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IRS Recently Revised Form 2848 – Power of Attorney

The IRS recently revised Form 2848, Power of Attorney and Declaration of Representative, and instructions. While the instructions to the revised form do not preclude using the prior version of the form, it is recommended that Tax professionals familiarize themselves with the revised form and begin using it.

Notable changes to Form 2848 include:

Part I -- Representatives/Notices and communications

 Line 2 of Form 2848 is to identify those individuals who are being authorized to represent the taxpayer. The information set forth on Line 2 includes the representative’s name, address, and other contact information. In addition to providing each representative’s Centralized Authorization File (CAF) number, the form now requests the preparer tax identification number (PTIN), where applicable.

In addition, Line 2 contains check boxes whereby two representatives  may receive copies of notices and other written communications. If the boxes are not checked, then the representatives will NOT receive copies of notices and other written communications the IRS sends to the  taxpayer.

Part I -- Acts authorized/Receipt of refund checks

Line 5 of the Form 2848 sets forth the authorized actions of a representative. The Form 2848 also contains certain actions that are not authorized to be undertaken by the representative unless specifically authorized by the taxpayer.

The actions that require specific authorization include substituting representatives, allowing the IRS to disclose tax return information to third parties, or signing certain returns. The revised Form 2848 contains boxes a taxpayer can check to indicate the taxpayer’s authorization for the representative to perform these actions.

Line 5 also makes clear that the representative is not authorized to receive or negotiate any amounts paid to the client in connection with representation, including refunds by either electronic means or paper checks.

Part I -- Identification/Signature of taxpayer 

Provides that if a joint return has been filed, each spouse must execute his or her own power of attorney

on a separate Form 2848 to designate a representative, even if the same representative is being appointed.

Part II -- Declaration of Representative  

 A new designation “(i)” has been added for “Registered Tax Return Preparer.” Additionally, the designations for student attorneys and student certified public accountants (CPA) have been combined into one designation “(k).”

The representative is also required to provide in addition to his or her licensing jurisdiction, the “License/Bar or Enrollment Number” where applicable.

The updated Form 2848 and corresponding instructions are posted on the IRS website.

Read more at: Tax Times blog

Groupons…anotheir State Sales Tax Headache

The Groupon and other online voucher sites have created some interesting tax consequences.

How much is the sales price and who should pay it?

Florida seems to have taken the position that the merchant is responsible for tax on the original price of the goods the purchaser of the voucher is entitled to receive.

As a secondary issue, there may be some escheat / unclaimed property issues you or your client may not be aware of or never even imagined.

For more information go to Florida Tax Law Blog

Read more at: Tax Times blog

Another Exception To Disregarded Entity Treatment

A new exception now has been added to the list.

Under final regulations issued under Section 881, the IRS can treat a disregarded entity in a financing structure as a person separate from its owner (that is, as a non-disregarded entity), in determining whether a financing arrangement exists that should be recharacterized under the multiple-party financing rules of Code §7701(l) and Treas. Regs. §1.881-3.

These rules allow the IRS to disregard the participation of one or more intermediate entities in a financing arrangement and recharacterize the financing arrangement as a transaction directly between other parties. It will often be applied where intermediate entities are employed by taxpayers to obtain treaty or other tax benefits that would not be available if a financing transaction was directly conducted between the ultimate lender and borrower.

T.D. 9562, 12/08/2011; Reg. § 1.881-3

Read more at: Tax Times blog

Moving Accounts To Non Complying Banks -2012's Loophole?

Great article by Dick Harvey on FATCA. Will taxpayers defeat FATCA by moving their foreign accounts to foreign banks which don’t care if they can’t sell US securities? They may decide not to cough up the names and SSN’s of their “U.S. persons.” Those banks will be known as NP-FFI’s: non-participating foreign financial institutions.

Offshore Accounts: Insider’s Summary of FATCA and its Potential Future


Since its signing by President Obama on March 18, 2010, the Foreign Account Tax Compliance Act (FATCA) has been criticized by many in the financial community. As one of the architects of FATCA, the purpose of this article is to: (i) describe my perception of the origins of FATCA, (ii) discuss selected issues, and finally (iii) make recommendations that may ultimately be helpful to insuring FATCA’s success in both the short and long-run.

The article is written for several audiences. The entire article should be of interest to students and academics. For tax professionals and my former colleagues in government, the recommendations in Section 4 should be of most interest.

Since 2007 the US has made significant progress in addressing offshore accounts through a combination of tools, including the threat of FATCA. FATCA was a bold, unilateral action by the US intended to ultimately provide transparency surrounding offshore accounts of US taxpayers. However, FATCA will take time to successfully implement and there will be growing pains.

The long-term success of FATCA may depend upon whether the US can convince other countries to adopt a similar system, or better yet, join with the US in developing a multilateral FATCA system. Thus, as the IRS and Treasury implement FATCA they need to focus on the long-term goal. In the short-run various compromises will need to be made to ease the initial implementation of FATCA. Some of those potential compromises are discussed in this article. In addition, a multilateral FATCA system and the related benefits are discussed.

Finally, financial institutions worldwide should seriously consider attempting to help forge an international consensus. Although financial institutions will clearly incur substantial costs from FATCA, those costs may pale in comparison to the future costs that could be incurred over the next 5 to 20 years as other countries implement their own specific systems. It would be substantially cheaper for financial institutions if there is one global standard, rather than ultimately building separate FATCA type systems for each country.

Number of Pages in PDF File: 27
Keywords: FATCA, Offshore Accounts, Foreign Account Tax Compliance Act, Qualified Intermediary, and Voluntary Compliance Initiative

Read more at: Tax Times blog