What’s a third party designee for taxes?

Your Guide to State, Local, Federal, Estate + International Taxation

third party designee, IRS, refund, tax, tax returnThe April 18 tax deadline has come and gone. Tax returns have been filed and now it’s just a waiting game for the refund. The IRS website says that a typical refund should be received within 21 days if e-filed and 6 weeks if mailed. What happens if it has been longer? Well, the IRS has a nifty “Where’s My Refund?” tool on their website to check the status of the return. But what if the status of the refund says “in process” a month or two after it should have been received? Looks like it is time to call the IRS and see what is going on. This is where the Third Party Designee comes in.

We have set up in our firm that any employee of the CPA firm designated on clients’ Form 1040 return can call the IRS on behalf of the client to check on the status of their refund. The Third Party Designee’s authority lasts for only one year from the due date of the return and is limited to issues involving processing that specific return. This is often referred to as “Checkbox Authority,” or like one of the fabulous partners here likes to say, “Under the check the box thing”. (Like I’m supposed to know what that means, right?)

There is one big caveat though….not all IRS agents fully understand what the Third Party Designee means (and neither did I, until today). The partner above (no names and I did say fabulous!) had me call the IRS twice so that I could speak to two different agents in order to talk with one who knew what the Third Party Designee was. Another issue with Third Party Designee is that many IRS agents think it is only for the paid preparer who signed the return; however, this isn’t true and many tax accountants have had to bring up the Internal Revenue Manual (IRM) section paragraph 9, which states otherwise.

Here are some additional things to keep in mind when using the Third Party Designee:

  • When calling on a married filing joint account, the designee only needs to provide the TIN of the taxpayer who authorized them to act on their behalf.
  • Third Party Designee authority expires with the taxpayer’s date of death if the death occurs during the one year period.
  • Authority granted on the client’s Form 1040 extends to their amended return, 1040x, if within the one year period of original due date.
  • The Third Party Designee cannot represent the taxpayer before the IRS. A POA is required.

For more information on Third Party Designee, click here.

Stacy Redmond