Small Business Resource Guide 2002
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Home > What's New > Important Tax Changes for 2002

What's New

Important Tax Changes for 2002

Centralized Authorization File (CAF)

Purpose of Centralized Authorization File (CAF)

  • Taxpayers appoint individuals as their representatives to receive confidential tax information on a Power of Attorney (POA) or designate them as appointees on a Tax Information Authorization (TIA). The CAF contains taxpayer records, representative records, and authorization records of POAs and TIAs.
  • Three forms are used to designate a third party representative:
    • Form 2848, Power of Attorney and Declaration of Representative.
    • Form 8821, Tax Information Authorization.
    • Form 706, U.S. Estate Tax Return.


Current Operations
The CAF Program currently processes Third Party Authorization requests in Information File (TIF) and CAF database on a stand-alone database. Taxpayers appoint individuals as their representatives to receive confidential tax information on a Power of Attorney (POA) or designate them as appointees on a Tax Information Authorization (TIA). The CAF contains taxpayer records, representative records, and authorization records of POAs For more information See http://www.irs.gov/smallbiz/index.htm

Current Operations
The CAF Program currently processes Third Party Authorization requests in ten service centers. Each service center maintains its own local Taxpayer Information File (TIF) and CAF database on a stand-alone database.

Consolidation Plans

  • In July 2001, the ten CAF databases will be consolidated into a central database and reside at the Martinsburg Computing Center (MCC) and the Tennessee Computing Center (TCC). Centers that currently process through MCC will access the MCC CAF, and those that process through TCC will access the TCC CAF. This mirror processing will provide internal customers identical up-to-date data on third party representatives. Universal access will no longer be supported or required.
  • In January 2002, authorization for specific use (examples: civil penalties and Form 843) will be entered into the CAF database which will eliminate the need to resubmit authorization requests each time a third party corresponds on a specific issue.


Questions and Answers:

How is data added to the CAF File?
Only employees in the service center CAF Units can input to or update the CAF. Currently there are 10 CAF Units, one in each service center. Effective January 1, 2002, CAF input and update will centralize in two centers Ogden and Memphis. International CAF will remain in Philadelphia.

How is CAF data received from the taxpayer?
Taxpayers will file Form 2848, Power of Attorney and Declaration of Representative to authorize individuals to represent them before the IRS, and/or to receive copies of any notices sent to the taxpayer, and to receive the taxpayer's refund check. Form 8821, Tax Information Authorization is submitted to authorize individuals, corporations, firms, organizations, or partnerships to inspect and/or receive confidential taxpayer information and notices, but not refunds. Form 706, U.S. Estate Tax Return, authorizes one attorney, one accountant, or one enrolled agent to represent the estate on a limited basis and to receive notices, but not refunds.

When will CAF centralization occur?
Centralization of CAF processing input and update to Memphis and Ogden (International Philadelphia) will occur January 1, 2002. Until December 31, 2001 taxpayers and their representatives should continue to file or fax third party authorization forms to the service center where the related return was filed.

Are there any other changes to the CAF Program?
Yes! This year for the first time a number of new services were available to taxpayers for authorizing third party representatives. New services included the Third Party Designee (formerly Checkbox Authority), Oral Disclosure Consent, and Oral Tax Information Authorization.

Can you provide more information about each service?
Yes! Third Party Designee (formerly Checkbox Authority) service was effective January 1, 2001 for tax year 2000 and subsequent tax years, on all paper and e-file Form 1040 series returns, with the exceptions of Telefile returns and Form 1040X Income Tax Returns. For tax year 2000, the "Checkbox" authority was limited to the paid preparer shown on the specific Form 1040 return for tax year 2000. The authority applied only to an individual paid preparer and not to a company. The authorized third party or designee is authorized to receive information about a refund or payment, respond about information on or missing from the return, communicate with IRS in response to a math error or penalty notice. Copies of taxpayer notices are not sent to the "Checkbox" designee. The checkbox designee is also not authorized to communicate concerning issues such as: Appeals Proceedings, Collection Notices, Examination Inquires, and Underreporter Notices. The "Checkbox" designee cannot represent a taxpayer or practice before the IRS unless her or she has a power of attorney.

