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DISCLAIMER: The original live broadcast of this web conference included an interactive polling feature which is disabled in this archived version. >> So it's the top of the hour, it's 2 p.m. Let's get started. Welcome again to our IRS presentation Tax Reform Due Diligence Requirements. We are super glad you're joining us. My name is Karen Russell and I'm a stakeholder liaison at the Internal Revenue Service and I am your moderator for today's webinar, which it's slated for an hour. And before we begin, if anyone in the audience is with the media, please take a moment and send us an email message to the address provided on the slide and include your contact information and the news publication you're with. And our media relations or stakeholder liaison staff can assist you or answer any questions you may have. So the email address is kind of small so let me read it to you. It is cl.sl.web. conference.team@IRS.gov. Okay. So now, if you have a technology issue during the webinar, this slide shows helpful tips and reminders. And we have posted the technical help document that you can download from the materials button on the left side of your screen, which provides the minimum system requirements for viewing the broadcast along with best practices and quick solutions. And if your technical issues persist, you can contact the help desk for assistance. Those numbers are 888-258- -- excuse me; not 2; 888-858-3240 or 954-935-7767, which that is not a toll-free number. Now if you have completed and passed your systems checks and you are still having issues, try closing the screen where you are viewing your webinar and relaunch it. Or click the gear icon on your viewing screen, it's in the top right corner of the slide and photo boxes. When you click the little gear icon, you will be given two choices. Select Flash instead of HLS. And if you don't have a gear icon and relaunching your viewing screen doesn't fix your problem, we suggest that you try using a different browser to launch and view the webinar. And one other thing you might want to try is to close all the windows and apps you have open on your viewing device. You may have received the PowerPoint today in a reminder email. But if not, you can download it by clicking the materials button on the left side of the screen, that's one of our favorite buttons of all time. And we also have a resource document there for you, too. All right. So like I said previously, closed captioning is available for today's presentation. So if you're having trouble hearing the audio through your computer speakers, click the CC button on the left side of your screen and this feature will be available throughout the broadcast. For those of you who have been on our webinars before, this is old hat for you. But for any newbies on the line, we do like questions from the audience. And we have some great SMEs on today. So if you have a topic-specific question, submit it by clicking the ask question button. You will type the question in the text box and then you'll click submit. And we say this over and over and we are going to stress it again. Do not enter any sensitive or taxpayer specific information please. This is -- we don't -- no personally identifiable information. That's a no-no. And we also ask until you wait until your specific topic is addressed before submitting your questions. And that is twofold. When you are typing, you really cannot listen. And secondly, the topic may cover -- may answer your question that you have. So please do wait. All right. During the presentation we will take a few breaks to share knowledge-based questions with you. A polling style future will pop up. In order to get the polling style feature will pop up. In order to get this polling style feature, you're going to have to disable your pop-up blocker. Now, even if you disable the pop-up blocker and you still don't get the polling question, you will need to put your response in using the ask question eature. So when you get this -- if you get the polling style feature that comes up, select the response you believe is correct by clicking on the radio button next to the selection and clicking submit. And let me again reiterate, if you don't get the pop-up box for responding, enter your response timely in the ask question feature so we can track your participation. Now moving along with our session, let me introduce today's speakers. I've got Anna Falkenstein, and she is a senior tax specialist with the IRS Stakeholder Liaison Division in Richmond, Virginia, and Karen Brehmer, who is also a tax specialist in the same division. And she's in our Bloomington, Minnesota office. These ladies both work with tax professionals and small business owners in their respective areas providing outreach and education. And they identify ways the agency can be more responsive to customer needs. And with that, I'm going to go ahead and turn it over to Anna to begin our presentation. Anna, go right ahead. >> ANNA FALKENSTEIN: Thank you, Karen. Our goal today is to help you understand where the new Tax Cuts and Jobs Act intersects with your due diligence requirements. And remember what Karen said. You will often hear us say TCJA instead of Tax Cuts and Jobs Act. The Form 1040 has been redesigned and it will be simpler for a lot of taxpayers. The paid preparers may also find that it's simpler now that there's only one Form 1040 and there's no Form 1040A or 1040EZ. But obviously with more complex tax situations, Social Security number requirements and the relationship that taxpayers have to consider, understanding and meeting your due diligence requirements with confidence is now very important. So today we'll be walking you through the expanded due diligence requirements. And keep in mind that there are a lot of tax twists and turns that you need to consider this year in order to pass the due diligence requirements. So let's go ahead and get started by looking at our goals. So, first