IRS Having Difficulty Processing Power of Attorney Forms

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The 2021 tax season is open! It is promising to bring a host of challenges. Tax professionals are largely ready to forge ahead to help their clients get through it, but now they may have trouble getting power of attorney forms processed.

The IRS is still dealing with a backlog of millions of tax returns, including 6 million unprocessed original individual returns (Forms 1040), 2.3 million unprocessed amended individual returns (Forms 1040-X), more than 2 million unprocessed employer’s quarterly tax returns (Forms 941 and 941-X), and about 5 million pieces of taxpayer correspondence as of late December, according to National Taxpayer Advocate Erin Collins. Her prediction is there will be delays with processing Form 2848, Power of Attorney and Declaration or Representative, and Form 8821, Tax Information Authorization.

Given all the problems last year in dealing with the various changes in tax law stemming from pandemic relief programs like the Paycheck Protection Program and Employee Retention Credits, multiple rounds of Economic Impact Payments, some practitioners think this tax season may at least be a little better.

Taxation professionals are encouraging clients to do estate planning, gift planning, charitable planning and investment planning early in the year as well-first quarter if possible. The gift tax exemption now is $16,000.

The IRS has been stretched thin trying to deal with Child Tax Credits, Economic Impact Payments and other pressing demands.

According to the latest data from the Treasury Inspector General for Tax Administration showing a backlog of 8.2 million unprocessed tax returns, 4.2 million returns in suspension, and 3.6 million pending amended returns. This translates to more than 16 million returns are outstanding at the IRS with less than two weeks until the start of the new tax filing season.