You can allow the IRS to discuss your tax return information with a third party by completing the Designated Third Party section of your tax return, often referred to as the Checkbox Authority. This will give the IRS permission to discuss the processing of your current tax return, including the status of tax refunds, with the person you designate. The IRS cannot discuss confidential information on your tax return with any third party until they receive a new authorization from you. Any tax professional with an IRS Preparer Tax Identification Number (PTIN) is authorized to prepare federal tax returns. However, tax professionals have different levels of skills, education, and experience.
This allows you to choose someone who is not a tax professional to discuss your return with the IRS. The information that the IRS can discuss with the designated third party on your tax return includes processing your current tax return and the status of tax refunds. This authorization is limited to tax returns with the Designated by a Third Party check box and the Preparer's Paid Use Only section. This designated third-party tax reporting authority only lasts one year from the due date of the return. The powers granted under 2848 are quite broad and, unless specifically excluded on the form, include the right to receive and inspect confidential tax information and to perform all acts, including signing consents and exemptions, that a taxpayer may do. However, unless otherwise stated, it does not include the power to receive a check, substitute or add another representative, or sign basic tax returns.
Forms 2848 can be canceled or revoked at any time by the taxpayer. In addition, signing a new Form 2848 revokes the old one, unless you specifically say otherwise and attach one that you want to remain in effect. The IRS states that it will accept a power of attorney other than federal Form 2848 as long as the document meets the requirements for a power of attorney. In most cases, this would include your general permanent power of attorney prepared by your lawyer. However, using a power of attorney instead of the IRS form can be complicated and time-consuming, so it is best to avoid them when possible. When you revoke the authorization for tax information, the designated person will no longer receive your confidential tax information for the matters and periods indicated in the authorization.
While checking the box gives the preparer a limited power of attorney to discuss the return with the Service, they do not have a power of attorney on all matters related to the tax return. For example, if an entry or entries on a corporate income return or small business income tax return are reportable to a partner or shareholder and their refund constitutes a substantial part of their return, then they are considered to be a tax return preparer of that partner or shareholder's return. According to instructions on Form 1040, “Your preparer, friend, family member, or anyone else you choose may serve as a designated third party for the tax year and tax return.” For purposes of applying rules in paragraph (b) (i) of this section to a tax return preparer who does not sign within meaning of paragraph (b) (of this section only), schedule or other part is not considered substantial part if schedule, registration or other part of return or claim for refund involves amounts of gross income, amounts of deductions or amounts on basis of which credits are determined that are- (iii) A tax return preparer with respect to one return is not considered a tax return preparer for another return simply because an entry or entries reported on first return may affect an entry reported on other return unless entry or entries reported on first statement are directly reflected in other return and constitute substantial part of other return. A signing tax return preparer is individual who has primary responsibility for overall substantive accuracy of preparing such return or request for refund. Whether schedule, registration or other part of return or claim for refund is substantial part is determined by whether person knows or should reasonably know that tax attributable to schedule, entry or other part of return or claim for refund is substantial part of tax must be on return or refund request. For purposes of this section, a tax refund application includes application for credit against any tax that is included in guidance published in Internal Revenue Bulletin. For purposes of this section, a tax return is a return (including amended or adjusted return) filed by or on behalf of taxpayer that reports taxpayer's tax liability under Code if type of return is identified in guidance published in Internal Revenue Bulletin. A person who provides tax advice on position that is directly relevant to determination of existence, characterization or amount of an entry in a return or claim for reimbursement shall be deemed to have prepared that entry.