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I had been doing their returns since 2000. At one time; all of the rentals were losses. They also had three Sch C businesses; two of which fell by the wayside. They have two daughters who qualified them for the Child Tax Credit and a small EIC. I am aware of what you are saying, but I believe that EIC is based on your AGI and not on the assets you have. I am also aware that once the rentals started to show a profit, it was considered investment income and disqualified them from EIC. There are a lot of variables to many tax returns. Just because someone has assets does not necessarily mean that they cannot receive EIC. The point I was trying to make here was not so much about the 8867 as it was about your duty and requirement to keep all records that you are supposed to and that, also, it doesn't hurt to keep anything and everything that can protect you from noncompliance in any event.

Yes, we all have to apply the 'smell test'. As my mother taught me, "if in doubt, don't".

There are few written rules for EITC due diligence.In an audit you must prove that you exercised due diligence.The last audit which I lost in appeals I am going to district court.Know where does it say you must have birth cetificates to prove dependents other than son or daughter.The fine is $17,000.IRS took the preparers refund this year

I completely understand all these variables....however....these people (not specifically anyone....but mine for sure) are still eating. How can one justify...in my #1 case....paying more in mtge interest alone than the entire W-2? Logic is involved (or, as my people say "sechel")....it's impossible.....and leaves too much room for questions. I don't have an issue with people who honestly "have a bad year" and get the credit....but when it goes on for years and years (and is 100% legit on paper)....even I have a breaking point!

In 2011, I posted the request of a client to eliminate some of the deductions on a Sch C to raise the taxpayer's taxable income. I have printed ten pages of replies from these boards telling me to "run for the hills". I refused to amend the return and she was very angry with me. Fast Forward to two weeks ago: I had to appear in court as a witness for the defendant (husband) because they have since divorced and she keeps trying to get more money out of him. I had to testify that she had asked me to alter a prepared return. I also had to show the engagement letter and refer to the fact that I had ten pages of agreement from you, my associates, that I would not agree to commit fraud. Her attorney tried to make me look uneducated and not capable of preparing a Schedule C return. I believe it backfired on her client because I had kept good records. The big issue was really over the 2012 return and the splitting of income for 11 months. It was an extremely difficult return and her attorney tried to make me look incompetent. I doubt that she succeeded. Bear in mind that I was not on trial here; just a witness for the defendant. The point here is that over the years, this couple has collected EIC in bad business years. They had seven rentals, three Sch C, etc. I have always been able to back up the facts; and since the 8867 became required, I have always filed it. You never know when these returns are going to come back to haunt you.

Having handeled three EITC audits for preparers that work for me the last two they only checked returns that had nieces,nephews,brothers ,sisters and grandchild.You had to have copies of birth certificates to prove the status claimed.They also wanted proof that the child lived in the household.They looked at the 8867 and it had to be signed to prove you asked the questions.All three preparers had done more than 150 EITC returns. In talking to other preparers that have been audited all had done over 150 EITC returns.