Paid Tax Preparer IRS
Due Diligence Audit
Facing an IRS Due Diligence Audit as a Paid Tax Preparer?
An IRS due diligence audit is one of the most serious threats a tax preparer, enrolled agent, or CPA can face and it goes far beyond financial penalties. If the IRS determines your due diligence compliance on Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), or Head of Household claims is insufficient, you risk penalties of up to USD 650 per credit per return, suspension or permanent revocation of your EFIN, loss of your PTIN, referral to the IRS Office of Professional Responsibility (OPR), and in the most serious cases, criminal investigation and prosecution that ends careers permanently. JLD Tax represents tax preparers, enrolled agents, and CPAs facing IRS due diligence audits, providing aggressive defense at every stage to protect your income, your license, and your ability to practice.
Our licensed Tax Attorneys, CPAs, and certified tax resolution specialists understand exactly what is at stake for a tax professional under due diligence scrutiny — we review your files, build your compliance defense, negotiate directly with the IRS, and intervene before an audit escalates into an OPR referral or criminal matter. Get a free, no‑obligation due diligence audit review today: call (201) 604‑2432. Confidential consultation with immediate case reviews available.
Why Tax Preparers, Enrolled Agents & CPAs Need Professional Representation
IRS due diligence audits are not routine tax examinations — they are targeted enforcement actions specifically designed to investigate paid tax professionals, and the consequences of mishandling them extend far beyond a financial penalty. Auditors review your client files, interview you directly about your intake process, examine your Form 8867 checklists, and look for patterns of non-compliance across your entire practice. What begins as a review of a handful of returns can quickly escalate into a practice-wide examination covering multiple tax years, with projected penalties that reach tens of thousands of dollars and enforcement actions that threaten your professional standing with the IRS permanently.
The most dangerous risk many preparers underestimate is how quickly a due diligence audit can turn into a license and criminal matter. Repeated or willful violations trigger EFIN suspension, cutting off your ability to e-file returns and effectively shutting down your business overnight. Serious cases are referred to the IRS Office of Professional Responsibility, which has authority under Circular 230 to suspend or disbar enrolled agents and CPAs from practicing before the IRS — a career-ending outcome that is publicly disclosed. In the most egregious situations involving fraud or willful preparation of false returns, the IRS Criminal Investigation division can pursue criminal charges with real prison exposure. Professional representation from the moment you receive your first notice is the only way to contain these risks before they become irreversible.
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Due Diligence Audit
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Eric A.
Working with Jonathan was an absolute relief. He was professional, knowledgeable, and genuinely cared about helping me resolve my tax situation. From the start, he explained every step clearly and made a complicated process feel manageable. Jonathan was responsive, patient, and always made sure I understood my options before moving forward.
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How JLD Tax Protects Your Practice and Your License
When you engage JLD Tax for IRS due diligence audit defense, we immediately assess your notice, review the returns under examination, and evaluate your existing documentation and client intake procedures to identify vulnerabilities and build your defense before you respond to a single IRS request. We take over all communication with the IRS so you are protected from making inadvertent statements during examiner interviews that could be used to escalate the case, expand the audit scope, or support an OPR referral.
Our technical defense is built around protecting your EFIN, your license, and your ability to practice above all else. We present your due diligence process — including Form 8867 documentation, client intake records, supporting documents, and your good faith reliance on client-provided information — in a way that demonstrates compliance and challenges the IRS’s basis for penalties. Where penalties are proposed, we pursue formal protests, reasonable cause abatement arguments, and appeals that reduce or eliminate financial liability. Where OPR referral is threatened or has already occurred, we provide immediate Circular 230 defense to protect your enrolled agent or CPA credentials from suspension or disbarment. And where criminal exposure is a risk, we intervene decisively to keep the matter civil and prevent escalation to IRS Criminal Investigation — because once a case goes criminal, the stakes and the costs increase exponentially.
What Is an IRS Due Diligence Audit and Common Audit Notices
An IRS due diligence audit is a formal examination of a paid tax preparer’s compliance with federal due diligence requirements under Internal Revenue Code Section 6695(g), which requires preparers to take specific steps to verify that clients are eligible for refundable credits and certain filing statuses before claiming them on a return. The four areas covered by due diligence requirements are the Earned Income Tax Credit (EITC), the Child Tax Credit and Additional Child Tax Credit (CTC/ACTC), the American Opportunity Tax Credit (AOTC), and Head of Household filing status. For the 2025 tax year, the IRS penalty for each due diligence failure is USD 650 per credit or status per return, meaning a single return claiming all four could expose a preparer to USD 2,600 in penalties on that return alone.
