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We all rely upon powers of attorney to manage incapacity. Who will help us when we need help? Who will assist us when we need someone to help us, not actually take over? Powers of attorney are essential to make healthcare and financial decisions for us. The person making or giving the power is known as the “principal”. The one receiving the authority is known as the “agent.” The word “attorney” means substitute. I am an attorney at law. An agent under a power of attorney is an “attorney in fact.”
Lawyers, accountants and other professionals who represent taxpayers before the IRS use Form 2848, Power of Attorney and Declaration of Representative. This is the form of power of attorney that the IRS recognizes. Attorneys often prepare powers of attorney for their clients. But if a taxpayer who signed a power of attorney becomes incapacitated and cannot sign a Form 2848 for the IRS the issue becomes what is the power of attorney worth? The answer is: It depends.
The IRS will accept a power of attorney in lieu of a Form 2848 if the power of attorney includes all of the elements specified in the IRS regulations at 26 CFR §§ 601.501 – 601.509. Publication 216, Conference and Practice Requirements. Twenty-six CFR § 601.503(b)(4) discusses powers of attorney. The power of attorney must include:
1. Taxpayer’s name and mailing address
2. Taxpayer’s TIN (i.e., SSN, EIN, etc.)
3. An employee plan number, if applicable
4. Name and mailing address of the representative
5. A description of the matter or matters for which the
representation is authorized that must include, as applicable -
a. Type of tax involved;
b. Federal tax form number involved;
c. Specific year(s) or non-annual period(s) involved; and
d. Decedent’s date of death in estate matters.
6. “A clear expression of the taxpayer’s intention concerning the
scope of authority granted to the…representative(s).”
26 CFR § 601.503(a).
Powers of attorney rarely have this information in them. Only if the specific tax issue is known at the time the power of attorney is prepared will it contain this information.
Sometimes this can be managed. The IRS will accept a Form 2848, with a power of attorney if:
1. The agent individual authorized in the power of attorney
executes a Form 2848 on behalf of the taxpayer that includes
the missing information, such as the type(s) of tax, tax form
numbers, and tax periods applicable to the situation for which
the representation before the IRS is needed; and
2. The power of attorney authorizes agent to handle federal tax
matters or otherwise gives this authority.
The requirements for IRS acceptance of a power of attorney, are referenced in the Instructions to Form 2848. Or you may go to your lawyer or CPA. If a power of attorney does not authorize in some manner the agent to handle federal tax matters, then a guardian has to be appointed by the Court of Chancery. The guardian can complete the necessary Form 2848 (to authorize representation by a tax practitioner) and file the notice of fiduciary. Form 56, Notice Concerning Fiduciary Relationship.
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