What is the purpose of Form 2848, Power of Attorney and Declaration of Representative?
Allows an authorized person to represent a taxpayer before the IRS.
Which form is used to appoint a third party to review and/or receive confidential tax information?
Form 8821, Tax Information Authorization
True or False:
A power of attorney is terminated if the taxpayer becomes incapacitated.
True
An IRS power of attorney is terminated upon the taxpayer’s incapacitation or incompetency, unlike a durable power of attorney.
What must a non-IRS power of attorney include to be accepted by the IRS?
- Taxpayer’s name, address, and ID number
- Representative’s name and address
- Type of tax and related form number
- Tax periods or years covered
- Statement of what authority is given
- Taxpayer’s signature and date
- Representative’s signed and dated statement under penalty of perjury
Fill in the blank:
A Form 2848 can cover future tax periods ending no later than _____ years after the calendar year in which the IRS receives the form.
three
What representation rights do unenrolled tax return preparers with an AFSP certificate have?
They may only represent clients in IRS examinations for returns they personally prepared and signed.
What happens if a new power of attorney is filed for the same issue?
Any previous power of attorney will automatically be revoked unless the taxpayer requests the old one to remain active.
Fill in the blank:
A representative may withdraw their authorization by submitting a written statement of withdrawal or by writing “______” across the top of a copy of the Form 2848 and signing it.
withdraw
The taxpayer can remove representation granted under a POA by writing “REVOKE” on the POA and submitting it to the IRS.
In what situations is a Power of Attorney not required?
- Providing information to the IRS.
- Authorizing disclosure of tax return information through Form 8821.
- Allowing IRS to discuss return information with a third party via a checkbox.
- Allowing a partnership representative to perform acts for a partnership.
- Allowing IRS to discuss tax return information with a fiduciary or executor.
What conditions must be met for a representative to sign a personal income tax return on behalf of a taxpayer?
- Signature is permitted under the Internal Revenue Code and related regulations.
- Taxpayer specifically grants signature authority on the power of attorney (Form 2848).
What is IRS Form 56 used for?
To report a fiduciary relationship to the IRS.
It is commonly used for estates and certain trusts, allowing the fiduciary to act on behalf of the taxpayer.
What happens to Form 2848 if a taxpayer dies?
It becomes invalid.
A Form 56 must be filed by the executor, and then a new Form 2848 can be filed to appoint an authorized representative of the estate.
What does Form 8821, Tax Information Authorization, allow?
It authorizes inspection or receipt of confidential information for specified tax types and periods.
It does not give authority to represent a taxpayer before the IRS.
What are the main types of IRS transcripts that can be requested?
- Return Transcript: Shows most line items from the original tax return as filed (no changes made after filing).
- Account Transcript: Shows changes made after filing, including payments, penalties, and adjustments.
- Wage and Income Transcript: Shows information returns submitted to the IRS, such as Forms W-2, 1099, 1098, and 5498.
What is a CAF number?
A unique nine-digit number assigned to a tax practitioner or authorized individual when Form 2848 or Form 8821 is filed.
It confirms that a centralized file has been established for the representative under that number.
What is the limitation of a third-party designee authorization?
It is temporary and expires on the due date of the next year’s tax return.
It allows verbal information exchange with the IRS on return processing issues, but does not authorize receiving tax refund checks.
What does IRC §7216 prohibit tax return preparers from doing without taxpayer consent?
IRC §7216 prohibits tax return preparers from disclosing or using a taxpayer’s information for anything other than preparing and filing the return.
What disclosures do not require taxpayer consent under IRC Section 7216?
- Disclosures to the IRS
- Disclosures pursuant to a court order or subpoena
- Disclosures to report a crime
These disclosures are permissible without taxpayer consent as outlined by the regulations.
What must a consent form include for a tax preparer to disclose information to a third party?
- Purpose of the disclosure
- Recipient and authorized information
- Name of the preparer and taxpayer
- Statement that signing is not required
The consent form must meet these guidelines to ensure proper authorization.
What must a tax return preparer obtain before disclosing taxpayer information to a third party?
Written consent from the taxpayer.
The consent form must identify the purpose, recipient, authorized information, include preparer’s and taxpayer’s name, inform that signing is not required, and may set a time period for duration.
What is the penalty for a preparer who knowingly discloses tax return information under IRC §7216?
A fine up to $1,000, imprisonment up to one year, or both.
IRC §6713 imposes a civil penalty for improper disclosure without needing the disclosure to be ‘knowing or reckless’.
Define ‘tax return information’ as it pertains to privacy regulations.
All information obtained from taxpayers or other sources used to prepare tax returns, including:
- Personally Identifiable Information (PII)
- computations
- IRS correspondence
- statistical compilations
- software registration information
It includes taxpayer’s name, mailing address, TIN, and information extracted from a return.
Under what conditions can a preparer disclose information from one taxpayer to another?
- The information appears on the first taxpayer’s return.
- Used for preparing the second taxpayer’s return.
- Second taxpayer is related to the first taxpayer.
- No adverse interest between taxpayers.
- No prohibition by the first taxpayer.
True or False:
A tax preparer can disclose tax return information for health care enrollment services without taxpayer consent.
False
Consent is required under IRC §7216 before using tax return information to directly solicit clients for any reason such as for services related to the Affordable Care Act.
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Essential Tax Law Updates for Representation12
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Unit 1: Legal Authority of the IRS30
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Unit 2: Practice Before the IRS31
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Unit 3: Authorizations and Disclosures31
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Unit 4: Circular 230 and Best Practices31
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Unit 5: Practitioner Standards and Tax Advice28
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Unit 6: Due Diligence for Refundable Credits and HOH Filing Status19
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Unit 7: Recordkeeping Requirements and Penalties51
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Unit 8: Practitioner Misconduct23
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Unit 9: Tax Payments and IRS Collections48
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Unit 10: The IRS Examination Process32
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Unit 11: IRS Appeals and the U.S. Tax Court19
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Unit 12: The IRS E-File Program29
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Unit 13: Identity Theft and Safeguarding Taxpayer Data25
