CARL WATTS & ASSOCIATES

July 15, 2013

www.carlwatts.com
office@carlwatts.com
Washington DC
 tel/fax 202 350-9002
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There are numerous reasons why you should have your own tax professional; either as an individual or as a business owner, whether you get a tax audit notice from the IRS or you have a more complex financial situation, hiring a tax professional is always the best option. A tax pro can save you time and money, provide audit assistance or just respond to IRS letters on your behalf when necessary.

The IRS recognizes the taxpayers right to name an agent to act on their behalf in connection with a federal tax matter, as long as your representative is authorized to practice before the IRS.

The IRS defines an authorized practitioner as an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or an enrolled retirement plan administrator.

You can allow the IRS to discuss your tax return information with a third party by completing the Third Party Designee section of your tax return, often referred to as “Check Box” authority. This will allow the IRS to discuss the processing of your current tax return, including the status of tax refunds, with the person you designate. This authorization is limited to matters concerning the processing of the tax return containing the completed Third Party Designee section.

Form 8821 can be used to allow discussions with third parties and disclosure of information to third parties on matters other than just the processing of your current tax return. The Form 8821 cannot be used to name an individual to represent you before the IRS.

In certain circumstances, the IRS can also accept oral authorization from taxpayers to discuss their confidential tax return information with a third party. For example, if you bring a third party to an interview with the IRS or involve a third party in a telephone conversation with the IRS, the IRS can disclose your confidential tax return information to that third party after confirming your identity and the identity of the third party, as well as confirming with you the issue or matters to be discussed to enable the third party to assist you and determine what confidential tax return information the IRS needs to disclose.

If you want someone to represent you before the IRS, you must submit a power of attorney with the IRS office where you want your representative to act for you.

The Power of Attorney and Declaration of Representative Form 2484 is a two pages form which allows you to hand over complete control to an agent or to allow the agent to only perform certain duties on your behalf.

If authorized on a power of attorney, CPAs, attorneys, and enrolled agents, enrolled actuaries, and enrolled retirement plan administrators are entitled to:

  1. Practice anywhere in the country,

  2. Sign consents, reports, waivers, and claim disallowance reports,

  3. Represent taxpayers in Appeals,

  4. File a written response to a 30-day letter,

  5. Sign returns if specifically authorized,

  6. Receive and inspect confidential tax return information,

  7. Discuss proposed adjustments, and

  8. Receive (but not negotiate) a refund check for the taxpayer.

A paid preparer is required, by law, to sign your tax return and fill in the preparer area of the form. Although the preparer signs the return, you are responsible for the accuracy of every item on your return.

While having a power of attorney issued for a representative allows them to sign documents on your behalf, it is still best practice to have you sign all the documents yourself.

Your signature on Form 2848 allows the individual or individuals named to represent you before the IRS and to receive your tax information for the matters and tax years or period specified on the Form 2848.

Form 2484
Power of Attorney
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The power of attorney must provide the name and mailing address of the represented party; identification number of the represented party (i.e., social security number and/or employer identification number); the name and address of the recognized representative(s); description of the matter(s) for which representation is authorized ; a clear expression of the taxpayer’s intention concerning the scope of authority granted to the recognized representative; and Declaration of Representative.

You may list any tax years or periods that have already ended as of the date you sign the power of attorney. However, you may include on a power of attorney only future tax periods that end no later than three years after the date the power of attorney is received by the IRS. The three future periods are determined starting after December 31 of the year the power of attorney is received by the IRS.

The power of attorney will be recognized after it is received, reviewed, and determined by the IRS to contain the required information.

A new IRS power of attorney form or Tax Information Authorization form will normally overrule and revoke a previous form, unless the new form explicitly states that it does not, which requires checking a box and attaching the old not-revoked form. You may also revoke power of attorney without filing a new form in two ways: you can file a copy of the old power of attorney document with "Revoke" written on it, or you may send a revocation statement to an IRS office.

Because of their special relationship with a taxpayer, certain individuals can represent the specified taxpayers before the IRS, provided they present satisfactory identification and, except in the case of an individual described in (1) below, proof of authority to represent the taxpayer.

  1. An individual. An individual can represent himself or herself before the IRS and does not have to file a written declaration of qualification and authority.
  2. A family member. An individual can represent members of his or her immediate family. Immediate family includes a spouse, child, parent, brother, or sister of the individual.
  3. An officer. A bona fide officer of a corporation (including a parent, subsidiary, or other affiliated corporation), association, or organized group can represent the corporation, association, or organized group. An officer of a governmental unit, agency, or authority, in the course of his or her official duties, can represent the organization before the IRS.
  4. A partner. A general partner may represent the partnership before the IRS.
  5. An employee. A regular full-time employee can represent his or her employer. An employer can be, but is not limited to, an individual, partnership, corporation (including a parent, subsidiary, or other affiliated corporation), association, trust, receivership, guardianship, estate, organized group, governmental unit, agency, or authority.
  6. A fiduciary. A fiduciary (trustee, executor, personal representative, administrator, receiver, or guardian) stands in the position of a taxpayer and acts as the taxpayer, not as a representative.

Since your tax return information is confidential, the IRS and your tax preparer and/or representative cannot disclose that information to anyone else without your explicit consent. The tax code has established a level of privilege for communications between you and your appointed representative. The privilege is similar to confidentiality enjoyed by an attorney-client relationship when you are talking to a tax practitioner related to any noncriminal tax matters dealing with the IRS or in a civil action by the United States in court. This privilege applies to any attorney, certified public accountant, enrolled tax agent, enrolled actuary or appraiser. Exceptions to this confidentiality apply to information disclosed to someone preparing your return, written communication regarding a tax shelter and information available from nonprivileged avenues.

When you choose your tax representative, make sure you check their qualifications, reputation, history and service fees. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes.

The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

Keep in mind that being smart about your taxes also means being smart about who prepares them for you!