Requirements for Tax Professionals Accepting Electronic Signatures on IRS Tax Forms
- Timalyn S. Bowens
- Jul 18
- 5 min read
We live in a digital world, whether people want to accept it or not. I do understand some people's hesitancy to accept it. For one, there has certainly been an increase in scams in the financial sector. The IRS annually gives warnings about protecting your data as a taxpayer. So it's no wonder that they would be some of the last to jump on board with technology updates.
Even so, they have put measures in place to help tax professionals help taxpayers keep their data safe. Such as the requirement to have a Written Information Security Plan (WISP). But did you know that as a tax professional, you also have a duty to authenticate a taxpayer's identity when the taxpayer signs certain tax forms electronically? Well, now you do.
I will go over those requirements today to help ensure that you are doing your due diligence in your office. These requirements covered in this article will cover all IRS electronic signature forms. Some forms may have more specific criteria. I will cover that in future articles and mini classes about the forms. These are just the general requirements. First, let's take a look at what an acceptable electronic signature is per the IRS.
What is an IRS Electronic Signature?
An IRS electronic signature is a way to approve an IRS form electronically. One of the most common forms that tax professionals have e-signed is the Form 8879, IRS e-file Signature Authorization. If you have a tax pro account, you may also let taxpayers e-sign Form 8821, Tax Information Authorization, and Form 2848, Power of Attorney and Declaration of Representative. They can only be e-signed if you upload them using the Tax Pro account.
If you do not know how to fill out Form 8821, you can check out this mini class that will walk you through the process, Form 8821: A Step-by-Step Guide. Make sure that you are subscribed to this e-mail list so you are notified when the class covering Form 2848 is released.
Does the IRS Accept Electronic Signatures on Form 1040?
The IRS does not accept electronic signatures on Form 1040. The IRS also does not accept electronic signatures on Form 8879. You cannot mail or fax to the IRS any IRS form that has been e-signed by the taxpayer. All signatures mailed or faxed to the IRS must be "wet", which means signed with an ink pen.
What is a Valid IRS Electronic Signature?
For forms submitted online, the IRS accepts certain types of electronic signatures. These are also acceptable for documents that the IRS requires the tax professional and an Electronic Return Originator (ERO) to keep on file. The following are the types accepted:
A handwritten signature is put onto an electronic signature pad
Handwritten signature, mark, or command input on a display screen with a stylus device
Scanned or digitized image of a handwritten signature attached to an electronic record
Signature created by a third-party software
Typed name that the taxpayer has typed on the signature block
The Internal Revenue Manual (IRM) explains the acceptable forms of electronic signature in IRM 10.10.1.3.1.1 Acceptable Forms of Electronic Signatures.
What are the Tax Professional's Responsibilities with Regard to E-Signature?
If a tax professional uses the e-signature option for IRS forms, they have a duty to verify the taxpayer's identity. An exception to this is if the taxpayer e-signs the form in the presence of the tax professional and has a multi-year business relationship with the tax professional. If that is the case, then you are not required to do any further identity verification. If that does not exist, identity verification must take place every time.
How is Identity Verification Performed?
When in a remote transaction, the taxpayer can show the tax professional their ID while on Zoom. The taxpayer can also take a picture with their face visible while holding the ID. If a software is being used to collect the signature, things are different.
Tax professionals must use software with knowledge-based authentication. I personally use DocuSign for this. To pull the information for this authentication, a soft pull/inquiry is made to the taxpayer's credit. This pull is not a credit check and will not affect the taxpayer's credit score.
The reason for the soft pull is that the questions address the taxpayer's personal and financial history. The software uses this to create multiple-choice questions about previous addresses, names, etc. If these questions are not answered correctly, the taxpayer can not use e-signature.
What Happens When There Is Identity Verification Failure?
If the taxpayer fails identity verification, the IRS requires you to get a handwritten signature. The IRS allows the taxpayer to fail the verification three times before it requires a handwritten signature. If the signature is handwritten and sent by hand delivery, mail, fax, e-mail, or an internet website, it is not considered a remote transaction.
What Does the Software Need to Record?
To meet the IRS qualifications, any software you use for an e-signature must record the following:
Date and time of the signature
Digital image of the signed form
Results of the identity verification check, validating that the taxpayer's ID verification is successful
Taxpayer's computer IP address (remote transactions only)
Taxpayer's login identification, aka the username (remote transactions only)
The e-signature method used to sign the form
As a tax professional, it is your responsibility to maintain a tamper-proof record in a secure, access-controlled storage system. You must be able to retrieve and reproduce legible hard copies of the signed form if the IRS requests them.
Now It's Your Turn
1 - Did you know about the knowledge-based authentication that the IRS requires for e-signatures? Review your current software that you use to collect signatures for clients. Ensure that the KBA is on and that you have all of the information that needs to be on record.
2 - Where are you storing your IRS forms that have been electronically signed? Verify that they are in a tamper-proof, secure, and access-controlled storage. In other words, somewhere that anyone who just sits down at your computer can access. Where and how you store this type of document should be in your Written Information Security Plan (WISP). If your current situation is not up to par, you should create a plan to ensure that you are meeting IRS qualifications.
3 - Do you feel overwhelmed? Share your concerns in the comments so we can get it sorted out, so you are collecting and storing signatures properly.
Timalyn S. Bowens EA is America's Favorite EA and Tax Expert who will work hard to find a customized legal solution for you! As an Enrolled Agent licensed through the Internal Revenue Service, Timalyn can fight the IRS for taxpayers in all 50 states. As the host of Tax Relief with Timalyn Bowens and a YouTube content creator, she empowers taxpayers to make educated decisions about their tax situation.
When you are facing questions regarding your personal or business taxes, working with a professional makes all the difference. At
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