Suppose you’ve heard of a power of attorney before or had to execute one. In that case, you will know that these documents are usually reserved to grant another person the right to represent you, in a general or limited capacity, for a given period. The IRS has its form similar to a power of attorney, called Form 2848, Power of Attorney and Declaration of Representative.
However, this form functions only within the context of taxpayer representation and IRS-related tax matters. It is often necessary when a tax professional must represent their client before the IRS. But not every interaction between the IRS and a third-party tax professional requires using Form 2848.
To simplify information requests and allow tax professionals to access their client’s tax accounts easier, the IRS offers IRS Form 8821, Tax Information Authorization.
What Is Form 8821?
Form 8821 is filed by taxpayers authorizing the listed individuals, corporations, firms, organizations, or partnerships to receive and review specific details of your confidential tax information, sorted by tax type and respective dates. Form 8821 does not give a tax professional a blanket check to review all your information.
Instead, it authorizes all the information you list on the form. For example, if you are hiring a tax attorney to represent you in the case of an audit from last year’s income tax return, you would fill out a Form 8821 specifying that you are granting your attorney the authority to access information related to your income tax return for the tax year 2021.
Form 8821 is not equivalent to an IRS power of attorney. Your respectively chosen tax professional may access your information before representing you before the IRS, meaning they may want to review your case before they need a Form 2848 to act within any official capacity before the IRS. Here are some of the things a Form 8821 does allow your attorney or chosen tax professional to do:
- Review where payments were made to a tax account.
- Obtain general tax account information.
- Receive transcripts of the specific tax return in question.
- Confirm filing status.
- Revoking existing authorization is essential when one wants to close a Form 8821 or authorize a different tax professional.
When Do You Need to File Form 8821?
Let’s say your tax representative wants to know more about your case before they can take you on fully. A Form 8821 may be a part of that process. Form 8821 will also help any given tax professional receive all notices related to your return. This gives your tax representative more time to work on your specific tax issue.
If, for example, you are in debt due to a discrepancy with this year’s return, giving your attorney authorization to review any information attached will also ensure that they receive a copy of all notices sent your way, sometimes even receiving them before you do. Form 8821 is also of greater use to tax firms and organizations.
Form 2848, for example, grants a single individual the right to act as their client’s agent before the IRS. But Form 8821 allows a taxpayer to name an entire organization or business, giving a whole firm the right to access their tax information and build their case. This may be especially useful for more significant matters that require the attention of multiple tax professionals and paralegals.
Form 8821 vs. Form 2848
There are a few critical differences between Forms 8821 and 2848 worth mentioning, aside from the points that have already been expanded upon. For one, Form 8821 may be optionally revoked in an automatic timeframe, meaning your authorization to review a client’s information can run out.
Form 2848, on the other hand, must be manually revoked. This means a tax professional can technically be authorized to represent a client long after their case has been resolved. Your tax professional may request that you revoke that authorization after the end of your engagement.
Form 8821 is usually seen as low commitment and required for most interactions between a tax professional and their client. Form 2848, on the other hand, is often optional – you may want a tax professional’s advice but may not necessarily need them to represent you in any official capacity.
In such cases, you will still need Form 8821 to give them access to crucial information required to formulate sound counsel. There are also several strong similarities, of course. For example, any given taxpayer investigation may require the use of several Forms, 8821 and 2848, to authorize multiple different people as agents or to expand the number of tax items that your respective representatives may be able to reference and examine.
What Information Do You Need for Filing?
Form 8821 itself is relatively straightforward. You will need:
- Your basic taxpayer information, including your taxpayer identification number and specific contact details.
- The name and address of all respective designees, along with their:
- PTIN
- CAF number
- Telephone number
- Then, you will need to provide details on the specific tax information they are authorized to review, meaning:
- The type of tax information (estate, income, gift, employment, etc).
- The tax form number (Form 1040 for an individual income tax return, for example).
- The years or period applicable.
- Specific tax details.
After completing Form 8821, you must sign and send the document to the IRS. The easiest way to do so is online. Log into your IRS account on the official IRS government website only, and upload a completed Form 8821 through the IRS’s web portal. Wait for a confirmation email from the IRS, then inform your tax representative. Do not send the same form to the IRS twice, whether once by mail and once by email or twice online.
Why You Should Work With a Tax Expert
Taxes are not always easy. Whether it’s something as simple as wanting an experienced tax professional’s opinion on how to minimize your tax liability and improve your returns to seeking representation due to tax debt or an unexpected audit, there may come the time when you will need help dealing with the IRS’ whims and conditions. When that time comes, it helps to be prepared and know which forms you will need at hand to begin cooperating on your case.