Electronic Signatures Become a Permanent Feature of the IRS

The Internal Revenue Service (IRS) recently updated its guidelines to permanently extend the option for taxpayers and their representatives to use e-signatures on select forms, returns, and documents. This change should make filing a little faster and easier for taxpayers, cut down on the necessity for in-person interaction, and help reduce unnecessary use of paper.

If they wish, however, taxpayers and tax preparers can continue to use handwritten signatures on all documents.

Background

In August 2020, the IRS introduced a temporary measure allowing electronic signatures for specific forms that traditionally needed a handwritten one. This decision was primarily to ensure the safety of taxpayers and tax professionals during the COVID pandemic, promoting remote work and minimizing in-person contact.

Initially, this change was set to last until December 31, 2020, but given ongoing pandemic concerns, the IRS extended it to June 30, 2021, and then again to December 31, 2021. On April 21, 2021, they expanded the list of eligible forms. In November 2021, the IRS issued a memorandum that extended this policy to October 31, 2023, and indicated that it would consider extending this e-signature option even beyond that date.

Finally, on October 17, 2023, the guidelines from the memorandum were officially incorporated into the IRS’s Internal Revenue Manual, highlighting the forms where e-signatures are now recognized.

Acceptable Signature Methods

Digital signatures for the IRS can be created by different technologies and may include any electronic sound, symbol, or process permitted by the IRS on the specific document. It’s important to note, however, that not all forms of electronic signature are permitted for all forms and documents. Acceptable forms of electronic signatures include:

• A typed name that is typed within or at the end of an electronic record, such as typed into a signature block
• A scanned or digitized image of a handwritten signature that is attached to an electronic record
• A shared secret, such as a code, password, or PIN
• A unique biometric-based identifier, such as a fingerprint, voice print, or retinal scan.
• A handwritten signature input onto an electronic signature pad
• A handwritten signature, mark, or command input on a display screen by means of a stylus device
• A selected checkbox on an electronic device such as a computer or tablet
• A signature created by a third-party software

Click here for a complete list of approved methods for specific forms.

E-signatures & Security

Given the rise in security breaches and cyber threats in recent years, there have been concerns regarding the security of e-signatures. To address these concerns, the IRS has implemented measures to maintain the security and integrity of electronic signatures. These include:

• Storing the data of a signature in a way that permanently associates it with the record in question
• Specific processes lock the electronic document, preventing post-signing alterations
• Storage systems that have been fortified with secure access controls
• Storage mechanisms equipped with capabilities for indexed retrieval and the generation of clear hard copies
• Established guidelines for IRS personnel
• Guidance to taxpayers on securely maintaining electronic records

Filing Just Got a Little Bit Easier

Since many of us have been signing our tax documents electronically for the last three years, this may not seem like a big change. The fact that it has been made permanent, however, is welcome, as it will help streamline the tax filing process on an ongoing basis.

For help filing your returns or with other tax-related questions, don’t hesitate to reach out to the CPAs at Tonneson.

At Tonneson, we combine decades of experience with a forward-thinking approach to emerging technologies to keep our clients compliant while helping them optimize their financial strategies. Contact us today.