The Power of Form 2848 Power of Attorney

BROOKS NELSON: Welcome to the Cherry Bekaert Tax Beat, a conversation about tax that matters. Welcome to this edition of the Cherry Bekaert Tax Beat Podcast. Today's episode is a deeper dive into one small but important tool for working with the IRS, Form 2848, the Power of Attorney and Declaration of Representative.

BROOKS NELSON: This form can streamline the flow of taxpayer information to and from the Internal Revenue Service, theoretically at least, and we'll go into that in more detail.

BROOKS NELSON: Joining us today is our expert, head of our federal tax controversy practice, Ann Oliver.

ANN OLIVER: I am calling in from Norfolk, Virginia, and I use the power of attorney almost every day in my practice.

SARAH: This is Sarah calling in from Greenville, South Carolina.

BROOKS NELSON: Sarah, how's life treating you?

SARAH: Life is good. We're past the April 18 deadline this year, so it's pretty quiet in the office. Many of the tax people are recovering from a couple of long weeks and from some festivities on Monday evening. It's a great day to be a tax professional.

BROOKS NELSON: Our profession is still adjusting to a real deadline. We hadn't had an April 15/18 deadline in two or three years, so it took some adjustment. All right, moving on to the topic of the day: the 2848s.

BROOKS NELSON: The IRS is very protective of taxpayer information, and rightfully so. There are ID theft and IT security issues, plus statutory provisions that govern the ability to share taxpayer information. The IRS takes it seriously and is often reluctant to talk to taxpayer representatives without all the proper forms in front of them. Sometimes they're difficult to talk with the actual taxpayer.

BROOKS NELSON: As cybersecurity issues continue to grow, we see pressure on the IRS to be even more strict. The IRS sends out many notices—some are good, some are bad—but there is a need for communication between the IRS, taxpayers, and the CPAs who represent them. That's where Form 2848 comes in.

BROOKS NELSON: In general, we need signed Form 2848s by the taxpayer and by the CPA, lawyer, or enrolled agent representing the taxpayer to be able to talk with and receive information from the IRS.

BROOKS NELSON: Ann, the floor is yours. How would you describe the POA, Form 2848, and its value in our practice?

ANN OLIVER: The POA we're discussing is the specific IRS Power of Attorney, Form 2848. The IRS requires this specific form to discuss taxpayer information. There are other powers of attorney for medical or personal matters, but the IRS requires Form 2848 for tax matters.

ANN OLIVER: This POA authorizes an individual to represent a taxpayer before the IRS and authorizes them to receive confidential tax information. Those are the two main purposes.

ANN OLIVER: Representing a taxpayer before the IRS covers communicating with the IRS about the taxpayer's rights or liabilities, handling notices, and dealing with laws and regulations administered by the IRS. It also covers representing a taxpayer at conferences, appeals hearings, exams, and meetings, now often conducted virtually.

ANN OLIVER: Receiving confidential tax information includes requesting account transcripts, asking questions about the client's account, and obtaining copies of correspondence or information from the tax return.

BROOKS NELSON: There is a checkbox at the bottom of Form 1040 authorizing the IRS to discuss the return with the CPA who signed it. Why isn't that sufficient?

ANN OLIVER: Checking the box on Form 1040 authorizes the CPA who signed that return to discuss that specific return with the IRS. However, I am not on clients' Forms 1040 as counsel, so I wouldn't be authorized by that checkbox.

ANN OLIVER: More importantly, the checkbox is limited in scope. If you authorize someone to talk about a particular year's Form 1040 but the issue involves other liabilities—such as an overpayment applied to a civil penalty—the checkbox won't authorize discussion of that other liability. A full power of attorney can cover multiple years, multiple forms, and multiple representatives, so it's much broader than the checkbox on a return.

BROOKS NELSON: The Form 2848 is filed separately from a tax return. How is it submitted?

ANN OLIVER: Historically, Form 2848 was a paper document signed in ink by the taxpayer and representatives and mailed to the IRS. That hard copy method is still available.

