IRS Improves Taxpayer Service with Online Power of Attorney Authorization
Power of Attorney may seem like a complicated legal term, but it is simply an authorization for someone to act on your behalf. For tax purposes, individuals may want to provide their tax professional with power of attorney so they can handle certain tax issues.
On July 19, 2021, the IRS launched a new feature that allows taxpayers digital control over who can represent them and view their records.
The update will allow taxpayers to authorize their tax professional power of attorney online. It will provide the authorized party with access to online tax documentation. This will bring America closer to a fully integrated tax system that will be beneficial for everyone involved.
How It Works
To initiate power of attorney, tax professionals must go to the new Tax Pro Account on IRS.gov to digitally initiate a POA or TIA. The request, which is basically a simplified version of Forms 2848 and 8821, will then appear on the taxpayer’s Online Account so they can approve or reject the request with a click of a button.
The new feature will speed up processes, eliminating the need for the IRS to review requests via fax and email or online submission of forms 2848 or 8821. Taxpayers’ identities are already verified through the system so they can just check a box and provide an e-signature to approve requests. However, if they are unable to verify their identities when setting up online accounts, they must rely on fax, email or form submission.
In time, the IRS is planning to update and improve the tool to increase options for electronic functionality.
Currently, the digital authorization process is available for individual taxpayers with United States addresses only. It is not available for businesses, entities and taxpayers with foreign addresses.
Individuals who use the system must be in good standing with the IRS and must have an assigned CAF number before making requests. Tax professionals looking to initiate requests must enter their personal information and their client’s information exactly as it appears on their tax records to gain access.
The IRS has also created two e-posters that tax professionals can use to educate their clients about the new service. These are as follows:
- Publication 5533: Why You Should Create and IRS Online Account
- Publication 5533-A: How to Submit Authorizations Using Tax Pro Account and Online Account
How Can a Tax Professional with Power of Attorney Help Me?
If you provide IRS power of attorney to your tax professional, they will be able to assist you with the following matters.
- Research your IRS account to help you understand notices, verify good standing and address existing compliance issues.
- Get copied on notices the IRS sends so they can alert you if you need to take action. You can also allow them to respond to notices and inquiries on your behalf.
- Set up agreements between you and the IRS including monthly payment plans and agreements on audit results.
- Represent you in legal tax related matters such as arguing the outcome of an audit or collection matter.
- Deal with IRS Taxpayer Advocate Service.
- Appeal disputes.
Who Can Be Granted Power of Attorney?
A family member may represent you in certain matters, but if you are dealing with the IRS, it’s advisable to grant POA to a tax professional such as a CPA, an enrolled agent or an attorney. An unlicensed professional may also be able to offer limited help, especially if they prepared the return in question.
You Can’t Authorize POA by Checking a Box on Your Return
When filling out your tax return, you may notice that you have the option to check a box to give someone the authority to speak to the IRS about your return. This is called third party designee and it is not the same thing as Power of Attorney. It merely directs the IRS as to who they should be speaking to if they have any issues processing the return.
There is Limited Authorization
You can also authorize someone for limited power of attorney. For example, you may allow your tax professional to receive and review IRS documents without permitting them to advocate on your behalf.
In the past, taxpayers used form 8821 to provide limited authorization. The new digital system may also allow taxpayers to limit authorization during the approval process.The updates the IRS have made will make life easier to taxpayers, tax professionals and the IRS allowing the staff to focus on more pressing duties. It is another example of how technology is making processes more convenient for everyone.