we will begin to help you understand Public Law 115–97, which we will refer to as the Tax Cuts and Jobs Act, TCJA. And we’ll also provide information to help you determine if your clients are eligible for the child tax credit, additional child tax credit or the new credit for other dependents. Now, we are also calling this ODC. Now the acronym is ODC. It doesn't quite match credit for other dependents. But this was done to prevent any confusion with other similar acronyms that are already known to folks inside and outside of the IRS. Now there are some very important changes that apply to tax preparers directly. The due diligence requirements will now apply to you when you are preparing tax year 2018 returns that claim either ODC and/or head of household filing status. Today we'll also be reviewing your due diligence requirements and the potential common errors to avoid. And the errors simply haven't changed much from prior years. We'll also be discussing the penalty consequences for failing to comply with your due diligence requirements. The penalty dollar amount did change. And finally, we'll be discussing the revised due diligence Form 8867. So let's get started. First we'll be sharing some TCJA changes affecting your clients. Karen Brehmer, why don't you get started with that. >> KAREN BREHMER: Okay great, I will. Thank you, Anna. So one change with TCJA is that the deduction for personal and dependent exemptions has been reduced to zero. But the standard deduction has almost doubled from what it was last year. So for some taxpayers the increased standard deduction will offset the fact that the exemptions are reduced to zero. One of the big changes with the child tax credit and the additional child tax credit is that the qualifying child needs to have a Social Security number by the due date of the return, including extensions. And we are going to cover that in more detail as we go along. Because of the requirement to have a Social Security number, you might have some clients who were able to take CTC/ACTC, you will hear us that acronym a couple times, too. But some of those people might not be eligible to claim it anymore. However, they might be eligible for the new credit for other dependents. And again, we are going to cover that credit in more detail as we go along. Also, there's an increase in the phaseout limits for CTC/ACTC. The new phaseout limits are higher than the old phaseout limits. So that means there could be a lot more taxpayers who will be able to qualify for that credit than in previous years. So the credit for other dependents is an extension of the child tax credit, additional child tax credit. The due diligence requirements were expanded to include head of household filing status. That is something new this year. So if you prepare your client's return using the head of household filing status and you don't address those qualifications, you the preparer may incur penalties. So what's happening with some of the traditional refundable credits you might be wondering. I'm glad you asked. One piece of good news is that there are no changes to the earned income tax credit or the American opportunity tax credit. So we won't be reviewing these credits with you today. But we certainly do hope that you take the time to review the rules for EITC and AOTC. And if you have employees, review these rules with them, as well. TCJA created big changes for CTC/ACTC. So Anna, can you introduce us to these changes? >> FALKENSTEIN: I sure will. All right. So, under the new law in order to qualify for both the nonrefundable CTC and the refundable ACTC, the qualifying child now must have a valid Social Security number issued before the due date of the tax return. And that includes extensions. This is a big change. The child tax credit is worth up to $2000 per qualifying child. And the age requirement did remain the same. The child must be under 17 at the end of the year in order to claim the credit. Now, the refundable portion of the credit has also gone up. And that has gone up to $1400 per qualified child. That amount will also be adjusted for inflation after tax year 2018. Now, the earned income minimum, in order to qualify for the refundable ACTC with only one or two children was $3000 in the past years. But now it's been lowered to $2500. Also in past years a taxpayer claiming the CTC/ACTC must have been able to claim an exemption for each child on their tax return. Now, even though the dependency exemption is now zero until after tax year 2025, excuse me, the taxpayer must still meet the dependency rules in order to claim a qualifying child for CTC/ACTC. So you still need to do your research and your due diligence. Now, as in the past, the child must be a US citizen or US resident. Therefore, any children that might be residing in Mexico or Canada who weren't US citizens won't qualify for this credit. Will not qualify. There is also another significant change I wanted to share with you. And that is affecting your clients with higher income. So we are going to take a look at a chart and you will begin to understand why here. So first let's start with a little history lesson. The CTC first appeared on the scene in 1998 as a small nonrefundable credit of 400 for each qualifying child under 17. And as we all know, over the last 20 years, that credit has gradually changed. And through the past filing seasons, the child tax credit was worth up to $1000 per qualifying child and was refundable for taxpayers with earned income of at least 3000. And also it phased out for taxpayers with an AGI above 75,000 for single taxpayers or 110,000 for joint filers. So if you're looking at that chart you'll see what is new. As you can see in this chart the phaseout in claiming one qualifying child for the child tax credit has increased to 200,000 for a single filer and 400 for joint filers. The phaseouts are greater if multiple children are claimed for CTC or if the ODC is also claimed. Now, because of rounding rules, a $2000 CTC or