Taxpayers who currently use Forms 8878 or 8879 to sign federal tax returns on Form 1040 or file extensions can use an electronic signature to sign these forms and send them electronically to their electronic return issuer (ERO). If the taxpayer uses the electronic signature option, the ERO must use software that includes identity verification. The software must record the following data: Each authorized electronic signature transaction must meet one of the following five requirements: No. The electronic signature option is only available to taxpayers who file their tax returns electronically using an ERO that uses identity verification and electronic signature software. In order to comply with the electronic signature requirements, the ERO must be able to electronically record the taxpayer`s name, social security number, address and date of birth for identity verification purposes. An electronic signature can be used to sign an IRS document and meets the requirements of IRC § 6061(b) and CFR § 301.6061-1 if the signature is made with the authorized electronic signature process for that specific IRS document. The IRS will closely monitor this temporary option for electronic signatures and determine if additional measures are needed. This document outlines the proposed framework requirements that all HIVES participants must meet in order to participate with electronic signatures for IRS Forms 4506-C, 4506-T or 4506T-EZ. Multiple requirements for the same taxpayer end up undermining the simplicity promised by the growing acceptance of electronic signatures by the IRS. It is hoped that, over time, States will also allow the use of electronic signatures in general. The IRS Electronic Signature Policy implements relevant authentication compliance laws, mandates, and policies. Interestingly, the temporary procedures did not include identity protection measures such as signing authority confirmation or KBA requirements.

In a June 2020 letter to the IRS, the AICPA recommended elements of identity protection, including a suggestion that the ERO should rely on previous business transactions to prove the taxpayer`s identity (see the AICPA`s June 4, 2020 letter, “IRS Guidance for Electronic Signature Program,” available at www.aicpa.org). One or more security processes or procedures to meet the other signature requirements described in IRM 10.10.1.6, Signer Identification and Authentication. In 2008, for the first time, the IRS allowed taxpayers to sign an IRS document with electronic signatures: specifically, consent forms § 7216. These forms are used to obtain consent to disclose a taxpayer`s information to someone other than the taxpayer. In the revision Proc. 2008-12, the service allowed tax creators to obtain the electronic signature of applicants (individuals) on these consent forms using one of three options: Monitoring and risk assessment of implementing an electronic signature solution The IRS announced in November 2020 that electronic signatures would be allowed on Forms 2848 and 8821 starting in January 2021. This means tax professionals can submit third-party authorization forms through a new irs.gov secure online platform. Taxpayers and tax professionals can sign the forms electronically or in ink and download them. The tax advisor is also required to verify the identity of the taxpayer. Next summer, the IRS plans to launch a platform called Tax Pro Account to electronically sign these third-party authorization forms, and with this system, signed forms will be immediately published in the centralized authorization file (CAF), avoiding delays and backlogs (see IRS website “Electronic signature options will simplify third-party authorizations,” available at www.irs.gov).

The IRS Electronic Signature Principles and state-mandated authentication controls describe how the IRS protects an individual`s identity and ensures that only authorized signatories complete the transaction. IA provides strategic guidance on electronic signatures and expertise on related procedural and legal issues that have already been addressed by the Office of the Deputy Chief, Procedure and Administration. The IRS accepts a wide range of electronic signatures, including: This IRM defines consistent guidelines, policies, and procedures to be followed by internal and external stakeholders when implementing an electronic signature process. Implement and maintain an e-signature program to provide business and forms owners with a source of information on an e-signature solution; Perform monitoring and compliance functions within the e-signature program. An additional layer of complexity for tax professionals and taxpayers navigating electronic signature rules is understanding which states allow electronic or digital signatures, on which state forms they are allowed, and how electronic or digital signatures should be executed. Many states, including California, do not allow electronic signatures for corporate tax returns. Other states, including New York, have recently passed laws allowing electronic signatures for documents filed electronically due to the pandemic and have their own identity verification requirements (see N.Y. Tax Law §171-aa and New York Dep`t of Tax. and End., Technical Note TSB-M-20(1)C, (2)(I(10/6/20)). The IRS has been grappling with COVID-19 and safely reopening operations. Recognizing the difficulties faced by many tax professionals and taxpayers during the pandemic, it temporarily allowed electronic signatures in many circumstances that previously required physical signatures.

To reduce the burden on the tax community, the IRS allows taxpayers to use electronic or digital signatures on certain paper forms that they cannot file electronically until December 31, 2021, and the IRS is considering other possible extensions of this option. The agency balances the electronic signature option with essential security and protection against identity theft and fraud. The IRS understands the importance of electronic signatures to the tax community and provides insight into their use in specific forms. What is a “remote electronic signature” with respect to Forms 8878 or 8879? The IRS`s requirements for electronic signatures form the basis for implementing technology and security controls. In March 2014, the IRS allowed taxpayers to use electronic signatures for tax returns for the first time. The IRS has provided guidance to individual taxpayers on how to electronically sign a tax return if the tax return is to be filed electronically with the IRS in IRS Publication 1345, Handbook for Authorized IRS E-File Providers of Individual Income Tax Returns (available at irs.gov/pub/irs-pdf/p1345.pdf). Form 8879 had to be hand-signed by the taxpayer before filing the return electronically. What are the tasks of the ERO with respect to electronic signatures? In August 2020, the IRS announced an expansion of the use of electronic and digital signatures on certain forms until December 31, 2020 (see IRS memos dated August 28, 2020, available at www.irs.gov). In December, the authorization to use electronic signatures on these forms was extended until June 30, 2021 (see IRS, “Memorandum for All Services and Enforcement Employees” (December 28, 2020), available at www.irs.gov).

The biggest change in these memos was that all 8879 series forms can now be signed electronically, not just Form 8879 for individuals. For example, electronic signature authorization forms for business declarations can be signed electronically until June 2021. This IRM establishes the electronic signature policy and minimum requirements for all forms and documents that require a taxpayer`s signature. As part of identity verification, the software can create a so-called “soft demand” in the credit reporting industry. A credit reporting agency uses information from the taxpayer`s credit report to generate knowledge-based authentication questions.