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Any estate plan should have a power of attorney that allows you to authorize one or more individuals to act on your behalf when you cannot. Any estate planner and estate planning guide will tell you this. Few will tell you that there are at least two major cases where the Power of Attorney (POA) is not recognized and followed.
The Internal Revenue Service (IRS) and Social Security Administration (SSA) do not recognize traditional POAs. Your agents can own a POA that’s gold-plated for any other purpose that doesn’t help with these two agencies.
The IRS insists that it receive a 2848 Power of Attorney and Representative Declaration Form before allowing anyone to act on your behalf. The form was created primarily for registered agents, lawyers, and accountants to represent their taxpayer clients in audits and negotiations with the IRS. But it is also required for an agent, even a relative, to try to manage your tax affairs when you cannot.
One of the tricks about Form 2848 is that you must include the tax matters and years that the agent is authorized to trade. A traditional POA for handling financial affairs often includes blanket statements that allow the agent to take one or more action on specific matters on your behalf.
On Form 2848, you must include the type of tax, the IRS form number, and the year or time periods concerned. Most people are required to at least list income, estate, and gift taxes and related forms that you have submitted in the past and may submit in the future. If in the past or in the future you have had to file other forms or deal with other types of taxes, they must be listed on the form for the agent to take action on your behalf.
You can list future years in the POA. However, the instructions seem to suggest that you need to specify specific years. They state: “Don’t use a generic reference like“ All Years ”,“ All Periods ”, or“ All Taxes ”. The IRS will return each power of attorney with a general notice. “You can use hyphens or words like” through “and” through “. For example, your Form 2848 may authorize someone to act on your behalf for the 2015-2030 tax years.
But there is another trick. The IRS enters the data from Form 2848 into its computer database known as the CAF system. The system is used by IRS staff to quickly determine if there is a valid Form 2848 for someone to act on your behalf. However, the IRS will not enter the system for years more than three years in the future when the form is received.
Another trick of the form is that for a married couple filing joint tax returns, each spouse must fill out and sign a form separately. You cannot run a shared form.
Technically, the IRS can accept other POAs. The instructions on Form 2848 say so. However, the POA must meet all of the requirements on Form 2848 to be accepted as a replacement. I imagine most POAs don’t because they don’t provide specific years and tax forms on which a person can act on your behalf. Whether or not an alternate POA is accepted also depends on the IRS representative you are dealing with. I’ve been taking care of my parents’ financial affairs for a number of years after they entered assisted living. The staff I dealt with made it clear that they only wanted to see a Form 2848. I also had to send copies of the forms at least three times. Apparently they were not entered into the CAF system.
The SSA takes a similar approach. As I researched my latest book “Where’s My Money?” Learned: Secrets To Getting The Most From Your Social Security The SSA clearly states on its website that it does not recognize POAs. If you need someone to manage your social security benefits, contact the SSA and designate a representative payee beforehand.
This feature, created in accordance with the 2018 Law, allows you to choose one or more people to manage your social security benefits. In most cases, the SSA then has to work with the named person (s). You can name up to three people as preliminary representatives and arrange them according to priority. If the first one is not available or cannot perform the role, the SSA moves to the next person on the list.
Someone who is already receiving social security benefits can appoint a pre-commissioner at any time. Someone who claims benefits first can name the proxy during the application process.
The agent can be appointed through your My Social Security account on the Social Security website or by contacting the SSA (800-772-1213) or the local office by phone. Designated Individuals may also be named via email using Form SSA-4547 – Predestination of Representative Payee.
You can change the agent at any time.
The SSA first evaluates an agent and determines the suitability of the person to act on your behalf. After acceptance, an authorized representative becomes the representative payee for your services. The payee receives the benefits on your behalf and must use the money to pay for your current needs.
Representative payees generally need to be individuals, but a representative payee can also be a social assistance agency, nursing home, or one of several other organizations recognized as payees by the SSA.
If you don’t designate a representative, the SSA will designate a representative payee on your behalf if it determines that you need help managing your money. Relatives or friends can apply to be representative payees, or the SSA can select someone.
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