Form 2848, Power of Attorney and Declaration of Representative, typically is seen as straightforward in preparation and filing. What the authors have learned, however, is that many practitioners find that the IRS does not process their Form 2848 filings and returns them because the form was prepared or filed incorrectly.
The power of attorney (POA) is the written authorization for an individual to receive confidential information from the IRS and to perform certain actions on behalf of a taxpayer. If the authorization is not limited, the individual can generally perform all acts that a taxpayer can perform except negotiating a check.
Publication 947, Practice Before the IRS and Power of Attorney, says the following acts can be performed by attorneys, CPAs, and enrolled agents:
- Represent taxpayers before any IRS office;
- Sign an offer or a waiver of restriction on assessment or collection of a tax deficiency, or a waiver of notice of disallowance of a claim for credit or refund;
- Sign a consent to extend the statutory time period for assessment or collection of tax; and
- Sign a closing agreement.
The representative named in a POA cannot sign an income tax return unless:
- The signature is permitted under the Internal Revenue Code and the related regulations (see Regs. Sec. 1.6012-1(a)(5)); and
- The taxpayer specifically authorizes this in its POA.
The regulation permits the authorized representative to sign a taxpayer's return if the taxpayer is unable to sign the return due to:
- Disease or injury;
- Continuous absence from the United States (including Puerto Rico) for a period of at least 60 days before the date required by law for filing the return; or
- Other good cause if specific permission is requested of and granted by the IRS.
When a representative signs a return, it must be accompanied by a POA authorizing the representative to sign the tax return.
In the authors' work with other practitioners and various state societies, several recurring items have come to light that the IRS encounters with Form 2848 filings that do not allow for the processing of the form by the relevant IRS service center. Examples include:
- The space for the taxpayer identification number (TIN) permits only 12 characters. If more characters are included, the IRS will not process the form. Note the title of the box is plural number(s), and a TIN such as a Social Security number or an employer identification number uses 11 spaces, so if a second identification number is included, the IRS will not process the form.
- The space for the Centralized Authorization File (CAF) number permits only 12 characters. Form 2848 is processed by an IRS computer, which treats spaces, dashes, and similar notations as characters.
- The date of the taxpayer's signature must be no later than the date of the representative's signature. This is a sensitive issue with the IRS, and it will not process a POA if a practitioner's signature is dated prior to the taxpayer's. The taxpayer's signature authorizes the practitioner to represent him or her, and the practitioner's signature signals his or her acceptance of the grant of authority. This must be evident by the taxpayer signing before the representative listed as the POA.
- Only the latest version of Form 2848 should be used. The IRS may not process a POA prepared on an outdated version of Form 2848.
- Despite what the form's instructions say, the IRS has indicated that, when a practitioner is requesting representation for multiple years, the form should not include dashes, e.g., 2011-2013. Each year must be stated separately as follows: 2011, 2012, 2013. The IRS will not process a POA that includes more than three years. If a POA needs to be filed for more than three years, multiple forms need to be filed at the same time.
- A POA can be prepared up to two years in advance, counting from the last year of actual filing. For example, a POA executed before the filing of the client's 2015 tax return could include the tax years 2014, 2015, and 2016, but no further ahead.
- One needs to be careful when preparing POAs for business entities. If a Form 1120, U.S. Corporation Income Tax Return, is under exam, then the payroll returns may ultimately be involved as well. Therefore, the POA should list the Forms 941, Employer's Quarterly Federal Tax Return, along with the Forms 1120.
- POAs for payroll returns need to list each Form 941 by quarter. The IRS will not accept a "blanket" POA for all the payroll returns in one tax year. The payroll returns, quarter by quarter, need to be detailed on Form 2848.
Corporate taxpayers need to be aware of the Form 2848 rules as they may apply to corporate employees. Section 1(b) of Form 4764, Communications Agreement, LB&I Examination Plan, allows a corporate taxpayer to designate one or more employees to:
- Discuss tax matters;
- Provide and receive information; or
- Receive and discuss adjustments (or a combination of these three).
Form 4764 operates as an authorization for an employee to receive tax information similar to the Form 8821, Tax Information Authorization. The Office of Professional Responsibility in Bulletin 2014-12 indicated that Form 4764 does not replace Form 2848. When an employee advocates, negotiates, disputes, or does anything that goes beyond mere delivery of facts, general explanation, or acceptance of materials, the employee is engaged in representation and the corporation needs to execute a Form 2848 authorizing the employee to "practice" before the IRS. A duly elected officer or director of the corporation, as identified in the corporate articles or bylaws, must sign the Form 2848.
Filing a Form 2848 does not revoke a Form 8821 that is in effect.
The CAF is the computer file system containing information regarding the authority of individuals appointed under POAs or persons designated under the tax information authorization system. This system gives IRS personnel quicker access to authorization information.
Executed Forms 2848 need to be filed with the Memphis, Tenn., Ogden, Utah, or Philadelphia service centers to be processed within the CAF system, depending on where the taxpayer resides. The instructions for Form 2848 detail the filing addresses along with the residency requirements for the specific service center. Filing Form 2848 with the incorrect service center is another instance when the IRS will not process a POA.
Practitioners need to be certain to follow the rules discussed above along with filing the POA with the correct service center so that the IRS will actually process their form.
Karl Fava is a principal with Business Financial Consultants Inc. in Dearborn, Mich. Arthur Auerbach is a tax practitioner in Atlanta. Mr. Fava and Mr. Auerbach are both members of the AICPA IRS Advocacy & Relations Committee. For more information about this column, contact firstname.lastname@example.org.