On September 16, 2015, a Chief Counsel’s office produced a memorandum addressing “whether a Form 2848, Power of Attorney and Declaration of Representative, should be rejected as to a representative who did not personally sign the Declaration of Representative and should the Internal Revenue Service correct the Centralized Authorization File?” The memo concludes that a person seeking to serve as a representative must personally sign the power of attorney (POA) form and that when someone else signs the form on their behalf, the signature does not authorize the non-signing individual to serve as a representative in the case.
Because we tend to pay little attention to the POA form, the advisory opinion serves as a reminder that completing the form properly has importance. The signature section for the representatives requires that the representative sign under penalties of perjury. The statement about penalties of perjury does not come immediately above the signature and can get lost in the shuffle but provides the foundation for the advice rendered in the opinion by Chief Counsel’s office. While this post will focus on the advisory opinion and signatures on the form, the opinion serves as a reminder of the power available to representatives when operating with a properly executed power of attorney. A panel in the Administrative Practice committee entitled “Back to Basics: Who Has Capacity to Sign on Behalf of the Taxpayer” at the most recent ABA Tax Section addressed these issues and another recent article provides background on these powers. In the revised Saltzman Book “IRS Practice and Procedure” treatise, issues relating to who may practice before the IRS and the POA rules in particular (including who may execute a POA) are covered in Chapter 1.08. One of the powers not always available with a power of attorney is the power to sign a tax return or other document that requires the taxpayer’s signature under penalties of perjury (See IRM 22.214.171.124.8).
An undisclosed law firm apparently handles a high volume of research credit refund cases. The names of three members of the firm appeared on the POA. Two of the three individuals signed their own names. Additionally, one of those two individuals signed their own name “on behalf of” the third individual who did not personally sign the POA form. Apparently, in this practice the third individual was out of the office routinely and a regular practice of the other members of the firm involved signing POAs on behalf of the third individual. The revenue agent handling the examination of the research credit issue in a case in which this POA was submitted requested advice concerning the validity of the POA. Because of the disclosure provisions restricting IRS employees from giving taxpayer information to unauthorized parties, the issue of the validity of a POA has a direct impact on the employee. A violation of the disclosure provisions can subject an IRS employee to severe sanctions. Making certain the correctness of a POA and carefully checking POAs is something all IRS employees are taught to do (at least they were when the IRS had funds for training.)
The Centralized Authorization File (CAF) has responsibility for inputting POA on the IRS computer system so that any IRS employee can quickly determine whether an individual has the authority to speak on behalf of a taxpayer and receive taxpayer information. In this case the CAF unit had accepted the POA signed by someone else on behalf of the unidentified third individual and by implication in all of the other cases in which POAs were submitted in which someone else signed the POA on behalf of the unidentified third individual at issue in this case. Acceptance of the POA by the CAF unit would mean that the IRS computer would show all three individuals as authorized to give and receive information for the taxpayer; however, something caused the revenue agent handling the case to question the authority of the signature by another. Here, the signature clearly showed that the third individual did not sign the POA. The representatives made no attempt to hide the fact that the third individual did not actually sign the form.
With a few exceptions, the CAF unit is located in the Memphis Service Center for taxpayers east of the Mississippi and in the Ogden Service Center for those living west of the Mississippi. The Philadelphia Service Center handles international forms. To learn more about how you got your CAF number and the functions of the CAF unit check out the Internal Revenue Manual provisions describing the function and its duties. As POAs come into the CAF unit, it must review them and load them onto the computer system. As it goes about the process of loading the POAs onto the IRS computer system, the employees at the CAF unit are charged with the responsibility of reviewing the POAs to insure that all of the necessary information is provided on the form. The IRM directs the CAF unit to review the forms for five essential elements.
During the time I have been submitting POAs, I have observed that the CAF unit has slowed down a bit in the time it takes for it to input a POA. Until it does so, it is not possible to pull up information on eServices. I do not say that it has slowed down to be critical of the CAF unit because I suspect that the budget issues impacting the IRS have had their effect on the CAF unit as well but the advertised three day time frame for loading in a POA is a thing of the past. The National Taxpayer Advocate has written about the CAF unit on several occasions because of its critical function as a focal point for representatives to get their names into the system and in 2012 made it one of the most serious problems. These behind the scenes operators, however, have an impact on the processing of the case because until they have time to load the POA forms you must wait to obtain information from the IRS or face the daunting task of calling. In collection cases the failure to load the POA can cause the IRS to contact the taxpayer in violation of Fair Debt Collection Practices Act provisions of the Internal Revenue Code.
To answer the question of whether a third party can sign the POA for a representative, something the CAF unit and others at the IRS had apparently not asked in the decades of existence of this process, the author of the advisory opinion, Michael Hara, the keyboard player for the world-renowned Chief Counsel rock band The Traveling Helverings, looks to the procedural regulations governing the POA process. (Their song list also does not yet include a title focused on POAs. Perhaps their most appropriate title for this discussion is, A Government Job). The code does not dictate the POA process or issues such as who can sign the form.
Statement of Procedural Rules at 26 CFR 601.502(b) provides that an individual seeking to represent a taxpayer enter an appearance before the IRS by filing:
- A power of attorney or tax information authorization permitting the holder to perform certain acts or to receive confidential tax information, and
- A practice declaration, which is a declaration that the person is recognized to practice before the Service.
Section 601.502(c) builds on this language and provides that the representative must attach the following statement to the power of attorney form:
- I am not currently under suspension or disbarment from practice before the Internal Revenue Service or other practice of my profession by any other authority;
- I am aware of the regulations contained in Treasury Department Circular No. 230 (31 C.F.R. part 10), concerning the practice of attorneys, certified public accountants, enrolled agents, enrolled actuaries and others);
- I am authorized to represent the taxpayer(s) identified in the power of attorney; and
- I am an individual described in 601.502(b)
The POA form itself contains a declaration that the representative must sign under penalties of perjury that tracks the language in the procedural regulation. Nothing in the code or the regulations provides the authority for someone other than the representative to sign the declaration under penalties of perjury on behalf of the representative. The advisory opinion notes that the rules protect the IRS. Because the regulation states that the representative “must” sign the declaration and because no authority exists allowing someone else to do it, the advisory opinion concludes that the POA signed by someone other than the representative does not meet the requirements necessary to become a valid POA.
The result does not come as a surprise but may cause a change in the practice of executing the POA form by some practitioners. Because of the long wait times involved in getting to the IRS either in waiting for the CAF unit to load the POA or in waiting on the phone to talk to an individual, you do not want to endure the wait only to have the IRS reject the POA and send you scrambling back to your client to execute another form. The practice of who signs the POA is just one of several items on that document that can trip up a practitioner who does not pay careful attention to the information requested on various lines and boxes. This advisory opinion may cause the workers in the CAF unit and in other IRS posts of duty to pay more careful attention to POAs which could mean more trips back to the client to sign a second version.