Effective Date: January 1, 2026

This Taxpayer Due Diligence Agreement (“Agreement”) sets forth your responsibilities as a taxpayer when engaging ProAdvisor CPA, SC (also known as “ProAdvisor CPA,” “we,” “us,” or “our”) for tax preparation services, including the preparation of original or amended federal, state, and local income tax returns. Applicable figures, thresholds, and deadlines referenced throughout this Agreement are provided for illustrative purposes based on information available at the time of this revision; while we strive for accuracy, tax law changes frequently, and taxpayers are solely responsible for verifying current amounts prior to filing.

This Agreement is required by IRS regulations governing tax return preparers and is designed to protect both you and ProAdvisor CPA by clearly establishing your responsibilities regarding eligibility for tax credits, deductions, and filing statuses. 

Under IRC §6695(g), tax preparers can be penalized for failing to meet due diligence requirements; accordingly, you are solely responsible for determining your eligibility for all credits, deductions, and filing statuses claimed on your return. 

ProAdvisor CPA relies on the information you provide to prepare your return and does not independently verify your eligibility for any credit or benefit on your behalf. By engaging ProAdvisor CPA for tax preparation services, you agree to the terms of this Agreement. 

If you have questions, please contact us at [email protected].

1. Taxpayer Acknowledgments

By signing, submitting, or otherwise accepting any formal agreement with ProAdvisor CPA for tax preparation services, you acknowledge and agree to the following:

Sole Responsibility for Eligibility. You are solely responsible for determining your eligibility for all credits, deductions, filing statuses, and other tax benefits claimed on your tax return. ProAdvisor CPA does not determine your eligibility for any tax benefit.

Accuracy of Information. You have provided, and will continue to provide, accurate, complete, and truthful information to ProAdvisor CPA. You understand that the accuracy of your tax return depends entirely on the accuracy of the information you provide.

No Reliance on ProAdvisor CPA for Eligibility Determination. You have not relied on ProAdvisor CPA to determine whether you qualify for any credit, deduction, filing status, or other tax benefit. Any questions we ask are for the purpose of preparing your return based on your representations, not to determine your eligibility.

Understanding of Consequences. You understand that claiming credits or benefits for which you are not eligible may result in IRS penalties and interest, requirement to repay the credit plus interest, a ban from claiming certain credits for 2 to 10 years, and potential criminal prosecution for fraud.

Documentation. You agree to provide documentation to substantiate any claims on your tax return upon request by ProAdvisor CPA or the IRS.

Repayment of Credits. If you claim a refundable credit for which you are not eligible, you will be required to repay the credit amount plus interest.

2. Penalty Disclosure

The IRS imposes significant penalties on taxpayers who claim credits or benefits for which they are not eligible, above and beyond repayment of ineligible credits plus interest:

Accuracy-Related Penalty (IRC §6662). A penalty equal to 20% of the underpayment of tax may be imposed if you claim credits or deductions due to negligence, disregard of rules, or substantial understatement of income.

Fraud Penalty (IRC §6663). A penalty equal to 75% of the underpayment of tax may be imposed if any part of the underpayment is due to fraud.

Erroneous Claim for Refund or Credit Penalty (IRC §6676). A penalty equal to 20% of the excessive amount claimed may be imposed for erroneous claims for refund or credit.

Ban from Claiming Credits. If you claim the Earned Income Tax Credit (EITC) or Child Tax Credit (CTC) due to reckless or intentional disregard of the rules, you may be banned from claiming these credits for 2 years. If the claim is due to fraud, the ban is 10 years.

Criminal Prosecution (IRC § 7201-7207). Filing a fraudulent tax return is a federal crime that can result in fines and imprisonment.

3. Due Diligence Credits and Requirements

The following sections outline the eligibility requirements for common credits and benefits subject to preparer due diligence requirements. You must meet ALL applicable requirements to claim these benefits. 

The credits, deductions, and filing statuses outlined in this section do not represent a comprehensive list of all tax benefits available under federal, state, or local law. This section focuses specifically on the areas most commonly associated with taxpayer errors, fraudulent claims, and ineligible filings, as identified by the IRS through its due diligence requirements and enforcement priorities. Your tax return may include additional credits or deductions not covered here; you remain solely responsible for verifying your eligibility for all items claimed, regardless of whether they are addressed in this Agreement.

