A reporting agent is a payroll service provider that you authorize, using IRS Form 8655, to file certain federal employment tax returns and make federal tax deposits for your business. The authorization is narrow on purpose: the agent handles the mechanics of filing and paying, but your business remains liable for the underlying taxes and any penalties if something goes wrong.
What a Reporting Agent Is Authorized to Do
Once Form 8655 is on file, the agent can prepare, sign, and electronically file your federal employment tax returns and send the corresponding deposits through the Electronic Federal Tax Payment System (EFTPS). The IRS requires reporting agents to file electronically and to make deposits through EFTPS, which lets them process payments in bulk across many clients.
On the return side, Form 8655 covers the core payroll and withholding filings:
- Form 940, annual federal unemployment tax
- Form 941, the quarterly employer return for income tax withholding, Social Security, and Medicare
- Form 943, the annual return for agricultural employees
- Form 944, the annual return for small employers who qualify
- Form 945, for withheld federal income tax on nonpayroll payments
- Form 1042, withholding on U.S.-source income of foreign persons
- Form CT-1, the employer’s annual railroad retirement tax return
Deposit authority extends further, to Forms 720, 1041, 1120, 990-PF, and 990-T.1Internal Revenue Service. Form 8655 – Reporting Agent Authorization The form also authorizes the agent to receive duplicate copies of IRS notices tied to the covered accounts and to provide the IRS with information supporting penalty relief requests.2Internal Revenue Service. About Form 8655, Reporting Agent Authorization
What the authorization does not do matters just as much. A reporting agent cannot represent you in an audit, appeal, or collection dispute. The role does not cover your income tax returns. And it grants no authority over state or local payroll taxes.
How You Authorize One
You fill out Form 8655 with your business name, address, and Employer Identification Number, then specify which forms and tax periods the agent may handle. The agent supplies its own business name, EIN, and contact information. Separate lines on the form let you grant signing and filing authority, deposit and payment authority, and disclosure authorization for W-2 and 1099 information returns independently. You are not required to grant all three.1Internal Revenue Service. Form 8655 – Reporting Agent Authorization
The agent typically submits the completed form and must have an IRS e-file application in place. The authorization takes effect with the tax period you list and continues until you revoke it or a new Form 8655 replaces it. One form can cover multiple tax types and periods.
Build in lead time. The IRS must process Form 8655 before the agent can begin electronic filing and deposits, and any missed deposit during a transition is still on you.
Your Tax Liability Does Not Transfer
Hiring a reporting agent is convenience, not protection. If the agent files late or fails to deposit your payroll taxes, the IRS looks to you for the tax and any penalties that follow.
Failure-to-Deposit Penalties
Late employment tax deposits trigger a penalty that grows with the delay:
- 1 to 5 days late: 2% of the underpayment
- 6 to 15 days late: 5% of the underpayment
- More than 15 days late: 10% of the underpayment
- Still unpaid 10 days after the first IRS delinquency notice: 15% of the underpayment
These penalties apply to the employer regardless of who was supposed to make the deposit.3Office of the Law Revision Counsel. 26 USC 6656 – Failure to Make Deposit of Taxes The IRS may waive the penalty for reasonable cause, for example if you transferred funds to the agent on time and the agent failed to deposit them. Proving that is your burden, so keep independent records of when you sent money to the agent and how much.
The Trust Fund Recovery Penalty
The income tax, Social Security, and Medicare amounts withheld from employee paychecks are held “in trust” for the government. Any person responsible for collecting and paying over those trust fund taxes who willfully fails to do so faces a penalty equal to 100% of the unpaid amount.4Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax That amount becomes a personal liability for business owners, officers, or anyone else with authority over the company’s financial decisions.
Using a reporting agent does not shield you. If the agent disappears with payroll funds or simply never deposits them, the IRS can still come after you personally. The practical move is to verify that deposits are being made. You can confirm through your own EFTPS enrollment or by pulling IRS account transcripts periodically. The IRS also expects employment tax records to be kept for at least four years after filing the fourth quarter return for the year, including deposit dates and amounts, EFTPS confirmation numbers, and copies of filed returns.5Internal Revenue Service. Employment Tax Recordkeeping
Reporting Agent vs. Power of Attorney
Confusing these authorizations leaves gaps that only appear when a problem hits.
A Power of Attorney, granted through Form 2848, lets a qualified representative advocate for you in audits, appeals, and collection disputes. That representative can negotiate with the IRS, argue how the law applies to your facts, and receive confidential tax information for the matters you specify.6Internal Revenue Service. Power of Attorney and Other Authorizations A reporting agent has none of that authority. If the IRS questions a return the agent filed, you will need someone holding a Power of Attorney to handle the dispute.
Many reporting agents also hold credentials as Certified Public Accountants or Enrolled Agents, which grants broader practice rights under Treasury Department Circular 230.7Internal Revenue Service. Drawing the Line: Tax Return Preparation vs. Practice Those credentials are separate from the reporting agent designation. If your payroll provider is not a CPA, EA, or attorney, they can file your employment tax returns but cannot represent you before the IRS.
Federal Employment Taxes Only
Form 8655 authorizes a reporting agent for federal employment tax purposes exclusively.2Internal Revenue Service. About Form 8655, Reporting Agent Authorization It has no effect on state income tax withholding, state unemployment insurance, local payroll taxes, or any other non-federal obligation. Payroll providers often handle state and local filings as part of their service agreement, but that authority comes from the service contract or a separate state form, not from Form 8655. When evaluating a provider, ask exactly how state and local filings are handled and which authorization documents your state requires.
Ending the Authorization
There are three ways to end a reporting agent’s authority. You can revoke it directly by writing “REVOKE” across a copy of the signed Form 8655, re-signing under the original signature, and mailing it to the IRS address listed in the Form 8655 instructions. If you no longer have the original, a signed written statement identifying the agent by name and address and revoking the authority works instead. Second, filing a new Form 8655 naming a different agent automatically terminates the prior agent’s authority beginning with the period listed on the new form, though prior disclosure authorizations survive unless separately revoked. Third, the agent can terminate its own authority by filing a written statement or using the IRS’s electronic delete process.1Internal Revenue Service. Form 8655 – Reporting Agent Authorization
Do not leave a gap. Before cutting off the current agent, confirm that a replacement’s Form 8655 has been processed or that you are ready to handle deposits and filings yourself. A missed deposit during a switch still generates penalties, and the IRS will not treat a provider change as reasonable cause.