Filing Another Person's Taxes: Permitted or Not?
Helping a Friend with Their Tax Return: A Guide for Non-Professionals
Navigating the complex world of taxes can be a daunting task, especially when it comes to helping a friend with their tax return. Here are some key points to keep in mind to avoid any potential conflicts with the Internal Revenue Service (IRS).
Firstly, it's essential to exercise caution when offering assistance. Understanding the tax implications and potential risks is crucial before diving in. Remember, the taxpayer, not the preparer, is ultimately responsible for any mistakes in the tax return.
If you're not a certified professional, it's important to note that you are not an authorized representative during an audit. Only attorneys, certified public accountants (CPAs), enrolled agents, or similarly licensed tax professionals can be authorized representatives. To become an authorized representative for someone during an IRS audit, the taxpayer must complete and file IRS Form 2848, Power of Attorney and Declaration of Representative. This form allows you to discuss the taxpayer’s tax matters with the IRS, sign documents on their behalf, negotiate payment plans, receive and respond to IRS notices, access tax transcripts, and appeal disputes with the IRS if needed.
Family members or other third parties can only represent taxpayers in very limited situations, like answering basic IRS customer service questions. They cannot represent the taxpayer in an audit or sign forms on their behalf unless they are licensed professionals and properly authorized via Form 2848.
In the context of partnerships undergoing audits, a specific representative such as a Tax Matters Partner or Partnership Representative must be designated, usually a U.S. person with a domestic address, who can bind the partnership in IRS matters. This role has particular legal and filing requirements distinct from individual taxpayer representation.
Parents are responsible for filing their child's tax return if the child has income from a job or investments. If a child's income does not reach the mandatory level for the year, they may still be eligible for a refund, although this rule applies twice in our research.
Finding all necessary documents for a deceased relative's tax return can be a difficult process, as reported by TurboTax. If no executor or estate administrator is specified after someone's death, a survivor is required to file the tax return for the year they died, and for any preceding years they did not file.
About 60% of American taxpayers hire professionals to prepare and file their returns, according to Ohlheiser. The IRS can be given permission to talk to the preparer about the return, if listed as a "Third Party Designee."
Assisting a friend with their tax return can potentially lead to issues with the IRS if not done carefully. It's always best to err on the side of caution and encourage your friend to consult a professional if they're unsure.
Lastly, it's worth noting that the federal tax code contained nearly 4 million words by 2013, as reported by Erb, making the task of preparing a tax return even more complex.
Requirements for Becoming an Authorized Representative:
- Eligible Representative: Attorney, CPA, enrolled agent, or qualified tax professional.
- Authorization Form: IRS Form 2848 (Power of Attorney).
- Authorization Scope: Must specify tax matters and years covered.
- Submission: Mail or fax to IRS as required.
- Family Member Representation: Limited; cannot represent in audits without proper authorization.
- Partnership Representation: Specific partner or representative designated with additional legal responsibilities.
- To represent a friend during an IRS audit, one needs to complete and file IRS Form 2848, Power of Attorney and Declaration of Representative, as only attorneys, certified public accountants (CPAs), enrolled agents, or similarly licensed tax professionals can be authorized representatives.
- Family members or other third parties can only represent taxpayers in very limited situations, such as answering basic IRS customer service questions. To become an authorized representative for someone during an IRS audit, the taxpayer must complete and file IRS Form 2848, allowing the representative to discuss tax matters with the IRS, sign documents on their behalf, negotiate payment plans, and more.