3.1 Earned Income Tax Credit (EITC/EIC)

The EITC is a refundable credit for low-to-moderate income working individuals and families. Reference: IRS Publication 596.

Basic qualifying rules

To qualify for the EITC, you must:

• Have earned income

• Have investment income below the limit

• Have a valid Social Security number by the due date of your return (including extensions)

• Be a U.S. citizen or a resident alien all year

• Not file Form 2555, Foreign Earned Income

• Meet certain rules if you are separated from your spouse and not filing a joint tax return

• You cannot be a qualifying child of another taxpayer

• If claiming without a qualifying child, you must be at least age 25 but under age 65

Special qualifying rules

The EITC has special qualifying rules for:

• Military members

• Clergy members

• Taxpayers and their relatives with disabilities

If you’re unsure if you qualify for the EITC, use IRS’s EITC Assistant.

Qualifying Child Requirements (if claiming with children):

• Age Test: The child must be under age 19 at the end of the year, or under age 24 if a full-time student, or any age if permanently and totally disabled

• Relationship Test: The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them

• Residency Test: The child must have lived with you in the United States for more than half the year

• Joint Return Test: The child cannot file a joint return for the year (unless only to claim a refund)

• SSN Requirement: The child must have a valid SSN

Documentation Checklist:

• [ ] Birth certificates for qualifying children

• [ ] Social Security cards for all persons claimed

• [ ] School records showing address

• [ ] Medical records showing address

• [ ] Childcare provider records

• [ ] Landlord statement or lease agreement

• [ ] W-2s, 1099s, or other income documentation

• [ ] Records of self-employment income and expenses

3.2 Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), and Credit for Other Dependents (ODC)

Reference: IRS Schedule 8812 instructions.

Child Tax Credit (CTC) Requirements:

• Be under 17 at the end of the tax year.

• Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew).

• Not provide more than half of his or her own support for the tax year.

• Have lived with you for more than half the tax year.

• Be claimed as a dependent on your return.

• Not file a joint return for the year (or filed the joint return only to claim a refund of taxes withheld or estimated taxes).

• Be a U.S. citizen, U.S. National or a U.S. resident alien.

Credit for Other Dependents (ODC) Requirements:

For dependents who don’t qualify for the CTC (such as children age 17 or older, or other qualifying relatives):

• Be claimed as a dependent on your tax return.

• Be a U.S. citizen, U.S. national, or U.S. resident alien.

• Have a Social Security number, Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN).

Income Phase-Out Thresholds: 

• Single: $200,000

• Married Filing Jointly: $400,000

Documentation Checklist:

• [ ] Birth certificates proving relationship and age

• [ ] Social Security cards

• [ ] School enrollment records

• [ ] Medical records showing residency

• [ ] Custody agreements (if applicable)

• [ ] Proof of support provided

3.3 Head of Household (HOH) Filing Status

Reference: IRS Publication 501.

Eligibility Requirements:

• You are unmarried or considered unmarried on the last day of the year. See Marital Status, earlier, and Considered Unmarried, later.

• You paid more than half the cost of keeping up a home for the year.

• A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, your dependent parent doesn’t have to live with you. See Special rule for parent, later, under Qualifying Person.

“Considered Unmarried” Requirements:

• You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status.

• You paid more than half the cost of keeping up your home for the tax year.

• Your spouse didn’t live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if your spouse is temporarily absent due to special circumstances. See Temporary absences, later.

• Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Home of qualifying person, later, for rules applying to a child’s birth, death, or temporary absence during the year.)

• You must be able to claim the child as a dependent. However, you meet this test if you can’t claim the child as a dependent only because the noncustodial parent can claim the child using the rules described later in Children of divorced or separated parents (or parents who live apart) under Qualifying Child or in Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) under Qualifying Relative. The general rules for claiming a child as a dependent are explained later under Dependents.