ANN OLIVER: You can mail, fax, or upload an ink-signed Form 2848 to the IRS's Centralized Authorization File (CAF) unit. Regardless of submission method, they process forms first come, first served.

ANN OLIVER: During COVID, the IRS allowed electronic signatures for powers of attorney. Electronically signed forms must be uploaded to the IRS portal; they cannot be faxed or mailed. Once uploaded, they go into the same processing queue.

ANN OLIVER: The CAF unit has been backed up. They used to process forms in three to five days, but in the last two years processing times have increased significantly. The electronic option is easy to submit, but you may have to wait for processing.

ANN OLIVER: The IRS also introduced the Tax Pro Account, a fully electronic option requiring e-Services accounts for both the taxpayer and the representative. The representative creates a request for authorization, the taxpayer authorizes it in their e-Services account, and the IRS processes it—typically within two days. This effectively creates an authorization without either party signing a paper Form 2848.

ANN OLIVER: The Tax Pro Account has downsides: it only works for individual taxpayers, it requires a U.S. address, and it covers only a limited set of issues, such as certain Form 1040 matters. It cannot be used for entities, foreign taxpayers, or many other tax issues.

BROOKS NELSON: From the taxpayer perspective, who signs Form 2848 for joint returns, child returns, and entities?

ANN OLIVER: For joint returns, each individual on the Form 1040 must sign their own Form 2848; each representative signs each individual's POA.

ANN OLIVER: For children, a parent or legal guardian signs on behalf of the minor if they are under age 18.

ANN OLIVER: For entities, it depends on how the entity is taxed. Corporations—C or S—require an officer who can bind the corporation, such as president, vice president, treasurer, CEO, or CFO.

ANN OLIVER: For partnerships, a partner authorized to act for the partnership generally must sign. If the partnership is under exam, the partnership representative designated under partnership audit rules may need to sign, for example, for an Administrative Adjustment Request (AAR) or during an exam. For LLCs, follow the taxation classification: if taxed as a partnership, use the partnership rules; if taxed as a corporation, use the corporate rules.

ANN OLIVER: Trusts and estates have other rules. The Form 2848 instructions provide useful guidance, but there are quirks in situations such as business purchases or divorces where signature authority can be messy. Check with your CPA or counsel when in doubt.

BROOKS NELSON: What submission method are we using most often these days?

ANN OLIVER: I prefer the old-school ink-signed Form 2848. It allows me, if necessary, to fax the ink-signed POA to the IRS while on a call. The IRS can receive, authenticate, and allow discussion immediately. An ink-signed POA does not need to be on file with the CAF unit to permit immediate discussion if you fax it during the call.

ANN OLIVER: You cannot fax an electronically signed POA, so if you rely on an electronic signature you must wait until the CAF unit processes it. The IRS will notify you if there is a problem with a POA, but they will not proactively tell you when a POA is on file. Having the ink-signed POA ready provides all the information you need—EIN, name, address, authorized forms, and years—so you can answer initial questions and fax it if needed.

ANN OLIVER: I scan and keep electronic copies of ink-signed POAs so I can fax from my system, but the ink-signed copy gives the greatest flexibility and speed.

BROOKS NELSON: What access does a POA provide that you wouldn't have otherwise?

ANN OLIVER: With a POA on file or faxed at the time of a call, I can request account transcripts, which the IRS will send to my e-Services account. I can ask the revenue agent or appeals officer what is happening on the account. If the POA authorizes copies of correspondence, I will receive correspondence sent to the taxpayer, which helps because mail may not always reach the right place.

ANN OLIVER: A major advantage is representing a client during an exam or at the appeals level, enabling direct communication with the revenue agent or appeals officer.

BROOKS NELSON: What do account transcripts show?

ANN OLIVER: Account transcripts show posted and processed transactions. Pending items won't appear. You can confirm filing dates, which matter for statutes such as the refund statute of limitations.

ANN OLIVER: Transcripts show all payments, including dates, amounts, and which tax account they were applied to. This is important when payments are made by different people and may be applied to the wrong account.

