If you own a partnership or a limited liability company (LLC), you should consider if you need to amend your operating agreement.
IRS Chief Counsel has added to the discussion as to who can sign Form 2848, the IRS Power-of-Attorney form, for a partnership or LLC. Under proposed IRS Reg. §601.503(c), only someone duly authorized by state law to act for and bind an entity can execute the IRS POA in the entity’s name. The IRS is recommending that its employees look to the entity’s operating agreement to determine who is authorized to sign a Form 2848, Power of Attorney and Declaration of Representative. In addition, IRS employees may look to state law, which may contain default provisions that apply if the entity’s operating agreement does not address the matter. With respect to the latter option of the IRS looking at state law for default provisions, I would imagine the likelihood of that happening is VERY remote.
How does this impact you? If your partnership or LLC has an urgent tax matter and you are using a tax professional to represent you before the IRS, time may be of the essence. You do not want your tax representation unnecessarily delayed. If the IRS requests to see your entity’s operating agreement before speaking with your tax representative and the operating agreement does not authorize you to grant such authority, the IRS will not recognize the POA (Form 2848) as being valid.
Accordingly, if you own an LLC or partnership, you want to make sure that your operating agreement contains language as to who is the tax matters representative for the entity and that such person has the power to execute a Form 2848 on behalf of the entity.
If you want to discuss your business and personal tax planning and tax preparation concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
