In order for the IRS to discuss your tax issues with your CPA, you must sign IRS Form 2848, Power of Attorney and Declaration of Representative to give him or her power of attorney (POA). Merely checking the box on your tax return to let the IRS speak to the person who prepared the return is only giving limited authority to discuss that particular return (e.g., answer IRS questions that arise in the processing of the return, and authorization ends automatically on the due date of the return for the following year). Some CPAs are now routinely asking clients to sign the POA form when they prepare a return.
What are the pros and cons of doing this at that time, or giving authority to your CPA at any time?
If you sign the form designating your CPA as your agent, both the CPA and you will be notified of any issues on your returns. This can be helpful because:
- If you travel, you could miss IRS notices, which are usually time-sensitive.
- If the notice concerns a mismatch of income (the income reported to the IRS on an information return does not match up with the income included on the tax return), the CPA may be able to resolve it easily, saving you work and anxiety.
- If you don’t sign a POA and you alone receive an IRS communication, you could forget to tell your CPA. Or you may be ill and can’t respond. Again, this can create problems for time-sensitive actions.
Cons of signing a POA
You may prefer not to give a POA before it’s needed. The reason: if the IRS is questioning something on your return, you may have lost confidence in the preparer and want someone other than the person who prepared the return to deal with the IRS on the matter. Of course, if you did sign a POA, you can always revoke it and sign a new one.
If there is any possibility of a criminal claim by the IRS, it’s not advisable to give a POA to a CPA. In this situation, you want an attorney representing you so you have full attorney-privilege confidentiality.
Scope of authority
Be sure that the scope of authority given to your CPA is broad enough to meet your needs. You must specify on the POA form the tax years and types of returns over which the CPA has authority to represent you. For example, with the new POA form that was revised last December you must indicate whether you’re giving authority for the individual mandate or the employer mandate, and any forms related to it.
You don’t have to use a CPA for representation with the IRS for all your tax matters. As mentioned earlier, you can use an attorney. You can also use an enrolled agent or a paid preparer who participates in the IRS’ Annual Filing Season Program. For returns prepared and signed after 2015, only CPAs, attorneys, enrolled agents and preparers participating in the IRS program have full representation rights; other preparers do not. Find details about credentials for full representation from the IRS.
You can wait to sign a POA until it becomes necessary. Or you can opt to sign one in advance of any tax problems just in case. The decision about signing a POA is yours.