Due Diligence Requirements for Head of Household Filing Status

This article was last edited on December 28, 2018. For more information about determining HoH eligibility, read our support article: Head of Household Filing Status.

Paid tax return preparers must satisfy additional due diligence and record keeping requirements on 2018 tax returns that are filed as Head of Household. The new requirement, brought on by the Tax Cuts and Jobs Act, requires paid preparers to ask an additional question during preparation of a taxpayer’s 2018 return. Additionally, paid preparers must keep adequate records documenting their due diligence findings. Information on what records must be kept, and for how long, can be found in the Form 8867 Instructions under Document Retention.

The draft version of Form 8867, which was released on July 26th, contains a new HOH column and a new section, Due Diligence Questions for Claiming HOH. Failure to keep adequate records in determining whether your clients can file using Head of Household could result in a $520 fine for each failure to comply.

The new question asks:

Have you determined that the taxpayer was unmarried or considered unmarried on the last day of the tax year and provided more than half of the cost of keeping up a home for the year for a qualifying person?

To file as head of household, a taxpayer must pass three tests: the marriage test, the qualifying person test and the cost of keeping up a home test. In order to avoid penalties for failing to meet the new due diligence and record keeping requirement, review IRS Form 886-HOH – Supporting Documents to Prove Head of Household Filing Status.

TaxSlayer Pro contains a Head of Household Worksheet that can be used to guide you through asking the right questions when determining eligibility for Head of Household filing status. To use the worksheet when Head of Household is selected as the filing status, from the main menu of the program select 7. Configuration > 8. Advanced Configuration > 6. Use Head of Household Worksheet.

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