IRS Electronic Signature

Streamlining Tax Processes

The IRS has adapted to the digital age by allowing electronic signature for tax forms. This change reflects how technology has impacted our lives. The shift towards electronic signatures not only streamlines the tax filing process but also enhances security and accessibility.

In this article, we will talk about the various electronic signature formats acceptable to IRS. Additionally, we will shed light on Identity Verification Failure and address some frequently asked questions about IRS electronic signatures.

Electronic Signature Extended

The IRS introduced the electronic signature option in 2020 to simplify the tax filing process for individual taxpayers and tax professionals. Electronic signatures are a safe and fast way to sign IRS forms online, removing the need for physical signatures on paper.

Types of Acceptable Electronic Signatures

Electronic signatures accepted by the IRS come in various forms, providing flexibility. 

1. Digital Signature: A digital signature is a specific type of electronic signature that uses cryptographic techniques to verify the authenticity of the signature. It provides a high level of security and is commonly used for sensitive documents.
2. Typed or Printed Name: Taxpayers can also electronically sign documents by typing or printing their names. This method is simpler and commonly used for less sensitive documents.
3. PIN: Some forms allow taxpayers to use a Personal Identification Number (PIN) as an electronic signature. The PIN serves as a unique identifier for the taxpayer, ensuring the validity of the signature.
4. Electronic Filing Identification Number (EFIN): Tax professionals who file on behalf of clients can use their EFIN as an electronic signature when e-filing tax returns.
5. Self-Select PIN: When e-filing individual tax returns, taxpayers can create a Self-Select PIN for electronic signature purposes. This PIN adds an extra layer of security to the process.

eSignatures on Certain Paper-Filed Forms

The IRS has extended this option to specific paper-filed forms, even though electronic signatures are commonly associated with e-filing.

You can electronically sign and submit these forms to the IRS through approved e-file providers.

How Does the eSignature Option Work?

The process of using the eSignature option is relatively straightforward:

1. Taxpayers or tax pros use tax software or get help from a pro to fill out tax forms electronically.
2. When prompted, they choose the electronic signature option and provide the required information - a PIN, EFIN, or other identifying details.
3. After signing electronically, the taxpayer or tax professional sends the forms to the IRS using an approved e-file provider.
4. The IRS processes the electronically submitted forms. Upon successful validation of the electronic signature, the filing is complete.

Can All Taxpayers Use the eSignature Option?

While the IRS has expanded the use of electronic signatures, not all taxpayers are eligible to use this option. Certain criteria must be met to utilize eSignatures for tax forms. Generally, the following criteria apply:

• Individual Tax Returns: Most individual taxpayers can use eSignatures to e-file their tax returns. It includes Form 1040 and its variants.
• Tax Professionals: Tax professionals who e-file on behalf of their clients can use eSignatures, typically in the form of their EFIN.
• Business Returns: Many business tax returns can be electronically signed, but the specific eligibility may vary depending on the form and filing method.
• Exemptions: Some forms or situations may not be eligible for electronic signatures due to specific requirements or exceptions. It's essential to check the IRS guidelines for each form.

Are Taxpayers Required to Sign Forms 8878 or 8879 Electronically?

Forms 8878 and 8879 are commonly associated with electronic signatures in the tax world. However, it's important to note that taxpayers are not always required to sign these forms electronically. These forms, related to e-filing individual and business tax returns, offer electronic and paper signature options.

The choice between electronic and paper signatures depends on the taxpayer's preference and eligibility. While eSignatures offer convenience and speed, some taxpayers may opt for the traditional paper signature method.

What eSignature Methods Are Available?

• Tax Preparation Software: Many tax preparation software packages offer built-in electronic signature features, allowing users to sign forms electronically before e-filing.
• Authorized e-File Providers: Tax professionals and e-filers can choose from a list of authorized e-file providers that support electronic signatures for various IRS forms.
• Online Services: The IRS provides online services that allow taxpayers and tax professionals to e-file and electronically sign forms directly on the IRS website.
• Third-Party Services: Some third-party services specialize in electronic signatures and provide solutions for signing IRS forms electronically.

What Is an "E-Signature via Remote Transaction" in Relation to Forms 8878 or 8879?

Forms 8878 and 8879 allow taxpayers and tax professionals to use a special type of electronic signature known as an "e-signature via remote transaction." This method involves a PIN for authentication. This PIN serves as a secure identifier, ensuring that the eSignature is genuine and not tampered with during transmission.

What Is Identity Verification Failure?

Identity Verification Failure (IVF) is when the IRS finds that the taxpayer or tax professional's identity doesn't match during e-filing. 

IVF can occur for various reasons, including discrepancies in the provided information or a mismatch between the electronic signature and the IRS records.

When IVF occurs, it can delay the processing of the tax return or form. To resolve IVF issues, the taxpayer or tax professional may need to provide additional information or take specific steps to verify their identity. It's crucial to ensure that all information provided during the e-filing process is accurate to avoid identity verification problems.

FAQs

Q: Can I use an electronic signature for all IRS forms?

No, not all IRS forms are eligible for electronic signatures. Eligibility depends on the specific form and the taxpayer's or tax professional's situation. It's essential to check the IRS guidelines for each.

Q: What is the advantage of using an electronic signature for tax forms?

Electronic signatures offer convenience, speed, and security. They eliminate the need for physical signatures, reduce paperwork, and streamline the e-filing process.

Q: Are electronic signatures legally binding for IRS forms?

Yes, electronic signatures are legally binding for IRS forms when used in compliance with IRS regulations and guidelines.

Q: What should I do if I encounter an Identity Verification Failure (IVF) issue?

If you encounter IVF during the e-filing process, follow the IRS guidance provided to resolve the issue. This may involve providing additional information or taking specific actions to verify your identity.