The IRS encourages all taxpayers to know their representation rights and the different types of authorization for third-party representatives. As a professional tax preparer, you can help your clients understand why they might need representation and the kinds of representation you can offer. From full power of attorney to simple verbal disclosures, here’s what you need to know about securing authorization to represent your client before the IRS.
What type of authorization do you need?
The IRS lists four different types of third-party authorization. Typically, professional tax preparers need power of attorney to help their clients, but third-party designee authorization can be useful for resolving simple matters.
Power of Attorney
Of course, power of attorney grants the most representation rights of any of these categories, allowing you to represent your clients in audits, disputes, collections issues, and nearly any other tax issue before the IRS. Only individuals with representation rights before the IRS –such as CPAs, Enrolled Agents, and attorneys– can receive this authorization (except in relatively rare “special and limited circumstances”).
Your client will need to sign Form 2848 to grant you power of attorney (more details on that below).
Tax Information Authorization
Tax Information Authorization simply gives you access to your clients’ private tax information, allowing the IRS to release information to you. Typically, if your client has already provided all of their tax documents to you, this authorization isn’t necessary. It may be useful, however, if you need additional information or if your client has lost certain documents.
“Third-party designee” is sometimes casually used as a catch-all term for representation before the IRS, but it is quite different from the full representation rights that come with power of attorney. This authorization simply allows the IRS to call you with questions about the return and vice versa. It doesn’t allow you to speak on your client’s behalf or represent them in any tax matters beyond basic questions about a return such as math errors.
If you are not an Enrolled Agent, CPA, or attorney, this is the highest form of authorization available to you. While it won’t allow you to represent your client, it can facilitate simple conversations to address minor issues with your client’s return. Your clients can grant you this authorization by checking “Yes” and entering your information in the third-party designee area on their return.
Verbal disclosure is only necessary if you’ll be accompanying a client to a meeting or phone call with the IRS and do not already have Power of Attorney.
IRS third-party authorization form
To be granted power of attorney, you and your client will file a Form 2848, Power of Attorney and Declaration of Representative. The form itself is simple. Your client enters basic identifying information for themself and for the person(s) they are choosing to represent them. You’ll need to provide your PTIN and CAF number.
Your client must specify the tax matters on which you may represent them (such as income, employment, payroll, or excise taxes) as well as the relevant tax forms and years. If they wish, they may also specify matters they do not authorize you to represent them on.
What to know about being your client’s third-party representative
Typically, if your client needs a third-party representative, they are facing a complex situation with the IRS. These are some of the most common:
- Audits and Examinations: If your client’s return is selected for an audit or examination by the IRS, you’ll represent them through the process by gathering and organizing supporting documentation, communicating with the IRS on behalf of the taxpayer, and providing explanations and arguments to support your client’s position.
- Appeals: If you and your client disagree with the IRS’s findings after an audit or examination, you can help your client navigate the appeals process. You’ll prepare the necessary paperwork, present the taxpayer’s case to the IRS Office of Appeals, and negotiate potential settlements or resolutions.
- Collection Issues: In cases where a taxpayer owes back taxes and is facing collection actions from the IRS, third party representatives can assist in resolving the matter. You’ll negotiate installment agreements, offers in compromise, or other options to help your client meet their tax obligations while still considering their financial circumstances.
Remember that communicating with the IRS is only part of being a good third-party representative. You’ll also need to keep your client informed and help them understand the process. It’s best practice to give your clients frequent updates on any interactions you’ve had with the IRS. This can be as simple as an email debrief.
For more tips, be sure to check out these guides to educating and supporting your clients through audits and collections:
How to Help Prepare Your Client for an Audit
How to Help Your Clients Settle Their Debts with the IRS
How to Help Your Clients Understand the IRS Collection Process