To date 2 of our preparers got form letters from IRS about EIC and following due diligence. One gal called IRS asking if there was a problem since she received this letter. The gal at IRS said no, they've been mailing these letters at random. After a lengthy conversation about watching for Sch C with EIC, and asking enough questions to satisfy that child is related to taxpayer, the IRS agent admitted there is NOTHING they can do or expect us to do if client KNOWS how to answer questions and is a big fat liar. She did say because they know clients lie, try to get as much documentation as possible by making copies of their records/logs, and what kinds of questions were asked to establish relationship. Without such documentation a preparer could be "called on the carpet". The agent said IRS is well aware of how clients "shop" around till they get their answers to fit, and I'm sure ALL of us have had many such clients that make us a bit uncomfortable.
Thank you, but that isn't what I was talking about. I was referring to ALL tax returns with eitc being scrutinized therefore delayed. Most won't see a refund for 3 weeks and some as long as 8 weeks. I've heard this rumor a couple of times in the past week but I haven't seen anything official on the irs web site.
Due diligence now consists of writing a novella about each client..