In a pair of internal memos (NHQ-10-1121-0005 and NHQ-01-1121-0004), the IRS has extended until Oct. 31, 2023, procedures that allow taxpayers and their representatives to sign digitally or by an image of their signatures an array of forms and returns as well as certain compliance-interaction-related forms and documents. The memos also reapprove for that period the IRS's ability to receive the compliance-related forms and documents and to transmit encrypted related documents by email when no other approved electronic alternative is available.
Both memos are dated Nov. 18 and supersede successive, similarly temporary authorizations, the latest of which were set to expire at the end of 2021. The procedures were first established in 2020 as part of the IRS's response to the COVID-19 pandemic.
The memo on compliance documents notes that the procedures do not establish a precedent for accepting e-signatures or email under "other circumstances." Both memos call their procedures a "temporary deviation" from standard ones, and neither addresses the AICPA's and other stakeholders' previous requests to make wider e-signing permanent.
Memo NHQ-01-1121-0004, which addresses compliance documents and emailing, and its predecessors cover compliance interactions between IRS employees and taxpayers outside standard filing procedures. These interactions are related to determining or collecting a tax liability, including "any statement or form traditionally exchanged" during such interactions. The memo lists several representative categories, with examples of related forms. These categories include: extensions of a statute of limitation on assessment or collection; waivers of statutory notices of deficiency consents to assessment; certain closing agreements; prior-year delinquent tax returns obtained through an examination or other collection interaction; other statements or forms needing the signature of a taxpayer or representative traditionally collected outside of standard filing procedures; and other statements or documents relevant to development of a case, not limited to IRS forms or signed documents.
Employees must authenticate in person or by phone the identity of any taxpayer or representative asking to send documents by email, advise them that unencrypted email is not secure, and recommend they exclude sensitive information and transmit any personally identifying information or other potentially sensitive information only by encrypted, password-protected attachments. More taxpayer-facing information is at irs.gov/usingemail.
Tax practitioners submitting third-party authorizations on Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, should be encouraged to instead use the IRS's dedicated online portal for that purpose, the memo states. Those authorizations may also be submitted via the IRS's Tax Pro Account feature.
Most common tax returns may be e-filed, when taxpayer signatures may be authenticated by any of several methods integral to the e-filing software. However, certain forms that generally may be submitted only on paper with a handwritten signature may instead be submitted with an electronic or digital signature, Memo NHQ-10-1121-0005 states. (Such e-signatures generally appear in any of several ways on a paper form when printed out from an electronically prepared one with that capability.) The memo lists 42 forms or types of series of forms for which e-signing is allowed, including:
- Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return, and certain others in the Form 706 series;
- Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons;
- Certain Form 1120 series returns for particular types of corporations and other entities;
- Form 3115, Application for Change in Accounting Method;
- Form 8283, Noncash Charitable Contributions;
- Form 8453 series, Form 8878 series, and Form 8879 series regarding e-filing signature authorizations;
- Form 8832, Entity Classification Election;
- Form 8971, Information Regarding Beneficiaries Acquiring Property From a Decedent; and
- Elections made pursuant to Sec. 83(b).
— Paul Bonner (Paul.Bonner@aicpa-cima.com) is a Tax Adviser senior editor.