Who May Not Sign a Personal Income Tax Return?

William Delaney, EA
Westwood, MA

Would you believe that your authorized representative may be ineligible?

In April, 2011, taxpayers Steven and Christina Levi hired an attorney to prepare their form 1040 for 2010.  On April 29, 2011, the taxpayers executed a form 2848 Power of Attorney so that their attorney could sign and file the 1040 return on their behalf.  The POA version in active use at that time was revised as of June 2008.  In box #5, Acts Authorized, it says (in part) “…the authority does not include…the power to sign certain returns…”

On the current version (Rev. July 2014), there is a place on line 5a to check a box and authorize the representative to “Sign a return.”  So, goodo, the problem has been fixed in the updated version.  Well, not so fast since it just looks as though it has been fixed.
Read on…

Back to the late-filed 2010 return.  It was processed in 2011 and then nothing happened until February 2013 (why are we not surprised at an almost two year delayed reaction) when the taxpayers were hit with a failure to timely file penalty of $4,024 and a $16,094 accuracy-related penalty for omitted income.  Ouch and ouch again!  Among other things, the Service also asserted that withholding was overclaimed in the amount of $69,970!  Triple ouch!

A Tax Court petition was timely filed (the case is silent as to what happened prior to the filing and why it was necessary to file).  See Steven N. and Christina Levi v. Comm., T.C. Memo 2015-118 (6/29/2015).  In response, the Service maintained that the taxpayers did not sign the return “in their names” and so they “failed to file” a tax return for that year.  The authority of the authorized representative to sign was refuted (the authority does not include…the power to sign certain returns).

Regulations under Sec. 1.6012-1 list circumstances under which an agent duly authorized may sign a return on behalf of a taxpayer.  These same circumstances are listed in the instructions to line 6a (Additional Acts Authorized) of the current form 2848.  They were also listed in the form 2848 instructions for the version in use during 2011.

So, it was not sufficient to execute a Form 2848 and authorize an agent or representative to sign on behalf of the taxpayers.  It was also necessary qualify under one of the specific circumstances; explain in writing to the IRS which particular circumstance applied (disease, injury, continuous absence from the U.S.); and obtain IRS approval to substitute another to sign on their behalf.
 This the taxpayers failed to do in 2011.  Failure to do so today would produce the same result, since checking a box on line 5a would not, in itself, be sufficient (see instructions to the form).  Advance IRS permission is still required.  You would think otherwise by looking at the current form, but it ain’t so!

Finally, to the issue of why the return did not “bounce” when filed, the Court said  “…an invalid return remains invalid even if the IRS accepts and processes it.”  Multiple Tax Court cases are cited as authority.  The IRS is holding all of the trump cards.

Your editor wonders if the attorney had decent E & O insurance.