Many state tax agencies require companies grant power of attorney to their payroll provider so that the provider can deposit state taxes and file state returns. In the context of payroll, power of attorney grants a third party the authority to represent a business on matters of taxation, but not in any other capacity.
In other words, the power of attorney given to a payroll provider allows the provider to act as an agent of the company and:
- electronically report, file, and pay a business' taxes with the appropriate federal and state agencies.
- request and inspect a business' confidential tax information, e.g., the proper federal and state tax rates.
- report new hires to the appropriate state labor departments.
Power of attorney does not authorize the provider to make legal decisions for the company.