If you’re preparing taxes for clients or if you’re trying to handle a loved one’s finances, you may need to file Form 8821. What is Form 8821, and how is it different than power of attorney? Here’s everything you need to know.
What is Tax Form 8821?
IRS Form 8821 is basically an IRS authorization form. It allows a taxpayer to authorize the right of any person or company to review their personal tax information from prior returns. The official IRS Form 8821 is a single page document and can be used to grant permission to any type of tax filing for any given year. It can also be used to revoke prior tax information authorizations.
What Does Tax Form 8821 Authorize?
Here are a few things that Form 8821 authorizes you to do:
- Receive client transcripts
- Obtain client account information
- View payments made to an account
- Verify filing status for returns
- Inspect information for the designated taxes and tax years
Form 8821 is incredibly helpful for tax professionals, but it may also be helpful for any caretaker of an elderly or disabled person.
How Long is Form 8821 Good For?
Unlike power of attorney, Form 8821 expires automatically. When you file Form 8821, you’ll have to designate a period of years in which you’re authorized access to a person’s tax information. We’ll cover this in our instructions section.
When Can I File Form 8821?
There are many circumstances in which you might want to grant permission for a third party to review your taxes, such as when you’re applying for a mortgage. However, it’s important to know the time limits placed on the different types of requests used on tax Form 8821.
If you are authorizing access to your confidential information for a reason that does not address a tax matter with the IRS (such as income verification), there is a period of 120 days by when the IRS must receive the form. If the IRS receives Form 8821 more than 120 days after the date of the taxpayer’s signature, they must submit a new form.
If the reason for submitting Form 8821 does address or resolve a tax matter with the IRS, that 120-day requirement no longer applies. For example, if you hire a tax advocate to correct a mistake on your return that is flagged by the IRS, you have more than 120 days from the signature date to submit Form 8821.
When Would I Want to File Form 8821?
Form 8821 is extremely beneficial to tax professionals, but there are a few other scenarios in which it would be beneficial to have access to a person’s tax information.
Receiving IRS Notices
If you know someone who may have difficulty receiving, responding, or understanding IRS notices, you may want to file Form 8821 so that IRS notices will be sent you, instead. This may be especially helpful if you’re taking care of an elderly person.
Providing Comfort for Care Recipients
Many people are hesitant to give power of attorney to a friend or family member because it can be highly intrusive to that person’s privacy and independence. Form 8821 makes it easier for a caretaker to assist someone with their finances without giving the caretaker all the powers afforded by Form 2848.
What is the Difference Between Form 8821 and Power of Attorney?
It’s easy to confuse tax Form 8821 with Power of Attorney because they both grant third party access to your private information. However, there are many important distinctions between the two. Unlike Power of Attorney, Form 8821 does not give the appointed individual or company permission to make decisions on your behalf.
The designee of Form 8821 is not allowed to:
- Speak on your behalf
- Disclose your information to another third party
- Advocate your position in regard to federal tax laws
- Execute waiver, consents, or closing agreements in your place
- Represent you in any other manner in front of the IRS
- Appoint another party as your authorized third party
- Negotiate your tax refund check
- Receive your refund check via direct deposit
Whereas a Power of Attorney Form could allow the appointed third party to act on your behalf by setting up an IRS online payment agreement or seeking tax abatement services, for example, Form 8821 prohibits any action other than the right to view confidential information.
What is a CAF Number?
A CAF number is a unique nine-digit identification number that’s assigned to you the first time that a third-party authorization is filed with the IRS. CAF numbers are different than taxpayer identification numbers or preparer identification numbers, and they can be assigned to an individual or a business.
We’ll cover this topic more in the next section.
Tax Form 8821 Instructions
Need step-by-step instructions for Form 8821? Follow along using the guide below to properly submit your Tax Information Authorization.[EXISTING GRAPHIC HERE]
Line: 1 Personal Information
- Fill out your personal information, including address, phone number, and taxpayer identification number (TIN). If you are granting access to a joint return, your spouse or former spouse must submit their own form 8821.
Corporation, partnership, or association:
- Fill out the name, EIN, and business address.
Employee plan or exempt organization:
- Fill out the name, address, and EIN or SSN of the organization, bond issuer, or plan sponsor. Where applicable, enter the three-digit number.
- Fill out the name, title, and address of the trustee along with the name and EIN of the trust.
- Fill out the name and address of the estate. If the estate doesn’t have its own ID number, use the decedent’s SSN.
Line 2: Appointee
- Fill out the full name of your appointee and the nine-digit CAF number for that appointee. If a CAF number has not been assigned, write NONE and the IRS will issue one to your appointee.
- You can add more than one appointee to receive and review your tax documents if you wish. Check the box on line 2 and attach a list of appointees along with their address and requested numbers.
Line 3: Tax Information
- Fill out the type of tax information, tax form number, the years or periods, and the specific matter of the tax information you are authorizing in form 8821.
- You may enter multiple years or a series of periods such as “2017 through 2020,” but you may not make blanket statements such as “all years.”
- If the authorization relates to an estate tax, fill in the date of the decedent’s death instead of the year period. If it relates to an employee plan, fill in the plan number in the description.
Line 4: Specific Use not Recorded on CAF
- The IRS collects most tax information authorizations on the CAF system, but some circumstances are not recorded. If you checked the box on line 4, your appointee should send form 8821 directly to IRS office handling your request. The box should be checked for:
- Requests to disclose information to loan companies or educational institutions.
- Requests to disclose information to federal or state agency investigators for background checks.
- Requests for information regarding the following forms:
- Form SS-4, Application for Employer Identification Number,
- Form W-2 Series,
- Form W-4, Employee’s Withholding Allowance Certificate,
- Form W-7, Application for IRS Individual Taxpayer Identification Number,
- Form 843, Claim for Refund and Request for Abatement,
- Form 966, Corporate Dissolution or Liquidation,
- Form 1096, Annual Summary and Transmittal of U.S. Information Returns,
- Form 1098, Mortgage Interest Statement,
- Form 1099 Series,
- Form 1128, Application to Adopt, Change or Retain a Tax Year,
- Form 2553, Election by a Small Business Corporation, or
- Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners.
Line 5: Disclosure of Tax Information
- You can only send copies of notices and communications to two appointees. If the IRS has prior authorized appointees for the same tax and tax years, they will stop sending notices and communications to the prior appointees. Check the box on 5a if you wish to take this action.
Line 6: Retention/Revocation of Prior Tax Information Authorizations
- If you checked the box on line 4, skip line 6. If you did not check the box on line 4, the IRS will revoke all previous tax information authorizations unless you to them not to.
- If you don’t want them to revoke prior authorizations, check the box on line 6 and attach a copy of the Tax Information Authorizations that you want to keep open.
Line 7: Signature of Taxpayer
- Sign and date the IRS tax form 8821.
- An officer with authority to bind the corporation, any person designated by the board of directors, any person with a written request from a principal officer, or any person authorized to access information under section 6103(e)(1)(D) can sign and date.
- Any person who was part of the partnership during the tax years being authorized can sign and date.
- If the plan is listed as the taxpayer, an authorized person with the authority to bind the taxpayer can sign and date.
- A trustee with the authority to bind the trust can sign and date.
- An executor with the authority to bind the estate can sign and date.
For help with submitting Form 8821, take advantage of Community Tax services for a stress-free filing season.