CCA 1105041: Presentation materials explain third-party authorizations and bypassing representatives

Plain-English summary

Chief Counsel advice supplied presentation materials about third-party authorizations used in dealings with the IRS. The materials distinguish tax information authorizations from powers of attorney, describe the information each authorization must contain, and identify people who may practice before the IRS. They also explain when an IRS employee may bypass a representative who unreasonably delays or hinders an examination, collection, or investigation. The document is educational guidance and does not resolve a taxpayer-specific tax liability.

Ruling snapshot

• Question: What are third-party authorizations, who may represent taxpayers before the IRS, and when may the IRS bypass a representative?
• Outcome: Advice given.
• Key authorities: 5 U.S.C. § 500; 31 U.S.C. § 330; 31 C.F.R. part 10 (Circular 230); sections 601.501(b)(9), 601.501(b)(13), and 601.502 of the Statement of Procedural Rules.

Full text (IRS public release)

ID: CCA-628390-10 Number: 201105041
Release Date: 2/4/2011
Office: ----------
UILC: 9999.00-00

From: -------------------------
Sent: Wednesday, June 2, 2010 8:39 AM
To: -----------------
Cc:
Subject: Third Party Authorizations

As requested, attached is a document on third party authorizations that can be used in
your presentation of the topic to your employees. Please note: The text of the
document has been copied into this email below.

        THIRD PARTY AUTHORIZATIONS
                                     February 2009

                 What Is A Third Party Authorization

A third party authorization is a signed document and/or an oral
statement made, by a taxpayer, granting a third party the
authority to perform specified acts relative to specific tax
matters on behalf of the taxpayer.

             Examples of Third Party Authorizations

Third Party Authorizations include:

• Tax information authorizations

    ►      Written (Form 8821)
    ►      Oral
    ►      e-Services disclosure authorization
    ►      Third party designee (aka Checkbox)

• Powers of Attorney (Form 2848)
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           Tax Information Authorizations

Permits designated third party to inspect or receive return or
return information

• Designee always entitled to inspect or receive return

• Taxpayer cannot compel disclosure of return information; designated IRS official
must withhold return information if disclosure if will seriously impair tax administration

                 Tax Information Authorizations

REQUIRED ELEMENTS

• Taxpayer’s Identity
• Identity of Designee
► May be an individual or other person
• Type of return (or portion of return) or return information to be
disclosed

                           Power of Attorney

A taxpayer may either represent oneself or, with proper written
authorization, an individual authorized to practice before the IRS
represent the taxpayer.

                             Representation

Acts performed on behalf of a taxpayer by a representative in
practice before the IRS

Section 601.501(b)(13), Conference and Practice Requirements, Statement of
Procedural Rules

                       Practice Before the IRS

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• The Secretary of the Treasury is authorized to Regulate Practice
Before the Department of Treasury
► 31 USC § 330(a)(1)

Regulations governing practice before the Internal Revenue Service
► 31 CFR part 10 (Circular 230)

                        Practice Before the IRS

Practice before the Internal Revenue Service comprehends all matters connected with a
presentation to the Internal Revenue Service or any of its officers or employees
relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations
administered by the Internal Revenue Service. Such presentations include, but are not
limited to, preparing and filing documents, corresponding and communicating with
the Internal Revenue Service, rendering written advice with respect to any entity,
transaction, plan or arrangement, or other plan or arrangement having a potential for
tax avoidance or evasion, and representing a client at conferences, hearings, and
meetings. Circular 230 §10.2(d).

                        Practice Before the IRS

                      Outside the United States

• Circular 230 § 10.7(c)(vii) authorizes any individual to represent any
individual or entity who is outside the United States before IRS personnel
when that representation takes place outside the United States

• A foreign person must be represented by a person eligible to practice
before the IRS when the representation takes places within the United
States

                            What is Practice?

Practice Before the IRS includes:
• negotiating with the IRS on behalf of the taxpayer
• advocating the taxpayer’s position to IRS official or employees
• offering or executing a waiver of restriction on assessment or collection of a
deficiency in tax
• offering or executing a waiver of notice of claim disallowance
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                                      What is Practice?                 continued

Practice Before the IRS includes:
• executing a consent to extend the period of assessment or collection of tax
• executing a closing agreement
• receiving a check drawn on the United States Treasury with respect to a tax
• signing a tax return

              Admitting a Representative to Practice

Attorneys and CPAs have a statutory right to represent persons
before the Internal Revenue Service
► 5 USC § 500

• The Secretary may admit other individuals to practice
► 31 USC § 330(a)(2)

                 Qualifications of a Representative

 Before admitting a representative to practice, Secretary may
 require the representative to demonstrate
        good character
        good reputation
        necessary qualifications to enable the representative to provide persons
          valuable service
        competency to advise and assist persons in presenting their cases

                  Who may Practice before the IRS

Persons eligible to practice before the IRS:
 attorneys • CPAs enrolled agents • enrolled actuaries enrolled retirement

•government officers plan administrators or employees• state officers or
•others eligible to practiceemployees under Circular 230 §§ 10.5(d) or 10.7

Circular 230 § 10.3
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                         Power of Attorney

A document signed by a taxpayer by which an individual is
appointed as attorney-in-fact to perform certain specific act(s)
on behalf of the principal.
Section 601.501(b)(9), Conference and Practice Requirements, Statement of
Procedural Rules

                         Power of Attorney

REQUIRED ELEMENTS
● name and mailing address of the represented party;
● identification number of the represented party (i.e., social security number and/or employer
identification number);
● employee plan number (if applicable);
● name and address of the recognized representative(s);
● description of the matter(s) for which representation is authorized
● a clear expression of the taxpayer’s intention concerning the scope of authority granted to the
recognized representative(s)
● Declaration of Representative

                     Declaration of Representation

Statement made under penalties of perjury
► Not currently under suspension or disbarment from practice before the
IRS
► Aware of the regulations contained in Circular 230 (31 CFR Part 10)
► Authorized to represent the person identified for the matters specified in
the power of attorney
► Individual described in Section 601.502((b), Conference and Practice
Requirements, Statement of Procedural Rules

             Bypassing a Taxpayer's Representative

Where a recognized representative has unreasonably delayed or hindered an
examination, collection, or investigation by failing to furnish, after repeated request,
nonprivileged information necessary to the examination, collection or investigation,
the Internal Revenue Service employee conducting the examination, collection, or
investigation may request permission from his/her immediate supervisor to bypass the
representative and contact the taxpayer directly for such information

                     Bypass – Unreasonable Delay

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May be necessary to bypass the representative if the representative
repeatedly:

fails to provide the taxpayer's records or information upon request
fails to return telephone calls or respond to written correspondence
cancels scheduled appointments at the last minute without timely notification
requests extensions of time beyond established deadlines for submitting requested
records or information

♦ Do not bypass a representative simply because you wish to interview the taxpayer

                  Bypass – A Two-Step Process

• Warning
► Document actions
► Letter 4016–A, Bypass Warning Letter (Power of Attorney)
► Do not notify taxpayer

• By-Pass
► Letter 4016–B, Bypass Letter (Power of Attorney)
► Notify representative and taxpayer of ByPass
► POA continues to represent taxpayer and you must continue to send copies of all
correspondence with the taxpayer to the representative

             For more information, please contact:

                       Office of Chief Counsel
                    Procedure and Administration
                        Phone: (202) 622-3400

                         Office of Chief Counsel
                         General Legal Services
                         Phone: (202) 927-0900

Attachment 1