ACTC is reduced to zero if the income is above the $239,001 for a single filer or $439,001 for someone who is married filing joint. That obviously represents a huge change to the number of taxpayers that may be qualified to take the credit. All right. We need to explore some of the rest of the requirements for your client to be qualified to receive the full credit. Now, some of the requirements haven't changed. But we wanted to just review them very quickly. The child must be related to your client, such as a son, a daughter, nephew, etc. And the child must be under the age of 17. That means age 16 or younger at the end of the tax year. The child must not have provided more than half of their own support. And the child must be a US citizen, US national or a US resident alien. The child must have lived with the client for more than half of the tax year. But don't forget to explore some possible exceptions during your interview that might apply if that child happened to be away at a school. Now, we do also want to make sure that you understand that if a child was born and died during the year, you do not need a Social Security number. But if that is not the case, they do need the social Security number. In fact, the child must have a valid or employment Social Security number. Now, interestingly enough, the taxpayer, whether it is primary or spouse, may have an ITIN. So the taxpayer can have an ITIN but the child must have a Social Security number that is valid for employment. So what does a valid for employment Social Security card look like? Basically it's either going to be a basic Social Security card that has no additional markings or the card is going to state valid for work with DHS authorization. Now, if that Social Security card states not valid for employment on the child's card, then your client will not be able to claim that child for CTC or ACTC. Okay. We've given you a good bit of information. I think, Karen, this is a good time for a polling question. >> RUSSELL: You are absolutely correct, Anna. Yes, we've got some new rules and we've got the same existing rules. So this is part of the new rules. All right. You guys, here's the question, will the taxpayer possibly qualify for CTC/ACTC if, A, the paren t has a Social Security number and the child also have a Social Security number. B, the parent has a Social Security number and the child has at ITIN. C, the parent has an ITIN and the child has a Social Security number. D, both A and C. Or E, both A and B. Again, if your polling style feature didn't pop up, respond using the ask question feature and you only need to put in A, B, C, D or E, whichever you think is the right answer. Okay. I'm going to go ahead and read it again and go through the selections again. So will the taxpayer possibly qualify for CTC/ ACTC, if A, the parent has a Social Security number and the child has a Social Security number. B, the parent has a Social Security number and the child has an ITIN. C, the parent has an ITIN and the child has a Social Security number. D, both A and C. Or E, both A and B. I will give you a few more seconds to respond. And I just went over it. Hopefully we have 100% accuracy because everybody has been paying attention and there's been no problems or issues with technology. Okay. Let's close the polling. And let's see what the correct answer is and how many got it right. Okay. So the correct answer is D, both A and C are correct. Because under the new law, a child with an ITIN will not qualify the taxpayer for child tax credit, additional child tax credit, even if the parent has a valid Social Security number. Let's see how many of you got that right; 80%. Way to go. I'm happy with that. That's terrific. So we are comfortable with child tax credit, additional child tax credit. Let's find out about the new credit for other dependents. And Karen Brehmer is going to tell us all about it. Karen, go ahead. >> BREHMER: Great, thank you, Karen. TCJA added a $500 credit for qualifying dependents. And this is a credit for other dependents. It is nonrefundable. The credit is for dependents that don't meet the definition of qualifying child for the child tax credit. So if a dependent does not qualify the taxpayer for the child tax credit or the additional child tax credit, that dependent might qualify the taxpayer for the credit for other dependents. And here are some examples of dependents that might allow the taxpayer to take this credit. It could be the taxpayers older qualifying children, those who are age 17 or older at the end of the year. It could be other qualifying relatives who are 17 and older. This could be someone such as an aunt or uncle. The dependent might be a parent who depends on care from that taxpayer. And this credit also applies to qualifying children with an ITIN or an ATIN. An ATIN is an adoption taxpayer ID number. I did want to mention, I saw a question in there about an ITIN. An ITIN always starts with the number nine and you can find more information about ITINs on IRS.gov. Unlike the child tax credit, additional child tax credit that we were just talking about in the polling question, the credit for other dependents, for that one, the dependent and the taxpayer, either the primary taxpayer or the spouse can have an ITIN. So an SSN is not a requirement for the credit for other dependents. However, they do need to have that ATIN or ITIN. And whether it is the ATIN or the ITIN, they need to be issued by the due date of the return, including extensions. Now, the ODC can only be claimed for dependents who are US citizens or US residents. So that means the dependents residing in Mexico or Canada can't be claimed for the ODC if they are not US citizens. And that rule is similar to the rule for child tax credit, additional child tax credit. Okay. This is fast but it's time for another polling question. And this one is on the credit for other dependents. Karen, will you do the honors of the polling question? >> RUSSELL: Yes. Yes, it's a good