An employer can be assessed penalties for an employee's failure to meet due diligence requirements under which of the following circumstances? a. An employer's written procedures require its employees to complete a detailed intake questionnaire when interviewing clients and preparing returns claiming the EITC, CTC/ACTC/ODC, AOTC or HOH filing status. For a new employee's first two months on the job, the procedures require a senior paid preparer to perform quality review of every return before it's e-filed. An employee who was on the job for 30 days prepared returns for six clients improperly claiming the EITC and head of household filing status for children who did not live with the client, and e-filed the returns prior to quality review being performed. b. The employer has no written procedures, provides no training to preparers and doesn't require the use of a standard intake questionnaire for clients. The employer performs no quality review and relies on employees using software to prepare and e-file returns. The only records the employer keeps are the electronic software files. An employee prepared and e-filed 12 returns improperly claiming the AOTC for clients who did not receive Forms 1098-T and did not pay tuition to eligible educational institutions. .. c. An employer with one employee personally interviews each client and prepares an informal worksheet for the one employee to input in the software and e-file. The employer believes clients who live with and support children of their girlfriend/boyfriend should be able to claim the EITC and CTC/ACTC for those children even when the client isn't related to the children. Using the employer's worksheets, the employee prepared and e-filed 20 returns for clients improperly claiming the EITC and CTC/ACTC for children who weren't related to the client. d. An employer has one employee who interviews each client and prepares a standard intake questionnaire for the employer to use when preparing the returns. When the employer meets the clients to prepare their returns, he sometimes chooses to disregard questionnaire information that would disqualify a client from eligibility for the EITC, CTC/ACTC/ODC or AOTC. e. a and c f. b, c and d

The correct answer is **f. b, c and d**. Here's why: - **b.** The employer has no written procedures, provides no training, and does not require a standard intake questionnaire. This lack of due diligence procedures and oversight can lead to penalties if employees improperly claim credits like the AOTC. - **c.** The employer's belief that clients can claim credits for children they are not related to, and the preparation of returns based on this incorrect belief, shows a lack of due diligence. This can result in penalties for improperly claiming the EITC and CTC/ACTC. - **d.** The employer disregards information that would disqualify clients from certain credits, which is a clear failure to exercise due diligence. This can lead to penalties for improperly claiming credits like the EITC, CTC/ACTC/ODC, or AOTC. In each of these scenarios, the employer fails to meet the due diligence requirements set by the IRS, which can result in penalties.

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