IRS Notices - Do you understand it?

Posted 8/7/2015

What do you do when you receive an IRS notice? Generally the IRS notices or letters tell the taxpayers to take some actions to solve the problem. But, what to do if you do not even understand the letter or you simply do not want to deal with the IRS for any reason. First, you need to understand that the IRS has strict privacy rules and will not talk to anybody about your tax problems or situation without proper signed authorization. 

You have different ways to authorize a third party to deal with the IRS on your behalf:

1. Third Party Designee (Form 1040 check box). Simply by checking the box on your tax return, you can authorize your tax preparer, family member, or other person to discuss your tax return with the IRS. This option can not be used for representation.

2. Tax Information Authorization (Form 8821). You can use this form to authorize a third party to review your tax information without given representation rights. For example, this form is used by third parties to request your tax history to analyze and better understand your tax situation.

3. Power of Attorney (Form 2848). This form is usually filed to give rights of representation to a third party. This is commonly used for attorneys, Certified Public Accountants CPAs and IRS Enrolled Agents EAs to be able to act on your behalf. This might be the best way to solve your tax problems if you already are in collection,  facing an IRS audit, or you can not pay your tax liability. Consider that authorizing someone to represent you before the IRS does not relieve you of your tax responsibilities. 

4. Notice Concerning Fiduciary Relationship (Form 56). You can use this form to give authorization to trustees, executors, administrators and guardians to act on your behalf when you are an entity such as trust or estate or other person without capacity to represent yourself. It is important to note that this is different than representation because the fiduciary actually takes the position of the entity or taxpayer.

If you need tax representation, contact your tax professional authorized to represent you before the IRS.