Don’t be surprised if you’re required to answer additional questions this year if you claim the Child Tax Credit (CTC), Additional Child Tax Credit (ACTC), or American Opportunity Tax Credit (AOTC). For the CTC and ACTC credits, you may be asked how long your children lived with you over the past year, or whether they lived with an ex-spouse, relatives or other guardian.
If you are eligible for the AOTC, which is a credit to defray as much as $2,500 in higher education costs for you or your children, you will need to provide Form 1098-T from the college or university. You will also need receipts for related expenses.
You may also be asked to double-check your forms for incorrect Social Security numbers and dates of birth for the dependents on your return, as these are two common sources of error.
These common errors have helped to make the EIC and the other credits a major source of what the IRS calls “improper payments.” The agency estimates that of the $66 billion in EIC funds paid in 2015, nearly a quarter were collected by filers who didn’t qualify to receive them. As a result, the IRS is requiring tax preparers to ask more questions. Starting this year, tax preparers who don’t document their compliance with these new requirements could face fines of up to $510 per return.
If you get more questions than usual or are asked for additional documents, be aware that it’s just a new requirement.