Choice "D" is correct. The due diligence requirements for the earned income credit address eligibility checklists, computation worksheets, record retention, and also reasonable inquiries to the taxpayer.Choice "b" is incorrect. The penalty for failure to comply with the IRS' "due diligence" requirements with respect to determining a client's eligibility for the earned income credit is a penalty of $100 for each such failure, not a minimum of 2 years imprisonment in a designated Federal Correctional Institution.Choice "a" is incorrect. The penalty for failure to comply with the IRS' "due diligence" requirements with respect to determining the amount of the earned income credit is a penalty of $100 for each such failure, not $1,000 for each such failure. This is the same penalty as that for failure to comply with the "due diligence" requirements with respect to determining a client's eligibility for the earned income credit. Choice "c" is incorrect. The statement is necessary but not sufficient. The penalty for failure to be diligent will not apply if the tax return preparer can demonstrate that the preparer's normal office procedures were reasonably designed and routinely followed to ensure due diligence compliance and the failure to meet the due diligence requirements was isolated and inadvertent. Both aspects are necessary.