Common IRS due diligence audit notices and what to do immediately: A Letter 5364 or similar audit notification announces that the IRS is reviewing your due diligence compliance and requests documentation and records — contact JLD Tax before responding, as how you respond to the initial request shapes the entire audit. An IRS Interview Request asks you to meet with an examiner to discuss your client intake process and documentation procedures — never attend an IRS interview without professional representation, as statements made during these interviews are used to support penalty assessments. A Notice of Proposed Penalty Assessment presents the IRS’s calculated penalties across the returns under examination — engage representation immediately to challenge the assessment and file a formal protest within the response deadline. A referral to the IRS Office of Professional Responsibility (OPR) is the most serious outcome and can result in suspension or disbarment from practice before the IRS — this requires immediate, specialized representation to protect your professional license and career.
Who Should Contact Us
Independent tax preparers, enrolled agents, and CPAs who have received any IRS notice referencing due diligence requirements, Form 8867 compliance, or Section 6695(g) penalties should contact us immediately — regardless of how minor the notice appears. High-volume preparers who process large numbers of returns claiming refundable credits are disproportionately targeted, and a single examination can project penalties across every similar return in your practice. Tax professionals who have already received a proposed penalty assessment, been contacted by an IRS examiner for an interview, or received a referral to the Office of Professional Responsibility need urgent representation to protect both their finances and their credentials.
If your EFIN has already been suspended or your PTIN has been flagged, call us immediately — restoration and reinstatement require a specific, documented response and professional advocacy that must begin without delay. Enrolled agents and CPAs who are concerned about their current due diligence compliance or want a proactive practice review before an audit arrives should also call now — prevention is always faster, less expensive, and less stressful than defense. Contact JLD Tax at (201) 604‑2432 for a free due diligence audit review and protect your practice before it’s too late.
Get Your Free Due Diligence Audit Review with JLD Tax
IRS due diligence audits move quickly and the financial and professional consequences of handling them alone can be severe and career-ending. JLD Tax provides licensed CPA and certified tax resolution expertise, deep knowledge of IRS due diligence law and penalty defense, and a proven commitment to protecting tax preparers’ practices, incomes, and professional credentials.
The fastest way to protect your practice is a free due diligence audit review. Call (201) 604‑2432 for a confidential, case assessment. No obligation, no pressure — just expert analysis and a clear path to defending your practice and reducing your penalties
Frequently Asked Questions About IRS Due Diligence Audits
IRS due diligence requirements mandate that paid tax preparers complete and submit Form 8867 (Paid Preparer's Due Diligence Checklist) with every return claiming EITC, CTC/ACTC, AOTC, or Head of Household status, apply knowledge and judgment to information provided by clients, ask additional questions when information appears incomplete or inconsistent, and retain documentation supporting eligibility for at least three years. The IRS expects preparers to be an active checkpoint — not just a data entry service — when refundable credits are involved. If you're unsure whether your current process meets these requirements, call JLD Tax at (201) 604‑2432 for a free compliance review.
Yes — reasonable cause defenses, good faith reliance arguments, and first-time penalty abatement can significantly reduce or eliminate due diligence penalties in many cases. The strength of your defense depends heavily on your documentation — if you have records showing you completed Form 8867, asked probing questions, and relied on client-provided documentation in good faith, you have a strong foundation for penalty abatement. JLD Tax evaluates your specific facts and builds the strongest possible abatement argument. Call (201) 604‑2432 to discuss your penalty reduction options.
A referral to the IRS Office of Professional Responsibility (OPR) is a serious escalation that can result in a formal complaint, suspension of your ability to practice before the IRS, or permanent disbarment — all of which would effectively end your tax preparation career. OPR proceedings require immediate, specialized representation from professionals who understand both the technical due diligence requirements and the OPR disciplinary process. Do not respond to OPR communications without counsel — call JLD Tax at (201) 604‑2432 immediately for urgent representation.
Strong due diligence defense documentation includes completed Form 8867 checklists for every applicable return, client intake questionnaires asking about eligibility factors, copies of supporting documents clients provided (birth certificates, school records, lease agreements, etc.), notes or records of additional questions you asked when information seemed inconsistent, and evidence of your standard intake and review process across your practice. If your documentation is incomplete, JLD Tax helps you reconstruct what you can, organize what you have, and build the strongest possible defense with available evidence. Contact us at (201) 604‑2432 for a documentation review.
IRS due diligence audits focus on the tax preparer, not the taxpayer, and auditors typically select a sample of returns from your practice for examination — but findings from sampled returns can be projected across all similar returns you prepared in the audit period, dramatically multiplying potential penalties. This projection methodology is one of the most important areas for technical challenge in a due diligence audit, and experienced representation can significantly limit the scope of the examination. Call JLD Tax to understand how projection risk applies to your specific situation.
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