Using a durable power of attorney vs. Form 2848 in tax matters

Form 2848, Power of Attorney and Declaration of Representative, is the standard document a taxpayer uses to authorize an eligible individual to represent them before the Internal Revenue Service (IRS). It isn't the only option. The IRS also accepts a durable power of attorney, the document often prepared for financial or estate planning, when it meets the same requirements.

Why rely on a durable power of attorney rather than Form 2848? Timing. The taxpayer signs the durable document while they have legal capacity, and it stays effective after physical or mental incapacity. A taxpayer who has lost capacity can't sign a new Form 2848. Without a durable authorization, the family may need a court-appointed guardian or another fiduciary to establish authority.

What the durable document must contain

Under Reg. §601.503(b)(2), the IRS accepts a power of attorney other than Form 2848 if it includes everything §601.503(a) requires:

• The taxpayer's name, mailing address and taxpayer identification number
• The representative's name and mailing address
• The type of tax, federal tax form number, and specific years or periods, when applicable
• The employee plan number, when applicable
• The decedent's date of death, in an estate matter
• A clear statement of the authority granted

The regulations treat each tax for each taxable period as a separate matter. Broad language such as "all taxes," "all years" or "any and all tax matters" may not identify the representation specifically enough.

Two additional rules apply when a durable document takes the place of Form 2848. First, the representative must attach a signed written declaration of representative, such as Part II of Form 2848, under Reg. §601.502(c). Second, if the document is to be recorded on the Centralized Authorization File (CAF), a completed Form 2848 must also be attached. The taxpayer doesn't have to sign that attached form if they signed the durable document.

When the durable document falls short

Many durable powers of attorney are written for banking and property decisions, so they leave out the tax form number and the specific years or periods. The IRS won't accept a document missing those details when they are required for the matter. Under Reg. §601.503(b)(3), the agent named in the durable document can fix the gap by completing and signing Form 2848 on the taxpayer's behalf and attaching it to a copy of the original durable power of attorney when two conditions are met:

1. The durable power of attorney authorizes the agent to handle federal tax matters, for example, with language granting authority to perform any and all acts.
2. The agent attaches a statement, signed under penalty of perjury, that the durable document is valid under the laws of the governing jurisdiction.

This procedure lets the agent complete the IRS authorization after the taxpayer loses capacity. The taxpayer can no longer sign, but the agent can.

What a durable power of attorney can’t do

A durable document doesn't expand who may represent the taxpayer. The representative must still be eligible to practice before the IRS, for example, as an attorney, certified public accountant or enrolled agent. An unenrolled return preparer has narrower authority, limited to specified examination matters involving returns they prepared and signed.

Some acts require specific authorization, including substituting or adding a representative, disclosing tax information to a third party, using an intermediary service provider and signing a tax return. A representative can't endorse or negotiate a taxpayer's refund check. When a trustee, executor, administrator, receiver or guardian acts as a fiduciary, that person stands in the taxpayer's position and files Form 56, Notice Concerning Fiduciary Relationship.

Putting it to work

A durable power of attorney can keep IRS representation within reach after a client loses capacity, something a standard Form 2848 generally cannot do. Encourage clients to sign one while they're able, make sure it expressly covers federal tax matters and confirm it's valid under state law. When the durable document lacks required tax details, the agent submits a completed Form 2848 identifying the tax type, form number and exact periods, along with a copy of the durable document and the validity statement.