Costs of Keeping Up a Home Include:

• Rent or mortgage payments

• Property taxes and insurance

• Utilities (electricity, gas, water)

• Food eaten in the home

• Repairs and maintenance

Costs NOT Included:

• Clothing, education, medical expenses

• Life insurance, transportation, vacations

• Rental value of home you own

Documentation Checklist:

• [ ] Rent receipts or mortgage statements

• [ ] Property tax statements

• [ ] Utility bills in your name

• [ ] Grocery receipts

• [ ] School records for qualifying person

• [ ] Medical records showing address

• [ ] Divorce decree or separation agreement (if applicable)

• [ ] Custody agreements

3.4 American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit (LLC)

Reference: IRS Publication 970, Form 8863 instructions.

You cannot claim an education credit if:

• You are claimed as a dependent on another tax return, such as your parent’s return.

• Your filing status is married filing separately.

• You (or your spouse) were a non-resident alien for any part of the year and did not choose to be treated as a resident alien for tax purposes (find more information in Publication 519, U.S. Tax Guide for Aliens).

• Your modified adjusted gross income (MAGI), is over $90,000 ($180,000 for joint filers).

American Opportunity Tax Credit (AOTC) Requirements:

• Be pursuing a degree or other recognized education credential in a post-secondary educational institution eligible to participate in a US Department of Education student aid program.

• Be enrolled at least half-time for at least 1 academic period* beginning in the tax year

• Not have finished the first 4 years of higher education at the beginning of the tax year

• Not have claimed AOTC or the former Hope Credit for more than 4 tax years; AOTC years do not have to be consecutive but do include years the Hope credit was claimed for the same student

• Not have a felony drug conviction at the end of the tax year

*Academic period can be semesters, trimesters, quarters or any other period of study such as a summer school session. Schools determine academic periods. For schools that use clock or credit hours and don’t have academic terms, the payment period may be treated as an academic period. 

Courses can be online.

Lifetime Learning Credit (LLC) Requirements:

• Be enrolled or taking courses at an eligible educational institution.

• Be taking higher education course or courses to get a degree or other recognized education credential or to get or improve job skills.

• Be enrolled for at least one academic period beginning in the tax year.

Academic Period can be semesters, trimesters, quarters, or any other period of study such as a summer school session. The school determines academic periods. For schools that use clock or credit hours and do not have academic terms, the payment period may be treated as an academic period.

Qualified Education Expenses:

• Tuition and fees required for enrollment

• Course-related books, supplies, and equipment (AOTC only, if required)

• NOT room and board, insurance, medical expenses, transportation

Documentation Checklist:

• [ ] Form 1098-T from educational institution

• [ ] Enrollment verification/class schedule

• [ ] Receipts for tuition payments

• [ ] Receipts for required books and supplies (AOTC)

• [ ] Proof student has not completed 4 years of higher education

3.5 Child and Dependent Care Credit

Reference: IRS Publication 503, Form 2441 instructions.

Eligibility Requirements:

• You (and your spouse if filing a joint return) have earned income.

• You paid qualified expenses for the care of a qualifying individual (child under 13, disabled spouse, or disabled dependent)

• This care was paid to enable you (and your spouse, if filing a joint return) to work or actively look for work.

• Your filing status is single, head of household, qualifying surviving spouse, or married filing jointly unless an exception applies to you.

• If married, both spouses must have earned income (unless one is a full-time student or disabled)

• You must identify the care provider (name, address, SSN or EIN)

• The care provider cannot be your spouse, the parent of your qualifying child (if child is under 13), your dependent, or your child under age 19

Documentation Checklist:

• [ ] Care provider’s name, address, and SSN or EIN

• [ ] Receipts or statements from care provider

• [ ] W-10 form from care provider (if available)

• [ ] Proof of your earned income

• [ ] Proof of work-related nature of expenses

• [ ] Birth certificate for child under 13

• [ ] Medical documentation for disabled persons

3.6 Premium Tax Credit (PTC)

Reference: IRS Form 8962 instructions.

