At the bottom of most federal income tax returns is the question, “May the IRS discuss this return with the preparer shown below?” Many preparers assume that checking the box next to this question gives the preparer a power of attorney over all matters related to that tax return. While checking the box gives the preparer a limited power of attorney to discuss the return with the Service, the preparer does not have a power of attorney over all matters related to the tax return.
Full Power of AttorneyTo grant a full power of attorney, a taxpayer must file Form 2848, Power of Attorney and Declaration of Representative. When a taxpayer submits Form 2848 to the IRS, the taxpayer authorizes the representative to perform any and all acts that the taxpayer may perform, including signing consents to extend the time to assess tax and executing waivers agreeing to a tax adjustment. The representative has the right to discuss with the Service all matters related to the taxes for which the taxpayer has granted the power of attorney.
The taxpayer may also authorize the representative to substitute another representative, to delegate authority to another representative, or to allow the IRS to disclose the tax return or tax return information to a third party. (The taxpayer must spell out these specific authorizations on line 5 of Form 2848.) In limited circumstances, the taxpayer may even grant the representative authority to sign the taxpayer’s tax return. Once the taxpayer grants a power of attorney using Form 2848, that power continues indefinitely unless the taxpayer revokes the power at a later date.
Due to the authority that a taxpayer may grant to the representative, Form 2848 limits who the taxpayer may grant a power of attorney. A taxpayer may only grant a power of attorney to an attorney, a CPA, an enrolled agent, an officer or full-time employee of a taxpayer entity, a family member, an enrolled actuary, or an unenrolled return preparer.
An unenrolled return preparer is an individual other than an attorney, certified public accountant, enrolled agent, or enrolled actuary who prepared and signed the return in question. A taxpayer may only grant an unenrolled preparer the authority to represent the taxpayer before an IRS customer service representative, revenue agent, and/or examination officer regarding the return that the unenrolled preparer prepared. An unenrolled preparer may not:
- Represent the taxpayer before other offices of the Service, such as Collection or Appeals (including the Automated Collection System unit);
- Execute closing documents;
- Extend the statutory period for tax assessments or collection of tax;
- Execute waivers;
- Execute refund claims; or
- Receive refund checks.
Limited Power of AttorneyThe power of attorney granted to the preparer by checking the box on the tax return is much more limited than the power of attorney granted by Form 2848. Checking the box authorizes the IRS to call the preparer to answer any questions that may arise during the processing of the return. It also authorizes the preparer to:
- Give the Service any information that is missing from the return;
- Call the Service for information about the processing of the return or the status of the refund or payment(s);
- Receive copies of notices or transcripts related to the return, upon request; and
- Respond to certain IRS notices about math errors, offsets, and return preparation.
ConclusionWhile checking the third-party designee box on the return is an easy way for a taxpayer to authorize another person to act on his or her behalf, doing so only gives that person limited authority (compared to a traditional power of attorney) to act on the taxpayer’s behalf, and the authority granted is of limited duration. Checking the box on the return does not authorize the preparer to receive any refund check, bind the taxpayer to anything (including any additional tax liability), or otherwise allow the preparer to represent the taxpayer before the IRS for any other purpose. This authorization automatically ends no later than the due date, without regard to extensions, of the tax return for the year following the year of the tax return in question. Thus, if the box is checked on Form 1040 for 2007, the authorization expires on April 15, 2009, even if the 2007 tax return was not filed until October 15, 2008.
John L. Miller is a faculty instructor at Metropolitan Community College in Omaha, NE. Marc Zwick is a member at Zwick & Steinberger, P.L.L.C., in Southfield, MI. The editor and contributors are all members of the AICPA Tax Division’s IRS Practice and Procedures Committee.
For further information about this column, contact Mr. Miller at email@example.com.