4 ways to authorize a tax representative
Monday, September 26, 2022
If you must have follow-up discussions with the Internal Revenue Service, one of the rights guaranteed under the Taxpayer Bill of Rights is the option to hire an authorized representative.
That can be anyone, from a relative to a paid tax professional. However, in some cases, your representative must be authorized to practice before the IRS.
You also need to make sure to officially designate your chosen tax representative, or as it's known in tax-speak, third-party authorization. That's done by filing a written declaration with the IRS — Form 2848 (more on this later) can be used here — stating that the person is authorized and qualified to you in your tax matters.
Finally, in determining who gets to speak to the IRS on your behalf, you need to be aware of the available types of third-party authorizations. Following are overviews of four of the most common third-party designations.
Power of Attorney: This designation allows the named person to represent you in tax matters before the IRS. The representative must be an individual authorized to practice before the IRS. In most cases, this is an attorney, certified public accountant (CPA), or enrolled agents (EA). Under special and limited circumstances, unenrolled return preparers, family members, employees, and students can be granted power of attorney to discuss your tax matters.
Power of Attorney must be authorized with your signature, either with an actual John Hancock or electronically.
If you go the e-route, certain tax professionals can submit a power of attorney authorization request to your online account. There you can review, electronically sign, and manage authorizations.
Or you can complete Form 2848 (excerpt shown below; more in the form's instructions), and submit it online, by fax, or mail it.
Tax Information Authorization: With this representation option, you appoint anyone to review or receive your confidential federal tax information for the type of tax for a specified period. With an official tax information authorization, your designee can —
- Review and/or receive your confidential information verbally or in writing for the tax matters and years/periods you specify.
- Disclose your tax information for a purpose other than resolving a tax matter. This is commonly used, for example, in income verification circumstances required by a lender or a background check.
You can find more on tax information authorization on Form 8821 (excerpt shown below) and its instructions.
Third-Party Designee: This person is designated on your tax return to discuss that specific tax-year filing with the IRS. You can authorize your tax preparer, a friend, a family member, or any other person you choose as a third-party designee.
This authorization is simple. You just need to check the "yes" box in the Third Party Designee section of Form 1040, highlighted on the tax return's page 2 excerpt below, and enter the requested information. More on this process is found on page 63 of the 1040's instructions.
Your third-party designee also can —
- Give the IRS any information that is missing from your tax return;
- Call the IRS for information about the processing of your return or the status of your refund or payment(s);
- Receive copies of notices or transcripts related to your return, upon request; and
- Respond to certain IRS notices about math errors, offsets, and return preparation.
Your third-party authorization is maintained in your tax record so that IRS assistors can verify your permission to speak with your representative about your private tax-related information.
Note, however, that third-party authority is limited to the specific tax form, time period of the return, and issues related to processing that specific return.
Oral Disclosure: In this case, you verbally authorize the IRS to disclose your tax info to a person you bring into a phone call or meeting with the IRS about a specific tax issue
In this case, you authorize the IRS to disclose your tax info to a person you bring into a phone call or meeting with the IRS about a specific tax issue. This is a temporary situation. Your oral authorization of a representative is limited to the conversation in which you provide the authorization.
After you state that you wish to authorize oral disclosure of your tax information to a third party during the conversation with the IRS, the tax agency employees will confirm the following three things —
- Your identity and the identity of the third party,
- The issues or matters to discuss, and
- The tax return information we may disclose to allow the third party to assist you.
Unless you state otherwise, your oral authorization is automatically revoked once the conversation has ended. That means that the IRS cannot subsequently discuss your confidential tax return information with that person, or any third party, until you provide the agency with a new authorization.
If you think that continued communication with your designated third party will be necessary, consider granting that person the previously discussed Tax Information Authorization.
You also might find these items of interest:
- Picking a tax pro
- Where to find your perfect tax preparer
- 5 things to check when hiring a tax preparer
- Don't ignore that IRS letter and nine other tax notice tips
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