Does your client need help dealing with an audit, tax debt, or other situation with the IRS? Filing Form 2848, is often the first step to resolving the issue. As a tax preparer, Form 2848 gives you the right to communicate with the IRS on behalf of your client. Here’s what you and your client should know about the form and the powers it grants.
What is Form 2848 used to report?
IRS Form 2848, Power of Attorney and Declaration of Representative, allows taxpayers to appoint someone to represent them before the IRS. The appointee must be qualified to practice on behalf of another person before the IRS. This authorization is not limited to the preparation and filing of tax returns but extends to various interactions with the IRS, such as responding to inquiries, setting up payment plans or offers in compromise, and resolving tax disputes and audits.
The form also grants the appointee access to the taxpayer’s confidential tax information. The taxpayer may choose to add certain rights to their representative such as the right to appoint other representatives or the right to disclose the taxpayer’s information to third parties.
What is a Power of Attorney?
There are several different types of Power of Attorney (POA) and several types of POA forms, and they can apply to medical, financial, and general situations. Form 2848 allows you to become your client’s third-party representative before the IRS and deals solely with POA for tax situations before the IRS.
If a client feels uneasy about granting POA to you as their tax preparer, be sure to specify that Form 2848 would not grant you power over any decision relating to their larger estate or finances, their medical situation, or other legal matters. This type of POA granted by Form 2848 deals solely with their tax situation before the IRS and their related tax documents.
Situations to use Form 2848
Typically, Form 2848 is used when a taxpayer has a complex tax situation that warrants professional help or when they are unable to communicate with the IRS themselves. Complex tax situations include audits, appeals, and significant tax debts. These situations typically require back-and-forth communication with the IRS, and having a POA allows the tax professional to handle communications seamlessly without constantly needing the signature or presence of the taxpayer.
Granting a tax professional POA is also helpful when the taxpayer is unable to or simply doesn’t want to communicate with the IRS because of a medical condition or other circumstances.
Who can be given power of attorney?
Only certain individuals can be given POA through Form 2848. These include:
Professionals with representation rights before the IRS
For the most part, anyone appointed Power of Attorney must be eligible to practice before the IRS. These individuals include attorneys, CPAs, IRS enrolled agents, enrolled retirement plan agents, and enrolled actuaries. The representative will need to supply their PTIN and their license number as an attorney, CPA, or enrolled agent.
Certain law, business, and accounting students who have not yet graduated and earned these credentials may also be appointed if they work for a Low-Income Tax Clinic or Student Tax Clinic Program.
Unenrolled tax preparers
Unenrolled tax preparers (i.e. those without any of the credentials above) may have limited representation rights before the IRS only if they have completed the IRS Annual Filing Season Participant program and only for clients for whom they have signed and prepared their return.
Immediate family members
The form does allow taxpayers to appoint individuals who are not qualified professionals as their representative but only if the individual is an immediate family member. Typically, if a taxpayer is appointing Power of Attorney, they are doing so because they need specialized tax help. Therefore, appointing a family member should typically only be done if the tax situation is not complex.
Conclusion
Form 2848 grants tax professionals Power of Attorney to represent their clients before the IRS, streamlining the communication process and allowing you to use your professional judgment to make certain decisions. If your client is facing a complex tax situation, granting you POA can help you resolve the situation more quickly with less stress.
Note: Form 2848 cannot be included electronically with a tax return. You can, however, access it through the TaxSlayer Pro software. For tips on choosing the best professional tax software for your business and more, download our Exclusive Resources for Tax Preparers today!
