MLR

Proposed regulations limit signing of power of attorney

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Under proposed regulations, the IRS is considering requiring a taxpayer to submit appropriate identification or evidence of authority when signing a Form 2848, Power of Attorney, for a limited liability company.

The IRS looks to the limited liability company (LLC) written operating agreement for guidance. If the LLC written operating agreement identifies a member who is designated as manager, then this person has the authority to bind the LLC to various agreements.

The manager would be the only member allowed to sign the Form 2848 on behalf of the limited liability company.

In addition, the IRS has the right to ask the manager for proof of this authority. The proof of authority would be a written copy of the LLC operating agreement.

An LLC can elect to have more than one manager. If that is the case, then both of the managers would be able to sign a Form 2848 on behalf of the LLC.

If the LLC does not have a written operating agreement in place, state law rules by default.

A good tax planning tip would be to always have a written operating agreement when setting up an LLC, and have that agreement spell out clearly who has authority to manage the LLC. This person will have the authority to sign the Form 2848.

Otherwise, you have to look to the state you are incorporated in for guidance in signing the power of attorney form.