Eligibility Requirements:

• You must have enrolled in a qualified health plan through the Health Insurance Marketplace

• You must not be eligible for coverage through an employer or government program (Medicare, Medicaid, CHIP, TRICARE, VA)

• Your household income must be between 100% and 400% of the federal poverty line (expanded under recent legislation)

• If married, you must file a joint return (with certain exceptions)

• You cannot be claimed as a dependent by another taxpayer

Documentation Checklist:

• [ ] Form 1095-A from the Marketplace

• [ ] Proof of household income

• [ ] Verification you were not eligible for other coverage

3.7 Self-Employment Income (Schedule C)

Reference: IRS Publication 334, Schedule C instructions.

Business vs. Hobby — IRS Test: The IRS uses the following factors to determine if an activity is a business (profit motive) or a hobby:

• The taxpayer carries out activity in a business-like manner and maintains complete and accurate books and records.

•  The taxpayer puts time and effort into the activity to show they intend to make it profitable.

• The taxpayer depends on income from the activity for their livelihood.

• The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation.

• The taxpayer has enough income from other sources to fund the activity

• Losses are due to circumstances beyond the taxpayer’s control or are normal for the startup phase of their type of business.

• There is a change to methods of operation to improve profitability.

• Taxpayer and their advisor have the knowledge needed to carry out the activity as a successful business.

• The taxpayer was successful in making a profit in similar activities in the past.

• Activity makes a profit in some years and how much profit it makes.

• The taxpayer can expect to make a future profit from the appreciation of the assets used in the activity.

Safe Harbor Guidance, not a hard rule: If you show a profit in 3 of the last 5 years (2 of 7 for horse activities), the IRS might presume you have a profit motive.

Documentation Requirements:

• [ ] Records of all income received

• [ ] Receipts for all business expenses

• [ ] Mileage logs (if claiming vehicle expenses)

• [ ] Home office measurements and calculations (if applicable)

• [ ] Bank statements showing business transactions

• [ ] Invoices and contracts

• [ ] Business licenses or permits

4. Documentation Requirements

Reference: IRS Pub 552

General Requirements:

• You must maintain adequate records to substantiate all items reported on your tax return

• Records should be kept for a minimum of 3 years from the date you file the return (we recommend 7 years)

• Records for property should be kept until the period of limitations expires for the year you dispose of the property

ProAdvisor CPA’s Rights:

• We may request documentation before preparing or filing your return

• We may refuse to claim credits or benefits if documentation is insufficient

• We may amend or decline to file returns if information provided is determined to be inaccurate

Acceptable Documentation Examples:

• Official government documents (birth certificates, Social Security cards)

• School records

• Medical records

• Landlord statements on letterhead

• Employer records

• Bank and financial institution statements

• Receipts and invoices

5. Taxpayer Certification

By engaging ProAdvisor CPA for tax preparation services, you certify that:

1. You have read and understand this Taxpayer Due Diligence Agreement

2. You meet all eligibility requirements for every credit, deduction, and filing status claimed on your return

3. All information you have provided to ProAdvisor CPA is true, correct, and complete to the best of your knowledge

4. You understand the penalties that may apply if you claim credits or benefits for which you are not eligible

5. You will provide documentation to support any claims upon request

6. You have NOT relied on ProAdvisor CPA to determine your eligibility for any credit or benefit

7. You will notify ProAdvisor CPA promptly if any information you have provided changes or is found to be incorrect

6. Contact Information and Acceptance

ProAdvisor CPA, SC 3430 E Sunrise Dr #180 Tucson, AZ 85718

Email: [email protected] Phone: 1-833-373-0780

BY SIGNING, SUBMITTING, AND/OR OTHERWISE ACCEPTING ANY FORMAL AGREEMENT WITH PROADVISOR CPA, SC (INCLUDING PROVIDING YOUR PAYMENT INFORMATION), YOU HAVE ACCEPTED THE TERMS OF THIS TERMS OF SERVICE AGREEMENT AS WELL AS ACKNOWLEDGED THAT YOU HAVE READ AND AGREE TO OUR “TERMS OF SERVICE AGREEMENT,” “TERMS AND CONDITIONS,” “PRIVACY POLICY,” AND “ACCEPTABLE USE POLICY.” 

Effective Date: January 1, 2026