thing that we did a little practice because I was totally shocked when this polling question came up the first time. I'm like what? Okay. You guys so here is the second polling question already. The taxpayer may qualify for the credit for other dependents if, A, the taxpayer has a Social Security and the dependent has a Social Security number. The taxpayer has an -- B; excuse me. B, the taxpayer has an ITIN and the dependent has an ITIN. C, the taxpayer has an ITIN and the dependent has a Social Security number. D, the taxpayer has a Social Security number and the dependent has an ITIN. Or E, all of the above. And again, if you don't get the polling style feature, use the ask question feature to submit your answer and just send in A, B, C, D or E. And if you do get the polling feature, just mark the radio button next to your answer. And let me read that one more time. If the taxpayer can't qualify for the child tax credit or additional child tax credit, they may qualify for the credit for other dependents if, A, the taxpayer has a Social Security Number and the dependent has a Social Security number. B, the taxpayer has an ITIN and the dependent has an ITIN. C, the taxpayer has an ITIN and the dependent has a Social Security number. D, the taxpayer has a Social Security number and the dependent has a ITIN. Or E, all of the above. The taxpayer may qualify for the ODCif, is it A, B, C, D or E? I'm counting to myself down to three. Okay. Let's stop the polling. Let's close the polling. And let's check out what the correct answer is on the next slide. And it is E. Hopefully everybody got that right. All scenarios are possible if the taxpayer was unable to claim the dependent under the child tax credit and additional child tax credit rules. In this case the dependent is a qualifying person for the ODC only if the dependent is not qualifying under CTC or ACTC. The taxpayer cannot claim both. Let's see how many of you guys got that right; 90%. Awesome. Okay, Karen. Back to you. >> BREHMER: All right. Thank you, Karen. So let's talk about head of household qualifications. As a tax preparer your due diligence requirements were expanded by TCJA. So what is new is that Form 8867, which is the paid preparer's due diligence checklist, now has a column for head of household. And we are going to show you that new Form 8867 in a few minutes. So, the law around the head of household rules didn't change, so that's good, right? But since the head of household filing status is a new due diligence requirement, let's brush up on some of the general rules that can qualify your client for head of household. So to claim head of household, your client must pass three tests. They need to be unmarried or considered unmarried for the tax year and have a qualifying child or dependent and pay more than half of the household expenses. So how will this new due diligence requirement change what you need to do? Let's say you are completing your return and the taxpayer appears to be qualified to claim head of household, you will need to complete the head of household column on Form 8867, paid preparer's due diligence checklist. And you will need to answer the related questions. And what you are doing there is you're confirming that you practiced due diligence in determining your client’s ability to claim the head of household filing status. We have two tools you can use. The first one is, this will help you with determining if your client is eligible to claim head of household. It is Form 13614–C. And I will repeat that number a few times. The title of that form is Intake/Interview and Quality Review Sheet. You can use this form to review the questions that are asked in the section on marital status. And again, that is Form 13614–C. It is available on IRS.gov. And it can be downloaded and printed for free. It's available in a lot of different languages. More than our normal selection of languages. It's available in English. But also Spanish, Korean, Chinese, Vietnamese, Portuguese, Polish and other languages, too. Again, that is Form 13614–C. And I wanted to mention one other tool that's available to you. If you go to IRS.gov and ask for -- search for interactive tax assistance and then what is my filing status, that can be a helpful tool. So interactive tax assistance, what is my filing status. Okay. So there's four steps to meet the due diligence requirement. First you want to apply the knowledge requirement. You need to know the applicable tax law for all the credits, including the new credit for other dependents as well as head of household filing status. And second, you need to compute the credit and keep the required records. You need to include the worksheets and the record of questions that you asked and the answers that you received. And then the final thing is to complete and submit the Form 8867, paid preparer's due diligence checklist. So now I want to share with you the two main areas from these requirements where we most often see mistakes. The No. 1 due diligence error is failing to meet the knowledge requirement. More than 70% of all due diligence penalties that are asserted during due diligence audits are for failing to meet the knowledge requirement. Preparers often make this error because they don't recognize the inconsistent or incomplete information that their clients are giving them. So here are some things that can help you apply the knowledge requirement. First, you got to use your common sense. You've got to use your training and your professional experience to really evaluate the information that your client is providing to you. You want to use what you know about your clients and about their occupations. Another suggestion is to compare what your clients claimed last year to what they are providing to you this year. And even though your tax software has questions that you can ask your clients, most tax software is generic. So you can't rely on it to ask every question that might be needed. There could be times when you need to