Effective January 2002, for tax year 2001 the "Checkbox" authority will be expanded to friends and family and business returns. The service will no longer be known as Checkbox authority, instead "Third Party Designee". Form 1040 series will include paid preparers as well as friends and family. Business returns will include all Form 94X, 720, 2290 and CT-1 returns. The business entity officer or authorized representative may appoint the bookkeeper and accountant who prepared the business return to discuss processing issues with the IRS.

A Third Party Designee cannot co-exist with a POA for the same form and tax period. Forms 2848 and 8821 authorizations have precedence over the Checkbox designation.


Two new services became available April 1, 2000 - Oral Consent and Oral Tax Information Authorization.
Oral Disclosure Consent - Allows a taxpayer to call IRS and establish Disclosure Authority for all types of tax accounts after receiving a notice from IRS. In order to establish the oral disclosure consent, the taxpayer must have received a notice from IRS and have open account issues. The taxpayer may call and designate a third party to resolve issues relative to the notice. The name and telephone number of the designee and a brief description of the issue is input on the account as a history. It is not required for the designee to have a CAF number and once an oral disclosure consent has been established, the taxpayer does not have to be physically present or on the phone when IRS disclose the tax information relative to the notice. The oral disclosure consent does not authorize a third party to receive notices, refunds, or sign waivers. The oral disclosure consent is valid until the tax related issues are resolved. A history item remains on the account for approximately 2 weeks. If the taxpayer receives subsequent notices from the IRS, he/she must call or visit the IRS and establish another verbal authorization, even if it is for the same party.

Oral disclosure consent can co-exist with a POA for the same form and same tax period. However, a taxpayer may not use oral disclosure consent to appoint a representative to act on his/her behalf. A POA (Form 2848) authorizing a third party to represent the taxpayer before the IRS must be secured in writing.

Oral Tax Information Authorization TIA (Paperless Forms 8821) - Temporary Regulations 301-6103© authorizes the IRS to accept non written requests or consents authorizing the disclosure of return information to third parties assisting taxpayers in resolving Federal tax related matters. Oral TIA allows taxpayer to call IRS and establish Disclosure Authority for all types of tax accounts. A taxpayer may designate a third party who currently has a CAF Number, to represent him by phone or in person, to receive notices and transcripts but not refunds, on open account issues. The taxpayer does not have to be physically present or on the phone when IRS discloses tax information to the third party designee based on the taxpayer's oral disclosure consent. The taxpayer's representative must have a CAF Number established; the taxpayer must know the representative's CAF Number; the designee can immediately call to discuss issues; and it's not necessary for the taxpayer to have received a notice from IRS prior to calling to establish an Oral TIA.


These procedures, especially oral third party authorization, are quite different from what I am use to regarding disclosure. Have disclosure regulations changed?
Yes. The Taxpayer Bill of Rights 2 was enacted on July 30, 1996. One provision of this law deleted the requirement that requests for disclosure to a designee be in writing. New regulations for IRC 6103© authorizes IRS employees to accept a taxpayer's verbal request or consent to disclose return information to parties assisting the taxpayer in resolving a federal tax related matter.

These new services for designating a third party are great! How does a taxpayer determine which service to use?
Perhaps an understanding of the basic differences in the three options will assist taxpayers in understanding which option to use. The Third Party Designee option is used when the return is filed. Use the Oral Consent Authority option when a notice is received that is not associated with the initial processing of the return. It's best to use the Oral TIA option for instances when account information is needed and the third party designee has a CAF number.

Am I authorized to suggest these new services to the taxpayer?
All IRS employees are encouraged to provide quality service to each and all customers. These service options for authorizing third parties to receive information and assist the taxpayer in resolving federal tax related matters are for the purpose of meeting the needs of customers.


A taxpayer submits Form 4506 and one of the boxes on Line 8 (a-d) is checked. Is Form 8821 needed to release the requested information to a third party?
In some instances, the taxpayer does not need to submit Form 8821 or 2848 along with Form 4506. To authorize IRS to release tax return information, such as a tax return transcript or photocopy, W-2 information or verification of non-filing, to a third party taxpayers only need to complete Line 5, Form 4506. The taxpayer, however, must sign Form 4506.

If the taxpayer wants tax account information sent to a third party, Form 8821 or Oral TIA is required. Tax account information includes original return information and any later changes made to the account by IRS or per the taxpayer's request. Please refer to the instructions for Form 4506 for more details.