reporting agents are service bureaus and other businesses that can handle all of your payroll duties, including depositing taxes and filing Forms 941, 941-X, 940 and 945. All too often, however, they can also default, leaving you holding the bag for your unpaid taxes and unnecessary penalties.
New guidance from the IRS is designed to help you keep tabs on your reporting agent. The new rules become effective Nov. 19, 2012. (Rev. Proc. 2012-32, IRB 2012-35)
More than boilerplate language
Before any reporting agent acts on your behalf, you must sign Form 8655. Buried in the “Authorization Agreement” portion of the form is a statement declaring that you remain responsible for ensuring that your tax returns are timely filed and your tax deposits are timely made.
Concluding that this statement isn’t enough to inform you of your responsibilities, the IRS will now require agents to provide quarterly statements to their clients. Agents can create their own statements or use an IRS-approved statement. All statements must include this information:
- You must be advised that you’re still responsible for timely filing the returns listed on Form 8655 and making timely tax deposits.
- Your authorization allowing the agent to act on your behalf doesn’t relieve you of liability resulting from the agent’s failure to perform those acts.
- You should enroll in and use the IRS’ Electronic Federal Tax Payment System to determine whether your agent has timely deposited your taxes.
- State-level verification services may also be available.
READ CAREFULLY: Statements from reporting agents may be provided to you on paper or electronically, and as stand-alone documents or included with other communications. Statements that are included with other information should have their own heading or caption and be set apart from other text.
Scope of authorization
Under the new rules, if you increase or decrease your agent’s authority, you must complete a new Form 8655. But your old authorization remains in effect, except as modified by the new authorization.
In addition to authorizing your agent to file tax returns and make deposits, Form 8655 authorizes the agent to receive tax correspondence and other confidential information from the IRS on your behalf.
Tip: To prevent the agent from hiding any wrongdoing from you, you don’t have to allow the IRS to provide confidential tax information to your agent, or allow the agent to see copies of correspondence the IRS sends you. The new rules make clear that you may strike out any nonapplicable portions of Form 8655. Finally, agents suspended by the IRS must provide you with written notification of the suspension within 10 days of the date on the IRS suspension letter.