ask follow-up questions and you just kind of keep asking until you are satisfied that you have all the answers that you need to make an accurate determination. And you need to also document those questions you asked and the answers you got as well. You really want to try to develop your own interview process and then apply it. And if you have employees, make sure you train your employees on the due diligence process that you want them to use and that you have established for your business. Often we do find that preparers are not keeping all the required records. So it's important to keep a copy of all client-provided documents that you relied on, whether it was that you were determining eligibility for the credits or eligibility for the head of household filing status. And you want to keep any information that you use to compute the amount of the credits. And it's also a good idea to keep a record of who gave you the information to complete the tax return and when it was given to you. And all of these records we just talked about should be retained for three years. So Karen, are we ready for our third polling question? >> RUSSELL: We certainly are, Karen. Okay. And this is a true or false. So we want to know if this statement obviously is true or false. So a preparer can't rely on the questions provided in their software as their sole source of interview questions. And this is because each client is unique and additional questions may be needed. Is that A, true. Or B, false? Mark the radio button next to your response. Okay. And I will read the question one more time. A preparer can't rely on the questions provided in their software as their sole source of interview questions. This is because each client is unique and additional questions may be needed. Is that A, true. Or B, false? And I will give you a few more seconds. And for those of you in the audience that were interested in what the name of Form 13614-C is, that's an Intake/Interview and Quality Review Sheet. Okay, you guys. So A for true or B for false for that statement. And let's go ahead and close out the polling and we will find out what the correct response is. And of course that is a true statement. Because a preparer cannot rely on the questions provided in their software as their sole source of interview questions. Because as you are asking questions of the client, you might be led in all different manner of direction. Each client is unique. So Karen mentioned earlier to develop your own interview process and apply it. And that this will help ensure you prepare an accurate return. And that's an excellent suggestion. And also if you have an office and you have employees, ensuring that they are trained is of the utmost importance. And 96% of you got that right. Way to go, everybody. And now we have talked about credits. We've talked about establishing an interview process or interview techniques. And we've also talked about due diligence requirements. And now we are going to talk about penalties. And with that, Anna is going to tell us about the penalties associated with the due diligence requirement. >> FALKENSTEIN: Okay. All right. Here comes sort of the alarming part of our presentation. There are penalties for not meeting the due diligence requirements. I think you all knew that. But unfortunately, they are pretty significant. If you are the paid preparer and failed to comply with the due diligence requirements for EITC, CTC/ACTC, and that includes the ODC now, AOTC and now head of household, the IRS can assess a $520 penalty against you or against your employer for each failure per return. That is each. Also, there's no limit on the dollar amount of the penalties you or your employer can get. So I want to give you an example, just to kind of make it hit home here. The IRS reviews 25 of your returns and finds that you failed to meet your due diligence requirements on 20 of them. Now, each of those returns had claims for EITC, CTC/ACTC, or ODC, AOTC and HOH filing status. And you didn't meet the requirements -- one or more of the requirements for each of those credits or the filing status. So that's $520 times 20 for EITC, $520 times 20 for CTC/ACTC or ODC, $520 times 20 for AOTC and $520 times 20 for HOH. That's $41,600 in penalties. So it doesn't take much to make it a pretty high penalty. Now, if you are an employer and the revenue agent finds that you didn't have appropriate procedures and practices in place to support due diligence by your preparers, by your employees, you could be fined the $41,600. Penalties for missing Forms 8867 are handled automatically through the mail. So you will get a warning letter. It is Letter 5364. The second time that we get a paper return that does not have a Form 8867. And if you eFile a return, you will get an electronic alert when we receive a missing -- a return that's missing that form. Now, if we continue to get returns without the form, then you will get a proposed penalty assessment in the mail. Now, we could assess the $520 penalty for each return missing the form for each of those credits or head of household filing status without even going through an audit process. Okay? So let's give you some facts on that from this past year. This year, through the end of April, we sent out over 6600, 5364 warning letters to preparers. And we also sent out more than 2100 electronic alerts. So if you received one of these, you don't actually have to respond to it. But what you need to do is make sure that you are taking corrective actions immediately with any future returns that you are filing. In addition, the IRS sent out over 270 penalty packages to preparers for tax year 2017 for missing Forms 8867 compared to about 300 in the prior year. So what does that tell you? Well, we certainly don't want to see you receiving any of these letters or proposed penalties. So please, pay attention. All right. The IRS just revised, and I'm talking hot off the presses here, the Form 8867 is now available. And here are a few things