Filing, withdrawing, and managing IRS authorizations.

• Author: Allen, Susan C.

Clients need their CPA to have the appropriate authorization to communicate with the IRS on their behalf. Whether they are selected for an audit, assessed a large penalty, or simply need a transcript to determine what payments were made this tax year, clients rely on CPAs to address their tax issues. Most practitioners regularly use a power of attorney (Form 2848, Power of Attorney and Declaration of Representative) to represent their clients. However, other types of IRS authorizations have practical uses. And, at times, it may make sense to obtain more than one type of authorization.

Form 8821

Form 8821, Tax Information Authorization, is used to obtain taxpayer information. It does not hold the same weight as Form 2848 (i.e., Form 8821 does not allow a practitioner to represent a client in any way). However, if a practitioner has this type of authorization, he or she is equipped with the tool to call the IRS and obtain information such as client transcripts, payments made on the account, fifing status, and more.

A benefit of a Form 8821 authorization is the ability to use less-expensive staff to call the IRS "and obtain IRS account information. If a practitioner fists his or her firm's name as the appointee on Form 8821, anyone from the firm may call the IRS and obtain information about the taxpayer. For example, the firm's secretary or bookkeeper, instead of the tax manager or partner, could call the IRS to obtain a client's transcript. Considering that call-wait times have increased steadily in fine with recent cuts to the IRS's budget, using less costly staff to make basic IRS phone calls can be beneficial.

Additionally, as a proactive measure, practitioners should consider having a Form 8821 on file for all clients (even clients that do not currently have any tax issues). This is because Form 8821 allows the appointee to be copied on all IRS correspondence. The appointee will then receive a copy of a client's notice at the same time as the client--allowing the practitioner the opportunity to determine how the client should address the matter. After all, sometimes clients ignore an IRS notice or do not understand its severity.

Checkbox Authorization (Third-Party Designee)

A CPA can complete the "Third Party Designee" section on a client's Form 1040, U.S. Individual Income Tax Return (often referred to as "checkbox authority"). This allows the CPA to discuss the processing of the client's tax return, including the status of tax refunds...