On January 25, 2021, the IRS debuted an online tool to allow tax practitioners to obtain electronic signatures from clients and submit Forms 2848 and 8821 electronically. Practitioners may still mail or fax Forms 2848 or 8821 to the IRS; however, these methods require that all signatures on the Forms be handwritten and no electronic signatures are allowed. It is clear that the IRS is trying to entice practitioners to go “paperless,” but is it worth the hassle?
Forms 2848 and 8821 authorize the IRS to disclose taxpayer information to the representative(s) listed on the Forms. By signing a Form 2848, a taxpayer authorizes eligible parties on the Form to represent the taxpayer before the IRS, perform acts on behalf of the taxpayer regarding the matters listed in the Form, and receive the taxpayer’s confidential tax information from the IRS. Form 8821 gives the listed representative the authority to receive and view the taxpayer’s information.
To use this tool, a practitioner must have a working Secure Access account or they must create an account. A taxpayer and their representative practitioner may both sign a Form 2848 or 8821 electronically (Form 8821 only requires the taxpayer’s signature). Additionally, practitioners have the ability to use this online tool to withdraw from a representation. Per the IRS FAQs, an electronic signature may be as simple as “a typed name that is typed on a signature block.”
If this tool is used, and the taxpayer signs the document not in the practitioner’s presence, the practitioner may bear the burden of authenticating the taxpayer’s identity. Specifically, the practitioner bears this burden only when the practitioner does not have a “personal or business relationship” with the taxpayer.
To authenticate an individual taxpayer, the practitioner must first compare a valid government-issued photo ID to a selfie taken by the taxpayer or the image of a taxpayer seen via video conferencing. The practitioner must record the taxpayer’s Social Security number/Tax Identification Number, address, and date of birth. Finally, the practitioner must verify the recorded information with some form of secondary documentation. A bit more information is required to authenticate a business entity, such as whether the individual is in an authorized covered relationship with the entity. See IRS FAQs.
After recording the taxpayer’s name, Social Security Number/Taxpayer Identification Number, address, and date of birth, the practitioner should retain this information as it may be requested later by the IRS? As initially released, the IRS FAQs stated that the practitioner is required to retain this information for seven years. However, the most recent IRS FAQs state that practitioners should retain this information for as long as it may be “material in the administration of any Internal Revenue Law.” Practitioners should not expect to bear the burden of authentication much longer since the IRS plans to launch the Tax Pro Account sometime in summer 2021. This next generation tool will place the burden of taxpayer authentication on the IRS.
When using this tool, practitioners should be careful to abide by the taxpayer authentication record requirements and should be prepared to document such records in the client’s file. Given the authentication requirements, the practitioners might think twice about using this tool since the IRS processes Forms sent via fax at the same rate. Until there is some other substantive change in the online representation authorization process, practitioners would be wise to wait until the Tax Pro Account is released.
For questions regarding this blog post or any other tax-related matter, please feel free to contact John Crowder at (214) 744-3700 or firstname.lastname@example.org.