8821 - how often

[mcbreck]

Do you make it a common practice to get a signed 8821 from each client or many clients?

Spoke with a tax attorney who casually mentioned that all clients sign an 8821. When I asked about it he said that ALL clients sign the form and then in June, July and August he pulls everyone's tax transcripts and compares them to the returns. It's part of their service, charge accordingly and it is mandatory. You have 120 days from the date of signature to file the 8821 so you can get the signature in March and upload it in July.

I don't think I want to get into that routine and I'm not sure clients want it but maybe I'll offer it. What would you charge for that? Your normal 1 hour rate?

 

[Lee B]

So what is the service being offered?

Comparing IRS records against the efiled return?

[BrewOne]

I've offered this service for the past few years, although I wait until late September, early October to make sure the IRS has all the documents.  I've caught many items, as well as seeing their 5498's and matching up 1099-R's to make sure an RMD was taken.

Most recently, a client told me in February he only had a $2,000 IRA distribution plus his Social Security so no return was filed.  I checked his transcript for 2023--it was about 90 pages long (turns out he has two brokerage accounts that were actively traded).  When I told him he needed to file he said "But you told me I didn't need to!"

I might add I don't require them to sign an 8821 to be a client, although I know preparers who do.

[mcbreck]

38 minutes ago, BrewOne said:

Most recently, a client told me in February he only had a $2,000 IRA distribution plus his Social Security so no return was filed.  I checked his transcript for 2023--it was about 90 pages long (turns out he has two brokerage accounts that were actively traded).  When I told him he needed to file he said "But you told me I didn't need to!"

If they came into the office in February, when did they sign the 8821? Did you just offer it as an option if they don't file? Did you charge for an hour of work, not charge at all, charge for 1/2 hour? (everyone has a different rate so I don't want to get into a bragging match about how high each person's rate is) I have an attorney I do her taxes in Oct and every year she's looking up 1099s on her phone in my office. I'm sure we are missing things.

 

Does it really take until October to get all the data on the transcript?

[BrewOne]

I have several years worth on one 8821, like 2020-2025 (you can go out 3 years on future returns).  I pushed getting the authorization for a couple of years in the off season to my clients and about 80% eventually responded.  Those who didn't, I encouraged them to set up their IRS account so they could take a peek at what was going on.  I don't charge for it, to me it is priceless to find out about a client's problem before the IRS goes into action.

Most 1099's, W2's are on a transcript before then, but there are K1's and whatnot that take awhile to show up.  Look too early and something might not be there yet, but wait too long and you're past the extension deadline.

[BrewOne]

And if you have a large practice, there are firms that when you check the 3rd party authorization box, will do weekly sweeps for you and alert you to upcoming IRS action (they claim something like a 6 month heads up on an audit).

[Slippery Pencil]

3 hours ago, BrewOne said:

Most recently, a client told me in February he only had a $2,000 IRA distribution plus his Social Security so no return was filed.  I checked his transcript for 2023--it was about 90 pages long (turns out he has two brokerage accounts that were actively traded).  When I told him he needed to file he said "But you told me I didn't need to!"

Did he not have a brokerage account in 2022?

[Lion EA]

John Sheeley of Tax Practice Pro is a big advocate of this. I think he makes it mandatory and charges (it was $99 many years ago) for it. You could follow him on Facebook or X or where ever and see what he's advising currently. Getting ahead of a simple IRS letter, such as a CP2000, or even an audit is one big benefit.

[schirallicpa]

Have gotten 8821s for the past 3 years and monitor clients thru IRS Solutions software.  Love that I can easily access their accounts if I need to, and can see if the IRS is throwing an flags before the client gets a notice.