Third party designee and oral disclosure: the limited alternatives to a Form 2848

The options side by side

Third party designee (the return checkbox)

IRM 21.1.3.3.1 says individual filers may authorize a designee by selecting the checkbox on a paper or electronic Form 1040, and “The designee may be any individual, including a paid or unpaid return preparer, family member, friend, or another person designated by the taxpayer.” The return shows the designee's name, phone number and a five-digit PIN the designee chose, which the IRS uses to authenticate the caller. Business returns carry similar checkboxes; on BMF returns where the paid preparer box doubles as the designee authorization, the authority applies only to the individual who signed as preparer, not the firm.

Scope. “Third-Party Designee authority is limited to the specific tax form, period of the return, and issues involving processing of that specific return.” Designees can receive and review information for that form and period and “may also provide information to support penalty abatement and reasonable cause determinations,” and the assistor may tell them the outcome. But the designee “may not discuss collection or examination proceedings,” meaning issues beyond return processing, such as an account in ACS, exam or AUR.

No representation. The IRM is emphatic: checkbox authority “does not allow the Designee any representational privileges” and does not let the designee bind the taxpayer to an extension or installment agreement. “The Third-Party Designee cannot represent the taxpayer before the IRS.”

Duration. The designation “automatically expires no later than one year from the return due date (not counting extensions)” except for Forms 709, 709-NA and 706-NA, where it expires three years from filing. It also extends to a Form 1040-X for the same year filed within that window. It ends at the taxpayer's death if death occurs within the year.

Timing and corrections. “A Third-Party Designee authorization is not valid until the return has been processed and posted to IDRS.” If the posted return lacks the checkbox or has a wrong PIN, the IRM allows the caller to fax a copy of the signed original return (or signed Form 8879 for an e-filed return) to verify; but designee information “cannot be added to or updated on Master File after the original return has been processed.”

Revocation. The taxpayer or designee can revoke early with a written statement; the IRS posts TC 971 with action code 263 and the indicator changes to 0. A revocation of a checkbox designation sent to the CAF unit is routed to the paper adjustment function (IRM 21.3.7.10.2).

Oral disclosure consent

IRM 21.1.3.3.2 explains that “Treasury Regulation 301.6103(c)-1(c) authorizes the IRS to accept both written and oral requests or consents from taxpayers that allow the disclosure of return information to third parties assisting with federal tax matters.” ODC is the oral version used during a call.

When it is available. “ODC can be obtained from either the taxpayer or Power of Attorney (POA) only if there are open account issues or the IRS issued a notice.” Asking for income or payment information to file a return is not an open account issue unless there is an open delinquency investigation. A POA can give ODC only if line 5a of the Form 2848 authorizes disclosure to third parties.

How it is recorded. The assistor confirms the taxpayer wants the IRS to deal directly with the third party until the matter is resolved and explains that the IRS may disclose all relevant information. The consent is recorded as history items on each tax module and as an AMS narrative with the designee's name, phone number and the periods. It is not recorded on the CAF. Once given, “the taxpayer does not need to remain on the call or be present during subsequent disclosures to that authorized designee.”

Duration and limits. “ODC remains in effect until the account issue is resolved.” It cannot appoint a representative: “To authorize a representative, the taxpayer must submit a written Form 2848.” The designee cannot bind the taxpayer, and the IRM says that as a policy “a taxpayer cannot use ODC to request the IRS to systemically issue and mail account transcripts and/or copies of notices, letters, or returns to an authorized third party,” although an assistor may send requested copies to your SOR mailbox or to the taxpayer's address during a call about the issue. An ODC designee can supply information for penalty abatement or payment resolution, but does not receive the abatement outcome unless the taxpayer is also on the call.

Interpreters work the same way. IRM 21.1.3.4 says the taxpayer or authorized third party must be present and give formal permission, written or oral, to disclose to an interpreter; a POA can authorize disclosure to a translator only if the disclosure box on line 5a is checked, and “A designee on Form 8821 cannot authorize IRS to disclose tax information to another third party.”

Oral tax information authorization

The IRS page on other authorizations describes the OTIA as “the verbal equivalent of Form 8821 and is valid until revoked or withdrawn,” recorded on the CAF at the taxpayer's request by calling 800-829-1040. The assistor authenticates the taxpayer, completes a Form 8821 and writes “Oral Taxpayer Information Authorization” on the signature line, then faxes it to the CAF unit, which processes it without a taxpayer signature (IRM 21.3.7.8.14 and 21.1.3.3.2). Unlike ODC, an OTIA needs no open account issue.

The comparison above is from the chart in IRM 21.1.3.3.2. An OTIA is revoked in writing like any Form 8821. See Form 8821.

When the client is on the call with you

A three-way call solves many authorization gaps. IRM 21.1.3.3 says abbreviated authentication of a representative is not required when the taxpayer completes authentication, the representative's authorization can be verified and the taxpayer clearly confirms the representative's identity. For a Form 2848 the form must already be on file, and once confirmed the taxpayer can drop off. For a Form 8821-type situation, a Form 8821 does not need to be on file: the assistor obtains ODC from the taxpayer and documents it. This is the fastest route when a new client calls with a notice and no authorization has posted yet.

How PPS treats designees and oral consent

On the Practitioner Priority Service line, IRM 21.3.10.3.1.4 says practitioners with checkbox authority may use PPS, but designees “may not negotiate on behalf of a taxpayer concerning a compliance issue,” and they are entitled to transcripts only for the periods and MFTs they hold. PPS assistors record ODC on IDRS or AMS when the taxpayer wants ongoing dialog so it is available on later calls (IRM 21.3.10.3.5). Designees and ODC holders are not transferred to ACS, because they cannot act for the taxpayer (IRM 21.3.10.5).

When you need a Form 2848 instead

1. The account is in collection (ACS or a revenue officer), examination or AUR, and you need to discuss or resolve it. The designee cannot, and ODC and OTIA holders cannot act for the client.
2. You need to agree to anything: an installment agreement, a statute extension, an exam report, a closing agreement.
3. You want copies of notices automatically. ODC does not produce systemic notices; a checkbox designee does not receive them; a Form 2848 or 8821 with the line 2 box checked does.
4. The return was processed without the checkbox or with a wrong PIN and the window to fix it has passed.
5. You need authority beyond the return year or the specific open issue.

For the choice between the two written forms, see Form 2848 vs Form 8821, or send a request through Tax Pro Account for an individual client.

Questions practitioners ask