Bottom line

Form 8867 – what paid preparers need to know for 2025–2026:

• Form 8867 (Rev. November 2024) is required on every return claiming EIC, CTC/ACTC, AOTC, or HOH.
• Penalty: $650 per covered credit or HOH filing status per return under IRC §6695(g) for returns filed in 2026; a return involving multiple categories may result in multiple penalties.
•  Records must be kept for three years from the latest applicable date per the Form 8867 instructions; the starting date varies by preparer role and filing method.
• CTC/ACTC: a valid SSN is required for the taxpayer – one spouse on joint returns – and each qualifying child (new for 2025 under OBBBA).
• US expats who exclude income under Form 2555 (FEIE) are not eligible for EIC on the same return.
• Form 8867 compliance protects both the preparer and the taxpayer. Complete the form accurately, document your inquiries, and retain the file.

TFX handles your expat return – including all Form 8867 requirements.

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