Your tax information is confidential data, and the federal government is required to keep it confidential – which means that if you intend to work with a tax professional, you need to fill out a specific form to allow them to review that information before they can act on your behalf or represent you legally. That form is Form 8821, Tax Information Authorization.
Understanding Form 8821
The tax information authorization form is explicitly not a power of attorney. With a tax information authorization, a tax professional can receive your tax information. The form also requires you to specify the type of tax data you intend to share and the year in which it was filed. Form 8821 is also used to revoke previously filed Forms 8821. Furthermore, Form 8821 comes with a neat little failsafe. Section 6103(c) allows you to hold the recipient of the form responsible for any misuse or unauthorized redisclosure of your information without your permission.
Form 2848 vs. Form 8821
IRS Form 8821 allows you to share specific tax information with a tax professional of your choice. In addition to tax attorneys and CPAs, Form 8821 may also be granted to other persons, corporations, firms, organizations, or partnerships. It is not limited to tax or legal professionals – for example. You may need to file a Form 8821 when you want a lender to review your tax information before authorizing a mortgage. Form 2848, on the other hand, grants a power of attorney to the agent listed within.
A power of attorney is a legal document that names someone as your representative. A general power of attorney can be used to authorize someone to travel to another state and administrate the sale of your home, for example, if you do not have the time to do so yourself. In other cases, you can name an agent in a power of attorney to represent your financial or healthcare interests if you are incapacitated so that task does not fall upon your closest kin. However, an IRS-issued power of attorney is specifically used to name a personal representative for tax matters.
Similar to an extraordinary power of attorney, an IRS-issued power of attorney through Form 2848 is usually necessary whenever you intend to avail the services of a tax attorney for an appeal against the IRS’s collection actions or to stand by your side and represent you during a face-to-face audit. Form 2848, Power of Attorney and Declaration of Representative, generally allows a legal professional to act in your best interest and initiate a discussion with the IRS. After filing Form 2848 and waiting for the IRS to process the document thoroughly, your chosen tax professional can begin:
- Receiving and processing tax information in your stead.
- Sign agreements with the IRS regarding matters and specific tax returns listed or detailed in your Form 2848.
- Sign requests for an extension on any deadlines pertinent to the tax liabilities or tax returns listed or detailed in your Form 2848.
- Sign a tax return (within specific circumstances, e.g., you are unavailable due to being abroad when the return must be filed, or have been incapacitated by illness, etc.).
- Represent you in an audit.
While Form 2848 allows a tax professional to conduct various tax-related services and represent you personally, it does not absolve you of your tax debt nor move the liability onto the chosen person. The IRS will still hold you responsible for resolving your tax debt, although you can use professional tax help. This is also meant to protect you, the taxpayer.
An agent listed through a Form 2848 power of attorney does not have the right to pay your tax liability. However, they also do not have the right to cash in your tax refunds or collect your tax credits. Furthermore, there are other limits automatically imposed upon agents with Form 2848. For example, an agent named in Form 2848 cannot name another substitute agent without your explicit authorization.
What Is an Authorized Agent?
Authorized professionals – those allowed to represent clients before the IRS – include tax attorneys, CPAs, and enrolled agents. In theory, anyone can negotiate with the IRS on behalf of someone else through the power of Form 2848. But your ability to arrange for your spouse or friend through an IRS-issued power of attorney is limited if you are not an authorized agent.
All other individuals granted limited powers of attorney through Form 2848 cannot represent other taxpayers in court or negotiate with the IRS for penalty waivers or payment agreements. The most they can do is represent a taxpayer before the IRS’s customer service personnel. Suppose you cannot afford a lawyer or CPA of your own. In that case, the IRS does allow law students to represent you through a low-income taxpayer clinic or student tax clinic program under special authorization through the IRS’s Taxpayer Advocate Service.
Filing either a Form 2848 or a Form 8821 is simple enough – the trick lies in the details. In addition to providing your basic taxpayer identification information, you will need to specify exactly what documents you wish to share (for Form 8821) or what privileges to grant your agent for what purpose (for Form 2848). For example, if you are filling out a Form 2848 due to an unresolved tax debt on your most recent income tax return and need a legal representative to work alongside you, you will want to describe:
- The matter at hand (your income tax debt).
- The tax form number (Form 1040 in the case of an Individual Income Tax Return).
- The same year or period (if it was last year’s income tax return, 2021).
As with Form 8821, the easiest way to revoke Form 2848 is to refile the form with the word “REVOKED” written across all pages.
When Do You Need Professional Tax Help?
The IRS provides much helpful information to taxpayers, from audits to collection actions, penalties, and the different payment methods the IRS accepts. However, there will always be situations where professional representation is essential – or cases where having a professional tax look at your tax information can give you much clearer and more actionable advice on dealing with the IRS.
Whether it might be an impending audit, a crushing tax debt, or your eligibility for a unique payment plan, a tax professional can help guide you through the processes involved, represent you in court, and get you back on the IRS’s good side.