ANN OLIVER: You can see penalties assessed, whether they've been paid or abated, and overpayments that may have been applied to other liabilities. For example, an overpayment on a corporation's Form 1120 may have been applied to a payroll liability on Form 941. The payment generally stays with the same taxpayer's EIN, not moved to another taxpayer's account.

ANN OLIVER: This is why a POA is broader than the checkbox on the tax return: it allows you to see all accounts for that taxpayer and determine exactly what happened.

BROOKS NELSON: Are there actions or information not covered by a POA, Form 2848?

ANN OLIVER: You don't need a power of attorney to submit information to the IRS. A POA allows you to receive information or to have the IRS speak to you. If you submit a letter on behalf of a taxpayer without a POA on file, the IRS will accept the submission but will respond directly to the taxpayer, not the preparer.

ANN OLIVER: You can call the IRS to request a collection hold or request first-time penalty abatement without a POA, but the IRS will not confirm whether they accepted those requests unless a POA is on file.

ANN OLIVER: In emergencies, I have called to request something and then, after obtaining the POA, called back to confirm whether the requested action occurred.

ANN OLIVER: Some matters require a POA but there is no IRS module to record it. Examples include private letter ruling requests and Form 8832 entity classification elections. For those, you must submit the POA each time you call or submit the request because the electronic systems cannot house the POA for those specific matters.

ANN OLIVER: About 90 percent of what I do requires a POA and will get recorded on file.

BROOKS NELSON: You had a notice and an exam and a signed POA. What happens when the issue is resolved? What if the client changes firms or representatives later?

ANN OLIVER: A POA stays on file for the years and forms listed on it forever unless it is revoked. Either the taxpayer or the representative can revoke it by submitting a copy of the POA marked "revoked" or "withdrawn," and the IRS will revoke it. A new POA can also supplant a prior one.

ANN OLIVER: If a client had a prior POA with other attorneys and you submit a new POA, you can check a box to request the prior POA remain on file and attach a copy of the prior one. If you do not check that box and submit a new POA, the new POA will replace the prior one and the previous representatives will be removed.

ANN OLIVER: If a representative leaves the firm, you can withdraw that individual from the POA while leaving other representatives in place. You can also revoke the entire POA.

ANN OLIVER: POAs often cover multiple years. For example, you might have a POA that runs through 2025 even if the current issue relates to 2020. A notice could arrive in 2027 regarding 2025, so the POA will allow receipt of that notice unless it has been revoked.

ANN OLIVER: If you leave a firm or lose contact with a client, it is prudent to revoke the POA. You can also submit an IRS FOIA request and receive a spreadsheet listing every EIN, period, and type of tax return you are authorized for. You then strike through ones you want to keep and the IRS will remove the rest. Periodic cleanup is a good practice to avoid receiving notices for clients you no longer represent.

BROOKS NELSON: Final comments. Ann, any closing words on this topic?

ANN OLIVER: Stay patient with my preference for ink-signed POAs. It is by far the best way to handle these matters quickly. I rely on fax machine technology for sending powers of attorney to the IRS, and for this use I remain firmly rooted in older methods.

SARAH: The power of attorney does not get enough attention in practice given the value and flexibility it provides. It helps enable conversations with the IRS and the resolution of issues once you have a person on the other end of the phone.

SARAH: There are many nuances in IRS controversy practice. Proper handling of a Form 2848 up front prevents frustration later. It's far better to get it done correctly from the start.

BROOKS NELSON: This concludes our discussion on the value of Form 2848, the Power of Attorney, when working with the IRS.

BROOKS NELSON: Quick disclaimer: we are not providing tax advice on this podcast. Please consult your tax advisor, hopefully at Cherry Bekaert, and with Ann Oliver when it deals with tax controversy and your specific tax issues.

BROOKS NELSON: For more information and guidance materials on this and other tax and business topics, visit the firm's website at cbh.com.

BROOKS NELSON: This concludes today's podcast. Please like, share, and subscribe. Thank you to our listeners for spending your time with us.