that you can see on the new form. And I know it's really hard to see this, so you may want to go online and get yourself a copy. But this is what you'll find on that form. So Part 1 still covers the general due diligence requirements that now include the head of household filing status. Part 2 continues to cover the EITC eligibility. And that includes the consideration also of head of household. Part 3 covers CTC/ACTC as well as the new credit for other dependents. Part 4 now will continue to cover the AOTC section. And Part 5, which is new this year, will ask you questions regarding head of household filing status. Part 6 is the eligibility certification that you need to complete and sign. Karen Russell, I think you've got one last polling question for us. Ready? >> RUSSELL: I think I am. Okay. [LAUGHTER] >>RUSSELL: I am ready. It is my time. Okay, guys. I'm sorry. So it's another true/false. And let's just start. So if a paid preparer -- if you are a paid preparer and you fail to comply with the due diligence requirements for EITC, CTC/ACTC, including ODC, AOTC and HOH, the IRS can assess a $500 penalty against you and the total penalty will not exceed $500. Is that A, true. Or B, false? Okay. Again, if you are a paid preparer and failed to comply with the due diligence requirements for EITC, CTC/ACTC, including ODC, AOTC and HOH, the IRS can assess a $520 penalty against you and the total penalty will not exceed $520. Apparently I have $500 stuck in my brain. It's 520. Is it A, true. Or B, false? If you are not getting the polling feature, use the ask question feature to submit your answer. If you are getting the polling feature, click the radio button next to the answer. Pretty cut and dry; $520 penalty, $520 total penalty that can be assessed. A, true. Or B, false. Let's finish up. If you guys will select your answer or send in your response using the ask question feature. All right. Let's close the polling. We will see what the correct answer is on the next page, next slide. And the correct answer is false. You wish the penalty would only -- couldn't exceed $520. She did the math, $41,600, that's a lot. And actually that was for only 20 reviewed returns. So it could be a lot more than that. As Anna stated earlier, the IRS can assess a $520 penalty against you or against your employer for each failure per return and there is no dollar limit on the amount of penalties you or your employer can get. Okay. So let's see how many of you guys got that right. Okay; 94%. So, Anna, if the tax professionals want to get more information on this topic, where can they find it? >> FALKENSTEIN: Well, we do have a couple places that they can get lots more information. First, when you visit our webpages on EITC Central, there is a sample here of some of the resources that you can expect to find. But first, where is EITC Central? Well, the website is right there at the top of your screen, www.EITC.IRS.gov. That's EITC Central. And there you're going to find hot topics, the latest updates and crucial information that you need on -- the tax credits are always going to be posted here. Also due diligence training modules for continuing education credits will be here. Frequently asked questions by our preparers. So if you have questions that may not have gotten answered on a webinar, you may see them here. Also past due diligence training videos and other content will be included here, as well. So I do suggest that you mark EITC.IRS.gov as a favorite on your web browser and that way you can refer to it as quickly as possible. Also our analysts in that section have been kind enough to allow you to ask questions or make suggestions. So you can contact them at EITC.Programs@IRS.gov. Now, that doesn't happen often. So if you are one of those that you do like to make suggestions or you have that very strange question that may not get answered, due to time limits, this may be a place where you can send that question. And Karen Russell, I'm going to pass it back to you to start our Q and A session. >> RUSSELL: Thank you, Anna. Thank you, Karen, so much. Okay. You guys, I moderated the webinar and now I'm also going to moderate the Q and A session. And we have two subject matter experts with us to answer your questions. And they are from wage and investment return integrity and compliance services. And I've got Christine Bass and Naomi Dillard. And both are program analysts. And I really appreciate them joining us today. And before we begin, I want to -- I don't know -- explain that we may not have time to answer all the questions that have been submitted because we got a boatload of them. But we will answer as many as we have time for. And if you are participating to earn a certificate and related continuing education credit, you will qualify by participating for at least 50 minutes from the official start time of this webcast, which was at the top of the hour. So it is just now 2:45. You need to stay on for another at least five minutes to hit that 50 minute mark. You've got to get that threshold of 50 minutes. As long as you meet the 50 minute requirement, you don't have to stay on for the full Q and A session, if you don't want to. But we hope that you will because, you know, we always have a lot of good questions and a lot of good information to share. So with that, let's go ahead and get started. And I'm going to toss a question out to Christine right off the bat regarding the tax law updates. So with all of the tax law updates that have occurred, a member of the audience wants to know where they can find information about forms and filing requirements. >> BASS: Well, that's a great question. And welcome to all of you. And I appreciate all the questions that we are getting in the chat. With regard to the tax law updates, you can find information on our website, which is IRS.gov/draftforms, where the Draft 2018 Form 1040 instructions have already been posted. And then you can find other information. We have an excellent tax preparer toolkit