IRS Due Diligence Audit
Facing an IRS Due Diligence Audit?
An IRS due diligence audit can threaten your tax preparation business, your professional license, and your livelihood with penalties of up to USD 650 per credit per return — and if the IRS targets multiple returns in your practice, those penalties can escalate into tens of thousands of dollars in a matter of weeks. If you’ve received an IRS notice questioning your due diligence compliance on Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), or Head of Household claims, you need experienced representation immediately. JLD Tax defends tax preparers against IRS due diligence audits, protecting their practices, reducing penalties, and building compliance systems that prevent future exposure.
Our licensed CPAs and certified tax resolution specialists represent tax preparers at every stage of the due diligence audit process — reviewing your files, challenging penalty assessments, presenting reasonable cause defenses, and negotiating directly with the IRS on your behalf. Get a free, no‑obligation due diligence audit review today:
An IRS due diligence audit can threaten your tax preparation business, your professional license, and your livelihood with penalties of up to USD 650 per credit per return — and if the IRS targets multiple returns in your practice, those penalties can escalate into tens of thousands of dollars in a matter of weeks. If you’ve received an IRS notice questioning your due diligence compliance on Earned Income Tax Credit (EITC), Child Tax Credit (CTC), American Opportunity Tax Credit (AOTC), or Head of Household claims, you need experienced representation immediately. JLD Tax defends tax preparers against IRS due diligence audits, protecting their practices, reducing penalties, and building compliance systems that prevent future exposure.
Our licensed CPAs and certified tax resolution specialists represent tax preparers at every stage of the due diligence audit process — reviewing your files, challenging penalty assessments, presenting reasonable cause defenses, and negotiating directly with the IRS on your behalf. Get a free, no‑obligation due diligence audit review today: call (201) 604‑2432.
Why You Need Professional Help With Your IRS Due Diligence Audit
IRS due diligence audits are specifically designed to hold paid tax preparers accountable for verifying the accuracy of credit and filing status claims on their clients’ returns — and the IRS pursues these cases aggressively because EITC fraud and improper credit claims represent billions of dollars in annual revenue loss. Auditors review your client files, interview you about your document-gathering process, examine your Form 8867 checklists, and assess penalties for every return where they determine your due diligence was insufficient. A single audit covering just ten returns with four credits each can produce USD 26,000 or more in penalties before interest and compliance costs.
Without experienced due diligence audit defense, tax preparers often make costly mistakes — admitting to inadequate procedures, failing to present documentation that supports their process, or missing critical appeal deadlines that eliminate penalty abatement options. Professional representation ensures your compliance process is presented accurately and completely, technical defenses are raised at every appropriate stage, and your professional standing with the IRS is protected. If you’re a tax preparer who has received any IRS communication about due diligence requirements, acting immediately with JLD Tax on your side is the only way to protect your practice and your income.
Fill Out The Form Below
To Resolve Your IRS
Due Diligence Audit
I hired JLD Tax to handle a tax audit due to an unfortunate typo in my divorce decree. It has been a long road with the IRS, due to their own continued struggles, but JLD has been great throughout the entire process. Everyone at JLD has been a pleasure to work with. They've kept me informed throughout the process and have been easy to reach, if I have questions or concerns that I need to cover with them. I highly recommend their services to family and friends without hesitation. Thanks to Jonathan and his team for a remarkable job!
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.
John L.
I was a victim of internet fraud a few years ago, in which my nest egg was wiped out. Not to mention the IRS and the state of New Jersey penalized me, through no fault of my own. The team at JLD Tax advocated on my behalf. They had worked on my case in such a diligent manner and explained the process every step of the way to put my mind at ease. JLD Tax negotiated a reasonable settlement for my case. I also use JLD Tax for my annual tax returns as well.
May Y.
The worst thing for taxpayers is to owe the I.R.S money. I being one of them. I owed a lot of money for unpaid taxes. Not until my friend introduced me to Jonathan. After reviewing the letters I had received from the IRS, he was able to help me. I now don’t receive letters threatening with levy and garnishing my wages. One thing i can assure you is that, Jonathan is a very honest, knowledgeable and someone you can trust.All what i can tell you is that my big problem was solved. And i am sure he will help you solve yours to. Thank you Jonathan.
Lawrence N.
How JLD Tax Can Resolve Your Due Diligence Audit
When you engage JLD Tax for IRS due diligence audit defense, we begin with an immediate review of your audit notice, the returns under examination, and your existing documentation and client intake procedures. We assess your exposure, identify which returns and credits are being scrutinized, and build a defense strategy that presents your due diligence process in the strongest possible light — including gathering client files, Form 8867 checklists, supporting documentation, and any records that demonstrate you asked the right questions and applied knowledge and judgment to your clients’ claims.
If the IRS proposes penalties, we file formal protests, negotiate reductions, and pursue appeals where the facts and law support a better outcome. Beyond resolving the immediate audit, we help you build a stronger compliance system — improving your intake procedures, Form 8867 documentation, and client record-keeping to significantly reduce your risk of future due diligence audits and protect your practice long-term.
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.
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.
Contact us
Schedule Your Free Consultation Today
Schedule your confidential, no-obligation consultation with an experienced tax attorney.