The State Tax Power of Attorney allows an individual, usually an accountant, tax attorney, or other certified persons, to file taxes on behalf of an individual or an entity. The Form allows authorized individuals to discuss tax matters with the IRS for a given period, as outlined in the Form.
By definition;
A ‘State Tax Power of Attorney Form’ is a legal document that is used by one party to confer to another party the power to file tax returns and manage one’s finances.
This form is issued by the tax departments of the various states and is subject to some unique rules and regulations.
The party authorized to file taxes on behalf of the entity or individual with the Internal Revenue Service must fill in Federal Taxes IRS Form 2848 (Revised Dec 2015)
The form is used to prepare, sign, execute, file, and inspect the returns and reports of the taxpayers. It is the agent (the person who is appointed to act on behalf of a taxpayer), who carries out these responsibilities after receiving these powers officially.
Not everyone can be allowed to fill in form 2848, according to IRS.
Those permitted by IRS include:
- Attorneys
- Enrolled agents
- Family members
- Officers
- Certified public accountants
- Enrolled actuary
- Un-enrolled return preparer
- Full-time employees
- Registered tax return preparer
- Enrolled retirement plan agent
- Student attorney or CPA
Understanding State Tax Power of Attorney
It is important to understand the state tax power of attorney, i.e., when to use it and what is expected of the you after granting the POA. Below is a guide on when to use the document and what you should know after granting the POA:
When to use a State tax POA
Any person/entity looking to grant another party legal right to their tax information should consider using form 2848.
Although granting POA to another party can be very helpful at times, careful consideration should be taken. Granting POA does not necessarily absolve the taxpayer of tax obligations; rather, it simply implies that they have appointed someone else to take charge of certain tax matters. It is important to note that attorneys and other certified tax professionals are usually held to precise legal standards that other persons, e.g., friends and family are not. As such, if you are looking to keep your tax information private and prevent it from getting out, it is recommended that you don’t ask your friends and family to handle your tax matters; rather, consider hiring a certified professional.
Some of the common reasons to use a STPOA are as follow:
- Squeezed schedules- The remittances of the various taxes happen within specified timelines which must never be skipped. To stay away from the adverse consequences that arise with the skipping of these deadlines, you want to put in place measures to prevent the same. Choosing and using this form is hence advisable if yours is a squeezed schedule.
- Internment- Are you just about to serve a prison term? You will still have to pay some taxes, especially on your real estate property. Since you will not be able to do so on your own while in prison, you have to acquire and make use of the state tax power of attorney form.
- Overseas travels- By traveling overseas, you will not be able to keep paying your taxes locality. In the meantime, you will have to appoint someone else to pay the taxes for you. The state tax power of attorney form will yet again come to your rescue. It lets you delegate the role to a third party.
- Lack of expertise- Some tax forms are way too complicated to handle alone. You definitely have to appoint someone, who obviously has the required expertise to do the trick. This person in many cases is someone who is well-versed with matters of taxation and is hence well-able to do a good job.
- Chronic illness- Some chronic illnesses also render one incapable of fulfilling his normal duties. If you happen to be affected by these illnesses, you will yet again have to appoint a proxy to act on your behalf. The form will prove a handy companion at such times.
No matter who is chosen as the representative, the taxpayer should still expect to stay involved throughout the process. Granting POA to another party does not mean that they are exempt from all the responsibilities- they’ll still have to ensure that the deadlines are met and are still legally responsible for ensuring that the representative has done everything that needs to be done according to the IRS. As such, they must keep an open dialogue with the representative to ensure that everything runs smoothly.
Who can be your state tax POA?
Different states impose different rules and regulations regarding who qualifies to be given this power. These differences notwithstanding, there are some ‘universal’ requirements. At the very minimum, the person has to be a US citizen, aged 18 and above, be of sound mind, and trustworthy enough to handle confidential financial tasks.
Can a POA sign tax returns?
Anyone granted POA according to the updated form 2848 cannot sign basic tax returns unless otherwise noted. They cannot add or substitute other representatives or receive checks either. According to the updates form 2848, the representatives’ rights include receiving and inspecting confidential tax information, signing consent and waiver, and other similar taxpayer acts unless otherwise stated in the Form.
Types of Taxes an STPOA Can File
Taxation regimes vary greatly from state to state. These variations determine to a great extent the kinds of taxes that an STPOA can file. Regardless of these variations though, there are some taxes that are remitted in just about every other state. They are stipulated hereunder:
- Personal Income Tax- This is a tax that is levied on the salaries, wages, interests, and dividends which a taxpayer earns year-round. The tax is imposed by the state in which the said income earner resides. Its actual rate varies from state to state and from time to time.
- Corporate Income Tax- A corporate tax is much like an income tax. It is however levied on a corporate entity rather than an individual. Like the personal income tax, its actual rate varies from time to time and state to state. It is hence a good thing to get to know the existing laws that govern it.
- Sales Tax- Unlike personal income and corporate taxes, the sales tax is imposed on the goods and services that are sold or on the receipts from the sales revenues. This tax is perhaps the most varied in the sense that its actual rate may be set at the county rather than the state level.
- Real Property Tax- Lastly comes the real property tax. This is an annual tax on real estate property. It is almost always a local tax and is fixed with regard to value. The tax may be suspended in case of capital transfers and exclusions.
Free State Tax POA Forms (by State)
Legal Considerations
The legal considerations for the State Tax Power of Attorney are as follow:
- Existing state laws- Your first and foremost consideration should be the existing state laws. The laws that govern the granting of these powers vary greatly from state to state and sometimes county to county. It is necessary to know about the rules that govern the issuance of these forms in your state for the avoidance of doubt.
- Laid-down Procedures- Other than the laws, the procedures that have to be followed to actualize the power transfer also come in handy. You yet again have to acquaint yourself with these procedures to see to it that you do a comparatively good job.
- Timelines- In most states, this form has a strict timeline within which it may be in force. It is yet again a good thing to know the restrictions that govern the timelines. You want to do everything in accordance with the law and to avoid the possibility of ruffling feathers with the relevant state authorities.
- Lawyers- Though lawyers are really not necessary in the entire process, you will find them quite handy and useful among the way. That is because the lawyers generally help to simplify those tough concepts and ensure that you enter an agreement that you fully understand.
- Official Documents- It is necessary that you work only with official documents. Many states do not recognize any other form than that which they themselves produce. You do not want to risk your own life by choosing to work with a form that is not really going to be acknowledged and recognized.
Frequently Asked Questions (FAQs)
The IRS does not process a POA that includes more than three years. If one needs to grant a POA covering more than three years, they may need to sign multiple forms simultaneously. A POA can usually be prepared up to two years in advance, starting Form the last year of actual filing.
Yes. You can sign your mom’s tax return as her representative, that is if she does not have a surviving spouse. You will have to attach a signed Form 56 with the tax return.
Key Takeaways
Granting POA to another individual does not imply that the taxpayer has no responsibilities or requirements, but instead, another individual is permitted to take charge of their tax issues. Therefore, during the entire process, one must involve themselves to ensure that the taxes are filed on time and are filed according to the IRS standards to avoid inconveniences.
