IRS OKs use of e-signatures for more forms in response to coronavirus
The Internal Revenue Service said Friday it would temporarily allow the use of digital e-signatures on some forms that can’t be filed electronically to reduce the risk to taxpayers and tax professionals of in-person contact during the novel coronavirus pandemic.
The move will allow tax preparers to stay safe during the pandemic by continuing to work remotely. The COVID-19 pandemic has already claimed over 180,000 lives in the U.S.
The IRS already permits the use of e-signatures on the Form 1040 by taxpayers and preparers who have selected a PIN for security. Over 90 percent of 1040 forms are already filed electronically.
“We take the health and safety of the nation’s taxpayers, the tax professional community and our employees very seriously,” said IRS Commissioner Chuck Rettig in a statement Friday. “Expanding the use of digital signatures is an important step during COVID-19 to help tax professionals. We understand the importance of digital signatures to the tax community, and we will continue to review our processes to determine where long-term actions can help reduce burden for the tax community, while appropriately balancing that with critical security and protection against identity theft and fraud.”
The IRS is recommending that all taxpayers consider e-filing forms this year, whenever possible, because of COVID-19. However, the new forms that now can be signed by digital signature still need to be printed and sent in manually, not electronically.
The move also helps safeguard IRS employees. In a memo Thursday, Sunita Lough, deputy commissioner of services and enforcement at the IRS, announced the change to employees. “As part of our response to the COVID-19 situation, we have taken steps to protect employees, taxpayers and their representatives by minimizing the need for in-person contact,” she said. Taxpayer representatives have expressed concerns with securing handwritten signatures during these times for forms that are required to be filed or maintained on paper.”
The temporary deviation from normal IRS procedures will enable taxpayers and representatives to use electronic or digital signatures when signing a number of forms that currently require a handwritten signature. The forms will all be available at IRS.gov and through tax software products. The following forms can be submitted with digital signatures if they’re mailed by or on Dec. 31, 2020:
• Form 3115, Application for Change in Accounting Method;
• Form 8832, Entity Classification Election;
• Form 8802, Application for U.S. Residency Certification;
• Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
• Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies;
• Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
• Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
• Form 1120-L, U.S. Life Insurance Company Income Tax Return;
• Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; and
• Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms.
“We recognize that this list of forms does not represent the full universe of forms filed or retained on paper that taxpayers and their representatives would like to see covered by this deviation guidance,” Lough wrote. “However, while we seek to maximize remote capabilities for taxpayers and their representatives during this time, we know that the acceptance of electronic/digital signatures presents elements of risk. Therefore, this temporary deviation is limited to the list of forms set forth above.”
The forms cannot be e-filed and generally are printed and mailed. The IRS won’t specify which digital signature product tax professionals must use, noting there are several commercial products available.
“The IRS can accept the associated risks with the forms at this time in a limited duration under these circumstances,” said Lough.
She noted that the memorandum is effective for the forms listed above, that are signed and postmarked starting on or after Aug. 28, 2020, through Dec. 31, 2020.
The IRS plans to closely monitor the temporary option for e-signatures and decide whether more steps are necessary.
“After the expiration of the temporary deviation, we will evaluate the full impact of this change to inform the future path for handwritten signatures, balancing flexibility for taxpayers and their representatives with ensuring that we do not introduce downstream risks for tax administration,” wrote Lough.
The American Institute of CPAs welcomed the news of the expansion of e-signatures by the IRS. The AICPA had submitted a letter this month asking the IRS to expand the scope of an earlier memorandum to all e-file signature authorization forms and non-income tax returns, including paper-filed returns.
“We greatly appreciate the IRS’s decision to expand the scope of their e-signature requirements,” said AICPA vice president of taxation Edward Karl in a statement. “By expanding the scope of relief beyond collection activities, the IRS is lessening the burden on taxpayers and tax practitioners in a significant way,” “The steps taken by the Service helps the nation navigate difficult circumstances. We encourage the IRS to continue to work to make this relief permanent.”
Currently, 11 states also now allow expanded e-signature use on tax returns in response to the COVID-19 pandemic, according to the AICPA.