on there, as well, for any questions that you have regarding refundable credits. And a due diligence module on there also, which will be covering the new credit for other dependents, ODC, and the head of household filing statuses. Unfortunately, that new due diligence CTE module won't be available probably till the end of January. But please keep checking as we are updating that. So there's a lot of information on IRS.gov and the EITC toolkit, which is what you need to put in there to search to look for that. >> RUSSELL: And Christine, just piggybacking off that, the questionnaire for head of household due diligence, is that also on the IRS website, that intake sheet? >> CHRISTINE BASS: Well, you know. Right. There is no specific questionnaire we can put for head of household due diligence on our website. I mean, the basic due diligence requirements are that you ask questions of your clients, if anything appears to be incorrect, incomplete or inconsistent. And again, you should ask those questions and document those questions, I'm sorry, and document their answers contemporaneously in case you would ever be subject to a due diligence audit. Again, each client is different. Each situation is different. We can't really put a one-size-fits-all questionnaire on there. But you know, you have to use your knowledge of the tax law and -- you know, to question your clients if anything seems incorrect, incomplete or inconsistent about the information that they are giving you. >> RUSSELL: Okay. And Naomi, I have something for you. So a question came in about including extensions. So does it mean that the Social Security, if it's not obtained before for 4/15, the taxpayer needs to file a valid extension allowing them to file with the Social Security number by 10/15? >> NAOMI MBUGUA-DILLARD: Yes, thank you for the question. Right. If your client does not have a Social Security number by 4/15 and you anticipate that they will be getting a Social Security number, it would be in their best interest for you to file an extension. And then prior to 10/15, you know, then -- when and if they have a Social Security number, you go ahead and file the tax return, you know, claiming the appropriate credit. Now, one thing that I did want to say when Christine was speaking about head of household, if any of you may have had a client who was audited, there's a form out there on IRS.gov, which is Form 886 HOH, it's Form 886 head of household. There is an English version and a Spanish version out there that shows information that the IRS does ask when an audit occurs regarding the head of household. So you may want to take a look at that and utilize some of that information when you are asking questions to your clients. >> RUSSELL: That is an excellent suggestion, Naomi, thank you. So basically, so no SSN, they get their SSN, if they get the child's SSN before 10/15, they don't have to wait until October 15th to file, they can file then. But if they file the return before the child has a Social Security number, then the credits are not retroactive, correct? >> MBUGUA-DILLARD: That is correct. >> RUSSELL: Okay. All right. And you know, there is something else about a child who was born and died in the same year and I'd like to ask you this. So no Social Security number is issued. How are the taxpayers still able to claim the child tax credit and the additional child tax credit? Do they use the birth and death certificates? How does that occur? >>MBUGUA-DILLARD: Thank you. Yes, that would be exactly right. So if your client had a child that was born and died in the same year, they would put the word died on the Schedule EIC, if they were claiming EIC, or child tax credit or ACTC. And they would include the birth certificate or medical record showing it was a live birth and the death certificate showing that they died. So they would include those two and write the word died on the tax return as well as the forms. And they would be entitled to the credit. They would be entitled to child tax credit, additional child tax credit, earned income tax credit, whatever would qualify your client based on their income. >> RUSSELL: Thank you so much for that clarification. Christine, something came up about if they have their tax return, tax preparation for free, they are not subject to file Form 8867; is that a correct or incorrect statement? >> BASS: Well, let me preface this with a lot of the penalty cases we did this year, many of the preparers said, but I completed the tax return for free. And my question to them is then, why did you sign it as a paid preparer? So if you were completing the tax return for free for your clients, you should not sign as a paid preparer. Because that's going to open you to a whole new world of opportunity, so to speak, that you might be liable for. So if you are doing it for free then, no, you don't need to do that 8867. But make sure you do not sign as a paid preparer. Because when you’re signing as a paid preparer, you need to do that 8867. Even if you did it for free. So again, if you did it for free but you are signing as a paid preparer, include that 8867 on any of those returns that include EITC, ACTC, CTC, ODC, AOTC, and HOH. And I know that's a lot of acronyms. So yes, please, if you are not paid, don't sign as paid preparer. And if you sign as paid preparer, then please you’re going to have to include that 8867. >> RUSSELL: You just answered my next question. [LAUGHTER] >> RUSSELL: The question was must Form 8867 be completed and submitted with any return claiming EITC, CTC, ACTC, ODC or HOH. And the answer is most emphatically yes. >> BASS: Yes, absolutely. And that's going to be for your 2018 returns up until tax year I think it ends in 2025. And so for the next several -- for the many foreseeable years you're going to have to do that for those credits unless any tax law changes on that. >> RUSSELL: Okay. And then let me see. I've got time for one more question. And it is a simple one. And Christine or Naomi, either