In the past, the IRS required taxpayers to send in certain forms with a handwritten signature on them. While some items, such as standard tax returns, could be e-filed with no problems, in order to prevent identity fraud and similar issues, other specific forms could not. However, the COVID-19 pandemic has changed all of that.
Thanks to the need for decreased personal contact between tax professionals and their clients, the IRS began temporarily allowing e-signatures on certain forms in 2020. Now, thanks to the popularity of that policy, they have made these e-signatures a permanent option. With that said, there’s still quite a bit that you, the taxpayer, need to know about this policy change.
Allowing E-Signatures on Tax Forms
The IRS has always accepted e-signatures on certain forms, such as standard tax forms that are e-filed. However, there are a number of forms that needed a physical, handwritten signature, or else the IRS would not accept them. Even though these forms, in most cases, were submitted by professional tax preparers or advisors, the IRS still wanted an original signature on them, or they would not accept the form.
After the COVID-19 pandemic began, the IRS temporarily changed their policy on certain forms, allowing for e-signatures. Although these forms still need to be manually mailed in (they cannot be e-filed), the IRS relented and permitted the taxpayers to sign the forms electronically. This allows tax preparers to limit their physical contact with their clients during a time when this lack of contact was needed most in order to prevent their exposure to the coronavirus.
At first, the IRS only allowed these e-signatures for specific periods of time. The first authorization of them was only from August 28, 2020 to December 31, 2020. Then, they extended the period from January 1, 2021 to June 30, 2021. On April 15, 2021, the IRS put forth a memo that extended the allowing of e-signatures until the end of the year, December 31, 2021. Finally, while they have not issued a memo, the language on their website seems to imply that these e-signatures are now a permanent thing, and they will accept the forms with them in perpetuity.
Which Forms Accept an E-Signature
There are a number of different forms that the IRS allows taxpayers and their professional tax preparers to submit with an e-signature. These forms can be broken down into groups, such as:
- Forms For Wagers and Wagering:
- Form 11-C, Occupational Tax and Registration Return for Wagering;
- Form 730, Monthly Tax Return for Wagers;
- Forms Related to Estate Taxes:
- Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
- Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions;
- Form 706-A, U.S. Additional Estate Tax Return;
- Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations;
- Form 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust;
- Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts;
- Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return;
- Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;
- Form 706, Schedule R-1, Generation Skipping Transfer Tax;
- Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent;
- Form 4421, Declaration — Executor’s Commissions and Attorney’s Fees;
- Various Income Tax Returns with Specific Purposes:
- Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
- Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
- Form 1120-H, U.S. Income Tax Return for Homeowners Associations;
- Form 1120-IC DISC, Interest Charge Domestic International Sales — Corporation Return;
- Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation;
- Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;
- Form 1120-L, U.S. Life Insurance Company Income Tax Return;
- Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
- Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;
- Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);
- Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies;
- Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts;
- Information Changes and Registrations:
- Form 637, Application for Registration (For Certain Excise Tax Activities);
- Form 2678, Employer/Payer Appointment of Agent;
- Form 3115, Application for Change in Accounting Method;
- Form 1128, Application to Adopt, Change or Retain a Tax Year;
- Installment Agreements and Payment Extensions:
- Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship;
- Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes;
- Information Returns:
- Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues;
- Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner;
- Form 8038-GC; Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales;
- Form 8038-G, Information Return for Tax-Exempt Governmental Bonds;
- Additional Forms:
- Form 8283, Noncash Charitable Contributions;
- Form 8802, Application for U.S. Residency Certification;
- Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms;
- Form 8973, Certified Professional Employer Organization/Customer Reporting
- Form 8832, Entity Classification Election;
How The Process Works
Designed to make the process a little simpler for both taxpayers and tax preparers, the forms that now permanently allow for e-signatures have to undergo a specific process. In the past, the tax preparer would print out the forms, wait for the taxpayer to come in and sign them, and then the forms would go in the mail straight to the IRS. Part of this process is still in place, as the forms do still need to be sent in through the mail. The IRS has made it clear that they will not be accepted electronically. However, if the tax preparer has the taxpayer’s signature on file, they can electronically add it to the form before dropping the envelope in the mail, thus removing some of the waiting period.
Worries About Verification and Means to Prevent Forgery
The IRS is very concerned about preventing fraud by having taxpayers sign and submit applications. Relying on the e-signature process can lead to problems, such as people signing returns and forms that aren’t the taxpayer in question, as well as the submission of incorrect or inaccurate information. In order to combat these problems with verification and to prevent forgery and other tax crimes, the IRS has limited the methods that can be used to create an e-signature on these particular forms.
Which Types of E-signatures Are Accepted?
In order to ensure that the correct taxpayer is the one who signed the forms, the IRS only accepts certain types of e-signatures. These include:
- Third-Party Software Signatures – Some online programs, such as PandaDoc and DocuSign allow for people to store their signatures electronically. These signatures can then be placed on the IRS forms, as well as any additional forms that need to be signed. Since the programs require identity verification, the IRS will accept them on these particular forms.
- Typed Names – If a person types their name on a digital entry block, and that “signature” is then placed on the IRS form, the organization will accept it. This is useful for people who do not use third-party software to store their signatures or are unable to sign their names for any particular reason.
- Scanned or Digitized Images – A scanned or digitized version of a handwritten signature, such as the type written on a piece of paper that is then entered into a computer through scanning or digital photography, is also an acceptable form of e-signature according to the IRS.
- Handwritten on a Screen – If the taxpayer writes their name on a digital pad, using any type of tool, such as a finger, a stylus, or a digital pen, then the IRS will accept the signature on the form. In addition, a mark or initial on the digital screen, made in the same manner, will be accepted as well.
- Handwritten With a Stylus – In addition to the other forms of e-signatures accepted, the IRS allows people to write their names or make their mark on a digital screen using a stylus. This is a useful manner of capturing and storing a signature, allowing the tax preparer to use it again when another form needs to be signed by the same taxpayer.
Currently, these five options are the only forms of e-signatures accepted by the IRS on these particular forms. Others, such as e-filed standard tax returns, allow for other types of e-signatures.
Contact Us Today
If you have tax forms that need to filed by mail, but an e-signature is acceptable, or just have any general questions about this particularly IRS policy, please reach out to the tax advisors at Enterprise Consultants Group. We can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.
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