IRS approves third-party checkbox initiative.

• Author: Oveson, Val W.
• Position: Tax preparers

Beginning with the 2001 filing season, with the "check of a box," paid preparers who have their clients' permission will be able to work directly with the IRS to resolve tax return processing issues (IR-2000-23). The checkbox will be available for all Forms 1040 (except Telefile).

Currently, practitioners and other paid preparers must file Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Third Party Authorization Disclosure, to discuss any details of a return, including how it was prepared, payment and refund issues and mathematical errors. Once the new initiative is implemented, a taxpayer's designee will be permitted to speak directly to IRS Customer Service Representatives over the phone to provide requested information and answer questions.

Each year, approximately 8 million pieces of correspondence specifically about processing tax returns are sent out during tax season. Up to 90% of the issues raised in these letters could be resolved over the telephone with a paid preparer, drastically reducing the correspondence burden on taxpayers and the Service.

Further, it is estimated that over a million hours could be saved with the elimination of correspondence between the IRS and preparers by allowing the Service to deal directly with the designees. Taxpayers spend an estimated 75,000 hours preparing Forms 8821. Because issues (such as processing disputes) will be resolved immediately, additional time will be saved in eliminating unnecessary post-filing contacts. It is estimated that over a million taxpayers will use the checkbox option instead of filing Form 2848. This adds up to 1.9 million hours initially not being spent in preparing these forms. Twenty-seven percent of the notices sent to taxpayers for processing issues are for paid preparer returns. Taxpayers should save approximately 779,000 hours by opting to automatically refer return processing issues to their preparers.

Attorneys, CPAs, enrolled agents and actuaries will still need a power of attorney to represent taxpayers in more complex matters. Federal law and regulations prohibit anyone who does not meet Circular 230 requirements from representing clients before the IRS. This issue had been a stumbling block to the implementation of the Checkbox Initiative, until a clear distinction was established between limited third-party disclosure for the purpose of responding to issues and questions on a single year's return and issues that required a power...