one of you ladies, is ODC a refundable credit? >> BASS: No, it is not refundable. And it is $500. Because I know several people asked what the amount of the ODC was. It's a $500 nonrefundable credit that will reduce the tax liability but will not be refundable. >> RUSSELL: Okay. Thank you so much. Thank you, my Subject Matter Experts. Okay. And I want to thank our presenters Anna and Karen for their excellent presentation. And we appreciate everyone sharing their knowledge. Anna, Karen, Naomi, Christine, thank you. And then Anna and Karen, I want to give you some time to go over a few of your highlights or high points that you want the audience to remember. Anna, will you start first please? >> FALKENSTEIN: I sure will. Okay. I know that we shared a lot of information, but we do want to leave you with a couple things that we want to make sure you get as a key takeaway. So the first one is that the income phaseout for the child tax credit has significantly increased. So we should see a lot more taxpayers being able to use that. So the beginning credit phaseout for CTC increases to $200,000 for single taxpayers and 400 for joint filers. And that does represent a big change to, as I said, the number of taxpayers that should be able to qualify to take the credit. Also, eligible children for the child tax credit must have a Social Security number valid for employment, and remember under the Tax Cuts and Jobs Act, the child tax credit may be worth as much as 2000 per qualifying child, depending on the income with the refundable portion being up to $1400 per child. Karen Brehmer, you want to take the next couple? > > BREHMER: I sure will. The third item is to remember to consider the new credit for other dependents or ODC. And as you just heard, it's a $500 nonrefundable credit. And the fourth item is that due diligence now applies to claiming head of household and CTC/ACTC also ODC, also EITC and AOTC. And also, please remember that there is a $520 penalty for not meeting the due diligence requirements. And with that, I will turn it back to you, Karen. >> RUSSELL: Thank you, Karen. We certainly trip over that $520 amount. Don't we? So it's $520. >> BREHMER: Yes, we do. >> RUSSELL: Okay. So for everyone that is attending today's presentation and you've been on for at least 50 minutes after the official start time of this webinar, you will receive a certificate of completion for one credit that you can use with your credentialing organization for possible CE credit. If you are eligible for continuing education from the IRS and you registered with your valid PTIN, your credit will be posted to your PTIN account. And if you are eligible for continuing education from the California Tax Education Council, your credit will be posted to your CTEC account. Now, if you qualify and you haven't received your certificate or credit by December 31st, email us at CL.SL.web.Conference.team@IRS.gov shown on the slide and let us know and we will take a look into that. And by the way, if you don't know who your local stakeholder liaison is like me, Karen Russell, or Karen Brehmer, or Anna Falkenstein, just go -- and if you are interested in finding out, you can either send us an email to this address on the screen or you can go on IRS.gov and put in local stakeholder liaison or just stakeholder liaison in the search box and it will pull up a map and you can click on your state. Okay. Now so as part of the Service's efforts to provide you with interesting topics and interesting speakers, we would like it if you would take a few minutes to complete the short evaluation before you exit. And if you have any requests for future webinar topics or pertinent information that you would like to see in an IRS fact sheet or tax tip or FAQ on IRS.gov, you can include your suggestions in the comments section of the survey. Or if you prefer, in the ask question feature on your viewing screen. And of course, if you click the survey button on the left side of your screen and it doesn't come up, that probably most likely means that you didn't disable your pop-up blocker. So you can disable it at this time to take the survey or again, use the ask question feature. So this is the last webinar for the year and we certainly appreciate everyone that attends our webinars. And we hope that you will join us for future webinars as well as they become available. And the great part is that we think they are informative and they are free. So to register visit IRS.gov and use keyword webinars. And you can select webinars for tax practitioners. And also if you have clients that are small business owners, we've got webinars for small business owners, as well, as they come up. And we will be offering certificates and CE credit. And then we ask that you look to your local stakeholder liaison for information about the policies, practices and procedures that the IRS uses to ensure compliance with the tax laws. And as for your information, we elevate issues that affect tax administration through what we call the issue management resolution system, which captures and develops and responds to significant national and local issues. So if you do run across something that could have a nationwide impact and it is affecting a process or procedure, let your local stakeholder liaison know. And it has been a very wonderful nice afternoon and a pleasure to be here with you and on behalf of the Internal Revenue Service, I want to thank everyone for attending today's webinar. It is very important to us, to the IRS, to maintain strong partnerships with the tax professional community and other stakeholders as well such as industry associations and the Federal and state and local organizations. You all make our jobs a lot easier by sharing information that allows for proper tax reporting. So thank you again for your time and attendance. Much success in your business or practice. And we wish you many happy returns. You may exit the webinar now.
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