AICPA recommends changes to e-signature requirements

By Sally P. Schreiber, J.D.

The AICPA Tax Executive Committee (TEC) has sent the IRS a letter requesting the Service update and modernize its e-filing signature requirements in four areas in response to the COVID-19 pandemic but with the aim of adopting the changes permanently to make it easier for all taxpayers and tax practitioners to use electronic signatures. In the letter, signed by TEC Chair Christopher W. Hesse, CPA, and addressed to IRS Commissioner Charles P. Rettig, the AICPA acknowledges the great efforts the IRS is making to accommodate taxpayers and tax practitioners during the pandemic, but says it also believes the “pandemic has highlighted the need to update the e-signature guidance and authentication requirements on a permanent basis going forward.”

The AICPA recommends that the IRS further expand on its previously announced relaxation of its requirements for digital signatures in the collections area to four other areas.

First, the IRS should allow all taxpayers the option to use an e-signature for the Form 8878 series and the Form 8879 series for e-file signature authorizations, if the taxpayer’s software has e-signature capability. Nearly 90% of individual income tax returns, over 80% of partnership, corporate, and fiduciary returns, and nearly 70% of not-for-profit returns are filed electronically, and this change would make e-filing easier going forward even after the pandemic ends and stay-at-home orders are removed.

Second, for taxpayers who are electronically signing e-file authorization forms remotely, the IRS should permit the electronic return originator (ERO), who is also the signer of the return, to rely on previous business transactions as a way of proving the taxpayer’s identity rather than meeting the knowledge-based authentication (KBA) identity verification requirements each time the taxpayer e-signs e-file authorization forms. Many EROs do not have relationships with KBA organizations, and the KBA requirement makes it difficult for first-time income tax return filers and nonresidents to meet the KBA requirements.

Third, the AICPA recommends expanding Notice 2007-79 to allow EROs to sign not only Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, Form 8878, and Form 8879, but also the Form 8453 series and Form 8879 series by rubber stamp, mechanical device (such as signature pen), or computer software program. This change will allow entity returns to be e-filed more easily. Currently, for business and not-for-profit returns, individuals signing on behalf of the ERO must print and sign the e-file authorization form and send the signed e-file authorization form to the taxpayer. The taxpayer must then print, sign, and date the e-file authorization form and send the signed e-file authorization form to the ERO. In the current health crisis, without expanding Notice 2007-79, in some cases, acquiring a manual signature is not possible.

Finally, the AICPA recommends expanding Notice 2004-54 to permit preparers of non–income tax returns (including paper-filed returns) to sign original returns, amended returns, or requests for filing extensions by rubber stamp, mechanical device, or computer software program. This new rule would permit preparers of estate, gift, payroll, and excise tax returns to electronically sign a paper-filed return and will eliminate the need for these preparers to print and manually sign the paper return.

The AICPA is asking that these changes be made immediately to facilitate e-filing during the current crisis, but it is also recommending that these procedures be adopted permanently as more and more returns are filed electronically.

Sally P. Schreiber, J.D., (Sally.Schreiber@aicpa-cima.com) is a Tax Adviser senior editor.

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