IRS Form 2678 Guide: Employer Appointment of Agent Rules

Introduction – What is Form 2678?

Form 2678, officially titled Employer/Payer Appointment of Agent, is an official federal tax form provided by the Internal Revenue Service (IRS). It is used by an employer or payer to formally authorize an agent to perform employment tax duties on their behalf.

The IRS governs Form 2678 under Section 3504 of the Internal Revenue Code (IRC). By executing this form, an employer delegates payroll tax filing, reporting, and payment obligations to an appointed agent, such as a payroll management company, Professional Employer Organization (PEO), or fiscal employer agent.

Purpose of the Form

Managing payroll tax obligations can be complex and time-consuming for small businesses, home care clients, and staffing arrangements. Form 2678 simplifies payroll administration by creating a formal statutory agency relationship under Section 3504.

Form 2678 serves several essential administrative tax functions:

• It authorizes an agent to file aggregate employment tax returns (such as Form 941 or Form 940) using the agent’s Employer Identification Number (EIN) rather than the employer’s EIN.
• It allows home care clients receiving state-administered care services to appoint fiscal agents to handle household employment taxes.
• It establishes joint and several liability between the employer and the agent, ensuring both parties remain legally responsible for payroll tax compliance.

Who Needs to File / Sign This Form

Form 2678 is executed jointly by an employer and their designated payroll agent. You should complete Form 2678 if you are:

• A business owner or employer appointing an agent to prepare, file, and pay federal employment taxes under Section 3504.
• An individual receiving home or community-based care services under a government program who appoints a fiscal agent to manage caregiver payroll taxes.
• A payroll service provider, staffing agency, or fiscal agent agreeing to assume employment tax responsibilities for a client.

Who Is Exempt / Not Required to File

Not all employers who use third-party payroll services file Form 2678. You do not need to file Form 2678 if:

• In-House Payroll: You process, file, and pay your own employment taxes directly using your own company EIN.
• Reporting Agents (Form 8655): You use a payroll service provider that files employment tax returns using your business EIN. These providers use **Form 8655** (Reporting Agent Authorization) instead of Form 2678.
• Certified PEOs (CPEOs): You work with a Certified Professional Employer Organization that operates under separate statutory CPEO rules.

When to File

Form 2678 must be completed and submitted to the IRS **before** the appointed agent begins filing employment tax returns or making tax deposits on behalf of the employer.

The agent appointment remains in effect indefinitely until either the employer or the agent submits a written notice of revocation to the IRS, or files a new Form 2678 terminating the agency relationship.

Where and How to File

Form 2678 is a paper application that requires physical signatures from both the employer and the appointed agent.

After both parties complete and sign the form, mail Form 2678 to the designated IRS service center address as per official IRS instructions. The IRS will process the authorization and update its employment tax databases accordingly.

Step-by-Step Instructions to Fill the Form

Form 2678 is a concise, one-page document organized into three distinct parts.

Form 2678 Section Breakdown

Form Part	Part Title	Required Information & Filing Instructions
Part 1	Employer / Payer Details	Enter the employer’s legal business name, trade name (DBA), Employer Identification Number (EIN), address, and employer type.
Part 2	Appointment Authorization	Check boxes to select specific employment tax forms the agent is authorized to file (e.g., Form 940, 941, 943, or 945).
Part 3	Agent Info & Signatures	Enter the agent’s legal name, EIN, and address. Requires signatures and dates from **both** the agent accepting appointment and the employer authorizing it.

Required Documents/Information Needed Before Filling

Gather the following organizational and payroll details before filling out Form 2678:

• Employer’s official legal name, trade name (DBA), and active Employer Identification Number (EIN).
• Appointed agent’s official corporate name and active EIN.
• Selection of specific federal employment tax returns being delegated (e.g., Form 941 for quarterly withholding or Form 940 for FUTA unemployment taxes).
• Authorization verifying that the individual signing for the employer has legal authority to execute tax agreements.

Common Mistakes to Avoid

Misinterpreting Form 2678 can create confusion over payroll tax responsibilities. Avoid these common mistakes:

• Confusing Form 2678 with Form 8655: Form 8655 authorizes a Reporting Agent who files taxes under *your* EIN. Form 2678 appoints a Section 3504 Agent who files taxes under *their own* EIN.
• Assuming Employer Immunity: Believing that appointing an agent removes your legal liability for unpaid taxes. Under Section 3504, the employer and agent are **jointly and severally liable** for all tax obligations.
• Submitting Missing Signatures: Submitting Form 2678 with only one signature. The IRS will reject the form if it lacks signatures from both the employer and the agent.
• Failing to Notify the IRS Upon Termination: Forgetting to notify the IRS when you end your relationship with a payroll agent, leaving old authorization records active.

Penalties for Non-Filing or Errors

The most critical aspect of Form 2678 is the statutory rule of **joint and several liability**.

If the appointed agent fails to file returns, miscalculates tax liabilities, or steals employment tax deposits, the IRS can assess back taxes, failure-to-file penalties, late payment penalties, and interest directly against **both the agent and the employer**. Employers must carefully audit their payroll agents to ensure tax deposits are made on time.

Related Forms or Schedules

Form 2678 is part of the federal employment tax framework and interacts with several core payroll forms:

• Form 8655 (Reporting Agent Authorization)
• Form 941 (Employer’s QUARTERLY Federal Tax Return)
• Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return)
• Form 943 (Employer’s Annual Federal Tax Return for Agricultural Employees)
• Form 2848 (Power of Attorney and Declaration of Representative)

Frequently Asked Questions

What is the difference between Form 2678 and Form 8655?

Form 8655 authorizes a Reporting Agent to file tax returns using your business EIN. Form 2678 appoints a Section 3504 Agent who files aggregate employment tax returns using their own agent EIN on your behalf.

Am I still liable for taxes if my payroll agent files Form 2678?

Yes. Under IRC Section 3504, both the employer and the appointed agent share joint and several liability. If the agent fails to pay required payroll taxes, the IRS can collect the unpaid taxes directly from the employer.

Who uses Form 2678 for household or home care workers?

Individuals receiving home care under government self-directed care programs frequently use Form 2678 to appoint a fiscal employer agent to handle payroll, tax withholding, and filing for personal care assistants.

Whose EIN appears on Form 941 after filing Form 2678?

Once Form 2678 is approved, the agent files aggregate Form 941 returns using the **agent’s EIN**, attaching an allocation schedule detailing client payroll figures.

How do I revoke a Form 2678 agent appointment?

To revoke an agent appointment, submit a new Form 2678 checking the revocation box, or send a written statement of revocation to the IRS service center where the original form was filed.

Can an agent handle Form 940 unemployment taxes using Form 2678?

Yes. In Part 2 of Form 2678, you can explicitly authorize the agent to handle Form 940 (Federal Unemployment Tax) along with quarterly Form 941 filings.

Conclusion – Key Takeaways

Form 2678 creates a formal payroll tax agency relationship under Section 3504. Key takeaways include:

• Appoints an agent to handle employment tax filings and payments under the agent’s EIN.
• Commonly used by small businesses, staffing arrangements, and home care fiscal management programs.
• Establishes joint and several liability between the employer and the appointed agent.
• Requires physical signatures from both the employer and the payroll agent.
• Submitted by mail directly to the designated IRS service center.