When deciding to work with a tax professional, you must grant the proper authority to not only represent you in tax matters but also authorize the retrieval of tax information prudent to a case or as part of a series of simple tax preparation requirements. This is where Forms 2848 and 8821 come in. One of the main questions people ask is; what is Form 2848 and how does it differ from Form 8821?
While similar, they each play a vastly different role when it comes to authorizing what other people can do for you, and it’s important to keep these two apart. Paying a CPA or an enrolled agent a retainer or officially becoming their client isn’t enough. You must inform the IRS of a given agent’s authorization to either act on your behalf or review confidential tax information on your account.
What Is Form 2848?
Form 2848 is the Power of Attorney and Declaration of Representative and authorizes an individual to act as an agent on behalf of you, the principal, via a power of attorney. It is like other power of attorney documents, such as those drafted to give a relative or a lawyer authority to buy a home in your name in another state in preparation for a move, or those durable powers of attorney signed to give someone you trust the ability to make important medical decisions in your name should you be incapacitated. The main difference between a regular power of attorney and Form 2848 is that it solely authorizes representation before the IRS.
No other organization, agency, or individual is required to recognize this authority. Furthermore, the matters governed by Form 2848 are limited to tax-related issues, ranging from litigation to debt resolution, on matters such as payroll or excise tax debt, civil penalties, income taxes, and so on. Lastly, Form 2848 is limited to the tax types explicitly specified on the form, as well as the tax years specified. The form can go back as far as necessary to capture all historical periods of liability, but can only go forward to include three years from the date it is signed. Form 2848 consists of:
- Taxpayer information.
- Key information on the respective representatives authorized through the form.
- Acts authorized by the filer.
- Additional acts authorized by the filer.
- Specific acts not authorized by the filer.
- Retention or revocation of a previous power of attorney involving the same tax matters.
- The filer’s signature.
- The Declaration of Representatives was signed and dated by the representative(s).
In general, Form 2848 only authorizes tax professionals, including CPAs, enrolled agents, and tax attorneys. Exceptions can be made for relatives (only to represent you in front of select IRS employees and customer-facing officers), students working for a qualified Low Income Taxpayer Clinic, and students working through the Student Tax Clinic Program.
What Is Form 8821?
Form 8821 is the Tax Information Authorization, and is needed whenever sensitive tax information must be accessed by anyone other than yourself. Aside from tax professionals, Form 8821 may also be designated to entire firms, organizations, corporations, or partnerships. To fill out Form 8821, you must provide:
- Taxpayer information.
- Information on each of the designees.
- The tax information to be divulged, is identified by the type of information, tax form number, the relevant period, and if necessary, specific matters.
- Whether or not the tax information authorization is for a specific use is recorded on the Centralized Authorization File.
- Retention or revocation of prior tax information authorizations provided for the same topics.
- The filer’s signature.
Whereas Form 2848 establishes representation, Form 8821 is a request for authorization to review tax information.
Providing Authorization Online
The IRS has recently simplified the process of both gaining authorization over certain tax information and accepting requests for personal representation, through a taxpayer’s online tax account. By logging into your tax account via your Social Security Number or your taxpayer Identity Protection PIN, you can accept and authorize requests by tax firms and tax preparation services made through Forms 8821 or 2848 and review the implications for these requests.
For example, we have established that tax firms might utilize Form 8821 to gain limited authority over a potential client’s tax information to further review their case and determine whether they are eligible for personal representation. Through the new simplified system, a potential client can simply log into their tax account after the initial interview with their prospective representative and accept a request for tax information and wait on their response. There’s a caveat to this method, however – it is limited in scope.
As a tax firm, your ability to represent a client or review their tax information and ask for authorization through their IRS tax account is limited to matters surrounding:
- Civil penalties.
- Split spousal assessment and shared-responsibility payments.
- Innocent spouse relief.
- Form 1040, U.S. Individual Income Tax Return, and other income tax matters.
For anything beyond this, a tax firm or tax attorney must request a paper filing of Forms 2848 or 8821 for further information or representation.
How Long Are Forms 2848 and 8821 Valid For?
A power of attorney established through paper-filed Form 2848 is indefinite until revoked, but will only ever cover the tax types and periods specified on the signed form. If a paper filing of Form 2848 is made and an individual or corporation is named a personal representative of the filer, that representation on established tax matters (limited as per the form) lasts until the filer files another Form 2848, with the original attached, while writing “REVOKE” in large, legible writing across the top of the form, and a fresh signature and date. The filer can also send the original form back in with the “REVOKE” amendment, signing and dating their revocation underneath the notation.
The time limit for tax information can be defined within Form 8821, under field (c), Year(s), or Period(s). The maximum limit for Form 8821 to remain valid is seven years. This means that you can define the period through which the designee can review your tax information (for example, the last ten years), and they will maximally be able to retain access to that information for seven years after the filing date. Similar to Form 2848, you can also revoke Form 8821 manually by refiling for revocation. Finally, the authority granted through online authorization via a taxpayer’s IRS account only lasts three years from the date of the request.
Forms 2848 and 8821 are central to working with tax professionals to resolve your problems, whether you’re seeking the help of a CPA to accurately assess your tax liability and improve your returns and potential tax savings or need the help of an experienced tax attorney to represent you in a complex case against the IRS, and an error on their part. Knowing the difference between these two forms and the roles they play for both you as a filer and any designees you involve in your tax situation is important – especially if you plan to name a power of attorney for someone other than a tax professional, such as a close relative, to represent you for tax matters in front of the IRS should you be incapacitated.