Navigating the complex world of tax can be daunting for the average person. That’s why tax advisors and accountants exist, after all. But for professionals to assist taxpayers in matters relating to the IRS, they first need legal clearance to act on their clients’ behalf. This is where Form 8821 and Form 2848 come in.
In this article, we’ll explore the purpose of these two critical forms, outlining the key differences between the two.
Introduction to Form 8821 and Form 2848
Before we look at the differences between IRS Form 8821 and IRS Form 2848, let’s first understand the purpose of each form.
Form 8821, titled “Tax Information Authorization,” allows designated individuals — usually accountants or tax professionals — to access a taxpayer’s information from the IRS. This includes previous tax returns, IRS records, transcripts, and other relevant data. Form 8821 does not permit the representative to advocate on behalf of the taxpayer, make decisions, or sign documents, however. It solely grants access to taxpayer information.
Form 2848, known as “Power of Attorney and Declaration of Representative,” goes a step further than Form 8821. It allows the appointed individual to not only access tax information but also to represent the taxpayer before the IRS. This includes speaking on the taxpayer’s behalf, negotiating, handling complex tax matters, and even signing tax-related agreements or documents.
Key Differences
As you can see, Form 8821 and Form 2848 share some fundamental similarities. Both grant a designated person the authority to assist a taxpayer in tax matters relating to the IRS. Where they differ is in their scope and specific use cases. In this section, we’ll explore these key differences in more detail.
Scope of Authority
The most significant difference between Form 8821 and Form 2848 is the scope of authority granted to the representative. Form 8821 offers a narrower scope, limited to obtaining and viewing tax information from the IRS. In contrast, Form 2848 grants the designated person the power of attorney, empowering them to represent the taxpayer in audits, appeals, and collection issues, and giving them the ability to undertake certain actions on the taxpayer’s behalf.
Representation Rights
Form 8821 does not provide any representation rights. Form 2848, on the other hand, grants the representative the right to act on behalf of the taxpayer. This includes discussing and disputing tax matters with the IRS, signing documents related to agreements or settlements, and representing the taxpayer at conferences, hearings, and meetings.
Duration and Specificity
These two forms also differ in terms of the duration and specificity of the authorization. Form 8821 can authorize access to a wider range of years or types of information without needing renewal for each specific interaction with the IRS. Form 2848, on the other hand, often needs to be more specific about the tax matters and periods covered — and in some cases, a new Form 2848 must be filed for different issues or tax years.
Revocation Process
The process for revoking the authorization varies between the two forms. For Form 8821, the taxpayer can simply file a new version of the form, indicating that they want to revoke the prior authorization. The revocation process is a bit more formal for Form 2848, requiring a written statement to the IRS requesting that the power of attorney granted through the form be revoked.
Specific Use Cases
Choosing between Form 8821 and Form 2848 depends on the needs of the taxpayer. If they simply need an expert to review tax documents and information for tax preparation purposes, for example, Form 8821 is perfectly adequate. When the situation demands active representation before the IRS, such as dealing with audits, disputes, or collections, Form 2848 — and the power of attorney it grants — is necessary.
Conclusion
Understanding the differences between Form 8821 and Form 2848 is important for taxpayers and tax professionals alike. By recognizing the specific use cases they serve, individuals can ensure that their tax matters are handled efficiently and effectively, with the right level of authority and representation.
If in doubt, always consult with a tax professional to determine which form best suits your specific needs.
