What is a Power of Attorney and How Can it Help Your Tax Woes?
If the Internal Revenue Service has become the new best friend you never wanted, the right CPA can help you by getting them to stop sending you letters and calling. A CPA can also discuss your account with the IRS and get them the information they need. Sometimes it is as simple as correcting matters through a written letter. Sometimes it is more intense like supervising a tax audit.
The most important thing for your CPA to be able to do is to actually talk to the IRS. This is where Form 2848, Power of Attorney and Declaration of Representative comes into play.
It can be scary to sign over power of attorney to someone, but rest assured, this little form only gives your CPA permission to talk to the Internal Revenue Service. It does not give them any rights with anyone else.
With that said, there are a few things you might want to check before you sign this piece of paper and hand it over.
1. CHECK YOUR INFORMATION
This shows the section of Form 2848 that identifies you. You will want to make sure that your full legal name, as the IRS knows it, is listed and your social security number is correct. This means that if you are recently married but have not yet changed your name with the Social Security Administration, you will want to list your maiden name. If this information is not correct, then a new Power of Attorney will need to be completed and will slow down the process.
2. KNOW WHAT YOU ARE AUTHORIZING
Typically the CPA only completes the matters section with the tax forms that they need to discuss with the IRS. You will want to pay special attention to line 5 which has additional acts authorized.
Disclosure to Third Parties – This allows the person authorized on the Power of Attorney to disclose your tax information to third parties, such as banks, creditors, etc.
Substitute or Add Representative(s) – This allows the person authorized to add or substitute a new representative without your written permission. This can be useful if you use a large CPA firm to handle your tax matters. The person handling your case could change regularly, but I would be weary of giving this authority to anyone unless an explanation is given as to why it is needed.
Signing a Return – This allows the person authorized to sign your return. The IRS only allows this in certain situations, but again be careful about giving anyone this authority. You want to make sure you fully discuss this with you CPA before giving this permission.
3. KNOW WHO NEEDS TO COMPLETE A FORM 2848
Anyone who needs someone to speak to the IRS on their behalf will need to complete Form 2848. If you are married and filing joint, you and your spouse will each need to sign a Power of Attorney.