IRS Form 8821 vs 2848: A Guide for Tax Information Authorization

The Internal Revenue Service publishes over 800 forms and schedules. Professionals know that navigating the complex world of tax forms can be a daunting task. Confusion often arises from understanding the differences between IRS Form 8821 vs IRS Form 2848. These forms, while seemingly similar, serve distinct purposes. Each is appropriate in different scenarios. It’s essential to understand which form is best to use for your clients, particularly in tax resolution cases.

Understanding the Differences Between IRS Form 8821 vs 2848

While both Form 8821 (Tax Information Authorization) and Form 2848 (Power of Attorney and Declaration of Representative) allow for the sharing of tax information, the key difference lies in the level of authority granted. Form 8821 allows for the sharing and inspection of tax information but does not allow for representation before the IRS. On the other hand, Form 2848 grants the power of representation before the IRS. Using Form 2848 when Form 8821 would suffice can result in unnecessary responsibilities and potential liability. Conversely, using Form 8821 when representation is required can leave you unable to effectively advocate for your client.

Why Is It Important to Always Use the Right IRS Form?

Using the correct IRS form or schedule is crucial for several reasons:

1. Accuracy: Each IRS form or schedule is designed for a specific purpose, such as reporting income, claiming deductions, or reporting information about specific types of transactions. The correct form improves the odds of a swift outcome and favorable resolution.
2. Compliance: The IRS requires taxpayers to use specific forms or schedules for certain types of transactions or tax situations. The wrong form can result in penalties, interest, and other potential legal consequences.
3. Efficiency: Using the correct form or schedule can help streamline your client’s case. The IRS has automated systems that are designed to process specific forms.
4. Clarity: Provide all the necessary details on the proper form to prevent confusion or misinterpretation.
5. Avoiding Delays: The wrong form or schedule will be sent back to you for correction, delaying possible resolution and possibly resulting in late filing penalties.

When to Use IRS 8821 Tax Information Authorization

IRS Form 8821, Tax Information Authorization authorizes a designated individual or organization to inspect and/or receive confidential information verbally or in writing for the type of tax and the years or periods listed. It affords visibility into client records to professional tax preparers such as Certified Public Accountants (CPA), Enrolled Agents (EA), or anyone who prepares taxes for a fee. For example, a small business owner might use Form 8821 to authorize their accountant to access their tax information, helping to streamline the tax preparation process. Importantly, Form 8821 does not permit the taxpayer’s representation before the IRS, and it does not require licensing to use, making it accessible to a wide range of professionals.

Form 8821 is particularly useful to IRS Solutions members when using IRS Advance Notification™ (IAN). Included with every IRS Solutions membership, IAN automatically alerts you to changes in a client’s IRS transcript, providing valuable insights for tax resolution and helping you stay one step ahead. By integrating IAN into your practice, you can receive early news of an audit or other tax issues, allowing you to prepare and respond accordingly. After you file Form 8821 on a client’s behalf, IAN will automatically notify you of changes to a client’s transcript including changes to status, passport forfeiture, and impending audits.

When to Use IRS Form 2848 Tax Information Authorization

IRS Form 2848, Power of Attorney and Declaration of Representative, is a more powerful tool than Form 8821 and that greater power comes with greater responsibilities. The key difference is this: unlike Form 8821, Form 2848 allows a licensed representative to engage with the IRS on behalf of a taxpayer. This is crucial when dealing with audits, appeals, or other contentious issues.

Using Form 2848 when Form 8821 would be sufficient is a common mistake that can lead to unnecessary complications. For instance, while you’re assessing a prospective client’s tax situation before deciding whether to take them on as a client, Form 8821 would be the right choice. Having a Form 2848 on file may indicate to your client that you are now stepping into their shoes and are obligated to assist them. There have been no lawsuits filed as of yet, but…

Once you decide to take on a tax resolution case, you’ll want to be sure to file Form 2848 so that you can act on your client’s behalf when dealing with the IRS.

Who Can Use IRS Form 8821 vs IRS Form 2848?

IRS Form 8821 and IRS Form 2848 are available for use by different professionals and others. Who can use which form depends on the level of authority and representation required. It’s important to understand which form(s) you can use.

IRS Form 8821, Tax Information Authorization, can be used by any individual, corporation, firm, organization, or partnership that the taxpayer wishes to authorize to inspect and/or receive their confidential tax information. This could include family members, tax preparers, or financial advisors. The person or entity authorized does not need to be a licensed professional, as Form 8821 only grants the authority to receive and inspect tax information, not to represent the taxpayer before the IRS.

Because IRS Form 2848, Power of Attorney and Declaration of Representative, authorizes an eligible individual to represent the taxpayer before the IRS, it requires a higher level of authority and responsibility than Form 8821. Therefore, the individual appointed must be eligible to practice before the IRS and could include attorneys, CPAs, Enrolled Agents, and corporate officers. Family members are legally permitted to use Form 2848.

Unenrolled agents who do not meet all of the requirements to represent clients in front of the IRS can use Form 8821 but are not permitted to use Form 2848. It’s important to note, however, that this does not prevent unenrolled agents from serving their clients effectively. By filing a Form 8821, anyone can authorize an unenrolled agent with a CAF number to inspect and/or receive their tax information – this includes transcript monitoring with IRS Advance Notice™ (IAN) from IRS Solutions.

What Information Should You Put on IRS Form 8821 vs IRS Form 2848?

Because both IRS Form 8821 and IRS Form 8821 are used to authorize individuals to receive and inspect confidential tax information there is some overlap in the data required to complete them. However, because they serve different purposes, there are some differences in the information required to file them properly.

IRS Form 8821 requires:

• The taxpayer’s information, including name, address, and taxpayer identification number
• The appointee’s information, including name, address, and telephone number
• The tax information the appointee is authorized to inspect or receive, such as the type of tax, the tax form number, and the tax periods
• Any specific use not recorded, such as disclosures to third parties
• The signature of the taxpayer (and spouse, if a joint return)

Because Form 2848 grants more extensive powers, it requires more detailed information about the tax matters the representative is authorized to handle and the specific acts they are authorized to perform, including:

• The taxpayer’s information, including name, address, and taxpayer identification number (usually the Social Security number or Employer Identification Number)
• The representative’s information, including name, address, and CAF number
• The tax matters the representative is authorized to handle, such as the type of tax, the tax form number, the tax periods, and the specific matters the representative is authorized to handle
• The acts the representative is authorized to perform, such as receiving confidential tax information, signing a return, or representing the taxpayer in hearings
• Any specific use not recorded, such as disclosures to third parties
• The signature of the taxpayer (and spouse, if a joint return)

Conclusion

Understanding IRS Form 8821 vs IRS Form 2848 can make a significant difference in how you handle your tax resolution practice. At IRS Solutions, we’re committed to providing tax professionals with the tools and resources they need to succeed. Learn more about IRS Solutions, a Tax Pro’s Best Friend. Schedule a demo today.