By Frank Byrt
The IRS is warning tax preparers of possible delays in processing tax returns or issuing refunds for two different forms – Schedule 8812, Child Tax Credit, and Form 8867, Paid Preparer’s Earned Income Credit Checklist – because either they have been prepared incorrectly or are incomplete.
In a QuickAlerts e-mail sent by the IRS to professional tax preparers on February 11, the IRS said, “We have observed instances in which the Schedule 8812 is attached to form 1040 and 1040A and is not filled out correctly. These instances are causing downstream processing delays.”
The IRS said it has experienced the following two conditions on Schedule 8812:
- The Schedule 8812 Part 1 checkboxes A, B, C, and D are checked when taxpayers list a dependent child with a Social Security number qualifying for child tax credit.
- The Schedule 8812 Part 1 checkboxes A, B, C, and D not being checked when taxpayers have a child with an Individual Taxpayer Identification Number (ITIN) on Form 1040 and 1040A line 6c identified as qualifying for the child tax credit in column 4.
The Schedule 8812 instructions direct the taxpayer to: "Use Part I of Schedule 8812 to document that any child for whom you entered an ITIN on Form 1040, line 6c; Form 1040A, line 6c; or Form 1040NR, line 7c; and for whom you also checked the box in column 4 of that line, is a resident of the United States because the child meets the substantial presence test and is not otherwise treated as a nonresident alien."
The IRS said it is working to implement business rules to reject the incorrectly completed returns. In the interim, the IRS is requesting that developers of tax software packages include an alert to help preparers identify inconsistencies when completing Schedule 8812 to help avoid delays in processing returns.
In a separate QuickAlerts e-mail sent to tax professionals on February 4, the IRS said it "has noticed that a large number of returns with the Form 8867, Paid Preparer's Earned Income Credit Checklist, have incomplete information. Although the IRS will not reject a return if information is missing on Form 8867, these returns will be suspended causing a potential delay in refunds if the information is missing."
The IRS goes on to say, "We are asking software developers and transmitters to communicate the Form 8867 information requirements through their software and other communication channels. Specifically, when Form 8867 is present in a return and Earned Income Credit is claimed, entries for lines 22, 23, 24, 25, both parts of 26, and 27 must be present. We recommend that the software ensures these lines on Form 8867 have entries in order to avoid processing delays that could impact refunds."
In addition, the IRS is asking software companies to remind preparers they could be assessed a penalty if they fail to comply with due diligence requirements on returns claiming the Earned Income Credit.