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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 ofauthorization.
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, filing 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 lists 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 line 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. This authorization has limited use but may be worthwhile to ensure a return is correctly processed.
How to Complete Forms 2848 and 8821
Completing Forms 2848 and 8821 is fairly straightforward. A practitioner needs to have:
- Taxpayer information (name, address, taxpayer identification number, and phone number);
- The practitioner’s information (name, address, Centralized Authorization File (CAF) number, preparer tax identification number (PTIN), telephone number, and fax number); and
- Tax information (type of tax, tax form number, years or periods, and specific tax matters, if applicable).
A practitioner will need to enter a CAF number to complete the forms. A CAF number is a unique nine-digitidentification number assigned to a practitioner the first time he or she files an authorization form with the IRS. A CAF number is different from a Social Security number, employer identification number, or PTIN.
CAF Number Tips
- If practitioners do not have a CAF number, they may enter “none” in the CAF number section on the form, and the IRS will assign one.
- If practitioners forget their CAF number, they may call the Practitioner Priority Service line at 866-860-4259866-860-4259 FREE. Once authenticating information is provided, the IRS representative can usually provide the CAF number over the phone.
Where to File Forms 2848 and 8821
Practitioners must mail or fax their authorization forms to the applicable CAF unit (Ogden, Utah; Memphis, Tenn.; or Philadelphia) unless they check the box on line 4 of Form 2848 or 8821 (specific use not recorded on the CAF). In that case, the practitioners would mail or fax the form to the office handling the matter.
Unfortunately, with the retirement of the online Disclosure Authorization product in 2013 (which allowed practitioners to file Forms 2848 and 8821 electronically), mailing or faxing these forms are the only filing options.
Tip: If a client has an urgent issue and the practitioner does not have time to wait for the authorization to be recorded at the CAF unit, the practitioner may call the IRS and scan and fax the authorization form to the agent who takes the call.
Withdrawing Form 2848 or 8821 Authorization
Practitioners may withdraw an authorization at any time. To do so, they must write “WITHDRAW” across the top of the first page of the Form 2848 or 8821 with a current signature and date below the annotation. Then they must provide a copy of the authorization form with the withdrawal annotation to the same CAF unit where the form was originally filed. The instructions to Form 2848 provide additional steps to take if practitioners do not have a copy of the authorization form. A taxpayer may also revoke the authorization at any time by following procedures similar to the withdrawal steps.
A new authorization supersedes an existing authorization unless otherwise specified on Form 2848 or 8821. Authorizations also expire with the taxpayer’s death (proof of death is required).
Obtaining a Listing of All Authorizations on File With the CAF Unit
It is advisable to keep a list of all client authorizations that a practitioner has open with the IRS. But, at times, a practitioner may need to obtain that list from the IRS. For example, a retiring CPA may wish to withdraw all authorizations on file with the CAF unit. To do so, the CPA may first make a Freedom of Information Act (FOIA) request for a CAF representative/client listing. This is known as a “CAF77 request.” A sample FOIA CAF77 letter is shown on the IRS’s FOIA Guidelines webpage.
The IRS will then provide a printout or electronic copy of all of the CPA’s current authorizations. The CPA can send a signed withdrawal request for all authorizations. The CAF unit will then delete the authorizations attached to thatCPA.
For additional guidance on IRS authorizations, refer to the following resources:
- Publication 4019, Third Party Authorization, Levels of Authority: This publication provides a nice summary chart of various types of authorizations (purpose, how authority is granted, etc.).
- Publication 947, Practice Before the IRS and Power of Attorney: This 19-page publication provides information about practicing before the IRS.
- Form 56, Notice Concerning Fiduciary Relationship: This form is used to authorize the designated person to perform any act on the taxpayer’s behalf (i.e., he or she is a fiduciary under Sec. 6036 or 6903).
- The CAF authorization rules: The IRS CAF webpage (available at www.irs.gov) provides detailed guidance on CAF rules and processes.
- Internal Revenue Manual (IRM) Section 21.3.7, Processing Third Party Authorizations Onto the Centralized Authorization File: This IRM section applies to IRS employees responsible for performing CAF account work, but the information may also be useful to tax practitioners to understand the IRS’s procedures.
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