Except for what you tell it, the IRS (and for that matter, state tax authorities like the FTB) doesn’t really know very much about you. But it’s worthwhile to find out what it does know about you. The IRS keeps information about taxpayers in transcripts, small files on its central computers. I find it invaluable to get these transcripts when I start to represent a client.

The IRS keeps transcripts of the tax return, the information returns it receives (from Forms W-2 and 1099), and account transcripts (see an example here) showing tax due and payments made. Some of the transcripts, such as tax return transcripts, are available for only three years; account transcripts are available as long as the account is open (meaning there are unresolved/unpaid taxes).

The computerized transcript format has remained almost the same since at least the late 1970s. It has only been in the last decade that transcripts actually use upper and lower-case letters. They display arcane codes, and I need to refer to large textbooks to determine what they mean.

But the transcripts give a wealth of useful information. Did you fail to file a tax return a few years ago, and now you don’t know how much money you made in 2011? A wage and income transcript will show you how much income your sources reported to the IRS. Do you have an S Corporation, and need to know when the corporation made its election? That shows on an account transcript. Is bankruptcy a good option for your unpaid taxes, or should you start a collection due process hearing? Reading the account transcript history will give me a good sense of how to advise you.

I have third ways to get the transcript: first, I can send a power of attorney form to the IRS, and in about two weeks, it may record that form and allow me to access your transcripts online. Second, I can call the IRS’s call center. After about an hour or two on hold, a phone service rep will send me the transcripts by fax. Finally, I can also walk into an IRS office to present the Forms 2848; the IRS will usually generate the transcripts right then.

Once I get the transcripts and read them, the “fun” (or my version of fun) can begin, because then I have a very good idea of exactly what my client’s problem is.