Tax preparation can be daunting and tedious, with complex legal jargon at every turn. While some taxes have relatively straightforward filing requirements, others are hard to dissect. Staying on top of your taxes is easier when you don’t have much on your plate, for example, but it can get overwhelming when your business grows or if you have more responsibilities or types of income. In such instances, hiring a tax professional is extremely beneficial. Third-party tax counsel might be just what you need to settle pending debts and get your affairs in order during tax season.
Enlisting the services of a tax attorney can help prevent trouble with the IRS or having to pay hefty tax penalties. An attorney can also help you deal with a tough situation if you’re already in deep water with the IRS. They might help you set up an IRS asset seizure defense, prevent income garnishment, or represent you in tax lawsuits, as a few examples. This article looks at what third-party tax counsel is, the different types of third-party authorizations, how to grant or revoke third-party authorizations, and five reasons you should consider working with a tax professional.
What Is Third-Party Tax Counsel?
Third-party tax counsel is a legal representation in which an attorney advises you or handles tax matters on your behalf. The tax attorney acts as an intermediary between you and the IRS. They can also help you interpret IRS tax codes, prepare for audits, file returns on time, negotiate with the IRS, defend against tax lawsuits, and handle other tax-related issues for you.
The IRS requires taxpayers to grant certain permissions before a third party can act on their behalf. These permissions are called third-party authorizations. We explore the different types of authorizations you can grant your legal counsel in more detail below.
Types of Third-Party Authorizations
The type of authorization you grant your third-party tax counsel determines how much they can help you in tax matters. You can choose how much tax information to share with your tax attorney and whether they can represent you before the IRS. Here are four types of third-party authorizations:
Power of Attorney
This authorization gives your third-party tax counsel the power to represent you in federal tax matters before the IRS. It enables your tax attorney to advocate, negotiate, and sign any relevant tax documents on your behalf. Your attorney will have permission to receive your tax information, including copies of your tax notices and communication with the IRS.
Tax Information Authorization
This authorization limits your attorney’s role to receiving and/or reviewing your confidential tax information in writing or verbally for the time periods and type of tax you specify. This means they will not have the legal right to act on your behalf in tax matters. Some of the information your tax counsel is authorized to receive includes your account status and history, IRS notices (letters), and estimated tax payments.
Appointing your tax attorney as a third-party designee on your tax forms authorizes the IRS to contact them on any issue regarding your tax return. This includes missing information, math errors, and offsets on your tax return. Your attorney will have the legal right to receive copies of your tax transcripts and notices and to contact the IRS about the status of your payments, refunds, and the processing of your return.
You can authorize the IRS to disclose your confidential tax information when you bring your attorney to a meeting, interview, or phone call with the IRS. Oral disclosure limits your tax counsel’s authorization to the specified conversation and expires immediately after the meeting or phone call ends. This means you’ll need to grant your tax attorney one of the preceding authorizations for subsequent communications with the IRS.
The process for granting or revoking your tax counsel’s authority in your tax matters may differ depending on the authorization type. Below is what you should know when appointing third-party tax counsel.
How to Grant or Revoke Third-Party Authorization
You can grant power of attorney and tax information authorization through your online IRS account or Form 2848. The first option requires your counsel to submit an authorization request to your IRS account, where you can review and sign it. The second option requires you to complete and submit Form 2848 by mail, fax, or online.
Mark the “Yes” checkbox in the “third party designee” section of your tax form to assign your tax attorney as a third-party designee for a specific return period. Be sure to also enter their name, phone number, and personal identification number. The IRS maintains this information in your tax record and uses it to verify communication authorization with your third-party tax counsel.
You’ll need to state that you wish to grant the IRS oral disclosure authorization of your tax information when your attorney is present during a conversation with the IRS. The IRS will then confirm your identity and that of your counsel, issues of discussion, and the tax information they may disclose during the conversation. Here are the key considerations regarding the revocation and expiration of third party authorizations:
- Oral disclosure authorization expires immediately after your communication with the IRS ends
- The authority of a third-party designee is valid for one year after your tax return’s due date (without counting extensions)
- You can revoke power of attorney and tax information authorization by submitting a revocation request to the IRS or by authorizing a new party for the same tax issues and periods
Working with a tax professional can reduce the likelihood you will have issues with the IRS. They help you file accurate returns, maintain your tax records, protect your rights, and respond to IRS inquiries in a timely manner.
Five Benefits of Working With Third-Party Tax Counsel
Resolving tax issues may require a level of skill and finesse you don’t have, and that’s normal. It can be extremely strenuous and time-consuming to handle taxes, and it’s beneficial to seek help with these matters. The top reasons for working with a tax attorney include:
1. Tax Code Expertise
Tax lawyers have expert knowledge of IRS tax codes and keep up with tax trends at the state and federal levels. This puts them in a unique position to research IRS regulations and tax codes and apply relevant laws accurately and fairly to your tax issues.
2. Complete Confidentiality
Having third-party tax counsel guarantees attorney-client privilege. They can’t be compelled to disclose confidential information or testify against you in court during a dispute with the IRS.
A tax attorney negotiates with the IRS on your behalf and protects you against abuse, intimidation, and threatening tactics by rogue officials. They can answer letters, handle phone calls, and take care of other communications with the IRS to get you the best outcome.
4. Filing Returns
These professionals can also help you file your returns, amend them, or request a filing extension from the IRS when necessary. They also ensure your income documentation – such as your W-2s and 1099s – is submitted on time.
5. Income and Asset Protection
A tax expert can help you take the right payment and settlement measures to ensure the IRS doesn’t garnish your income or seize your assets to recover your debt. They can also help you get any current garnishes or tax liens released by the IRS.
The IRS has the legal right to claim any debt you owe the government. You can stay on the right side of the law and act in your best interest, however, by leveraging the advantages of working with third-party tax counsel.
Get Expert Help From a Tax Professional
Dealing with the IRS can be intimidating. You may not know what information to provide (or not to provide) or how to answer questions regarding your tax obligations. Rather than risk providing inaccurate information or incriminating yourself, you can appoint third-party tax attorneys like Silver Tax Group to handle your tax matters. To get started, contact us and let us know which tax issues you need help with.