What is a Power of Attorney?

A power of attorney (POA) is a written document that authorizes another person to function as one’s agent or attorney in particular circumstances or in all legal or financial matters. The powers granted depend on how it is written and the powers granted. Any individual given power of attorney over another can make decisions and act for the person granting the power, whether they can act for themselves or not. Thus, a person granting a power of attorney does not need to be incapacitated for the other party to be able to act on their behalf. Your estate planning documents may include a general power of attorney. The powers granted in connection with estate planning or specific healthcare situations can be sweeping and should be discussed with your attorney and understood.

What is IRS Form 2848?

Form 2848 Power of Attorney and Declaration of Representative is a form used to notify the IRS that a taxpayer has designated a CPA, attorney, or enrolled agent to represent them before the IRS. We use this form to assist clients with IRS notices, inquiries, or tax audits. When you hear “audit,” it conjures up images of meeting with an IRS agent to go through boxes of paper documents one by one to substantiate your deductions. It was a source of significant work and anxiety. Very few IRS and State audits are conducted in person today. Most are handled with notices. It is important to note that signing Form 2848 does not relieve taxpayers of any liability; it allows the IRS to respond directly to our office with correspondence and speak to us by telephone about your tax returns and other confidential tax information. Without a signed Form 2848, the IRS cannot communicate with our office regarding your tax return.

What is the current situation like at the IRS?

In the past, due to the difficulty of reaching a live person at the IRS, it was quicker and, most times, more effective to respond to a notice by writing a letter of explanation and providing the necessary support to answer the notice. We did not prepare a Form 2848 POA because, in most cases, by the time the IRS recorded it in their system, the matter had been resolved. For years, we could resolve most issues without preparing Form 2848.

During COVID-19, shutdowns and government restrictions created a considerable backlog, and matters that had taken a single letter and 8-10 weeks to resolve began to take multiple letters and 12-18 months to resolve. While this has improved substantially, we have started to have better outcomes by contacting the IRS by phone and speaking with an agent. Some issues that used to be handled with correspondence are better handled by phone because wait times have come down.

Preparing the form while preparing the tax return takes very little additional time. Once a copy is on file, it can be used to respond to any notices you may receive. Since multiple years can be covered with a single Form 2848, it saves time and money.

How does signing a POA benefit me?

• Both the client and CPA receive copies of IRS notices. This is helpful if a client is traveling and misses a time-sensitive IRS notice or if the notice concerns a mismatch of income issue, which can be addressed with a letter, saving the client time and stress. 
• If the IRS has a POA on file, we can respond more quickly than if we need to prepare and file one.

Can a Form 2848 be revoked?

Yes. If you change tax preparers, your new CPA can file a new POA and revoke all prior POAs. Otherwise, the POA will expire when the statute of limitation for the years listed expire.