NTA Blog: Do you need to e-sign a tax form that can’t be e-filed? Make it digital.
For the more than 40 forms that cannot be filed online, the IRS allows these forms to be filed on paper with an electronic or digital signature through a temporary policy until October 31, 2023. Although the IRS makes no distinction between electronic and digital signatures, taxpayers who choose to file documents on paper should carefully consider the differences between these types of signatures when relying on an authorized representative or paid preparer to file these forms on their behalf. Paid preparers are required by law to sign in the paid preparer area of the return and provide the taxpayer with a copy of the return.
What is a digital signature?
A digital signature is a certificate-based digital identification that allows the signer to encrypt a signed document, validate the authenticity of the signature, and disallow further modifications after the document is signed. Digital signatures protect taxpayers from changes made after they approve a form.
What benefits do digital signatures offer?
Digital signatures use a digital certificate that is embedded in the document and locks the document against further modifications. This creates a reliable document history for verification of authenticity and provides protection against manipulation or tampering by the preparer after a taxpayer signs a form. Digital signatures can also be applied without having to print and rescan the document.
How to apply a digital signature
Creating a digital signature requires dedicated software, but many types are available for free. Obtaining a unique digital certificate to sign documents requires verifying the identity of the signer. This process may vary depending on the issuer of the digital certificate and may require a one-time validation of a government-issued photo ID. The software may also require the creation of a PIN that the user must enter each time a digital signature is applied to a document.
What is an electronic signature?
An electronic signature, on the other hand, is an image of a typed or scanned signature. With electronic or ink signatures, an unscrupulous preparer could modify the form to adjust entries or direct a tax refund to a bank account controlled by the unscrupulous preparer.
An electronic signature can take several forms. According to the United States Electronic Signatures in Global and Domestic Commerce Act, an electronic signature is broadly defined as “an electronic sound, symbol, or process attached to or associated with a contract or other record and performed or adopted by a person with the intention to sign a record. In simple terms, an electronic signature indicates an intention to ratify a document. The IRS accepts a wide variety of electronic signatures in different formats, including:
- A name typed on a signature block;
- A scanned or digitized image of a handwritten signature attached to an electronic record;
- A handwritten signature entry on an electronic signature pad;
- A handwritten signature, mark, or command entry on a display screen with a stylus; Where
- A signature created by third-party software.
Additionally, the IRS accepts scanned or photographed signature images which can be submitted in a variety of file formats supported by Microsoft 365. Electronic signatures can be captured, scanned, and even digitally stamped onto electronic forms by computers or even mobile devices. However, electronic signatures can also be easily forged, as these signatures can be scanned and photographed. Additionally, documents signed with an electronic image can also be forged after a taxpayer approves the form with an electronic signature. This is where a digital signature adds extra security for taxpayers.
A digital signature is more secure than other electronic signatures
Various document processing platforms like Microsoft Word, Adobe, and DocuSign offer digital signature technology to its users. Tax forms can be opened on these platforms to capture a digital signature. Although from the perspective of the signer, the implementation of this technology may look different from platform to platform, what remains constant is that the digital signature provides an additional layer of security to a document and creates a digital audit trail. Digital signatures can also facilitate more secure document exchanges between taxpayers and those who submit their forms to the IRS.
TAS continues to advocate for the extension of electronic signatures to all documents that require a signature and cannot be filed online, providing taxpayers the freedom to interact remotely with their tax preparers if it is their preferred method. The IRS continues to explore various options to expand electronic signature options, but remains committed to balancing security with protection against identity theft and fraud. In my annual report to Congress, I advocated for the IRS to develop and implement improved electronic signature tools not only to meet industry security standards, but also to provide taxpayers with a more accessible service. and secure. With this recommendation, we hope the IRS will expand the options for taxpayers to use more secure digital signature services.