Many US citizens know it’s legally acceptable to use an electronic signature when filing for tax returns, but only a handful know the important facts about e-signing during the e-filing process. 6 years ago, in 2014, the IRS passed new regulations that allowed taxpayers to use e-signatures on certain tax forms. This move reduced workload for tax officers enabling them to file citizen tax returns electronically. But that’s just a drop in the bucket, there’s more to learn about the use of e-signatures and IRS e-filing. This post will help get you up to speed and prepare you for a smooth tax filing session.
Here are the FAQs about IRS electronic filing and the use of e-signatures; 1.
Any taxpayer whouse Forms 8878 or 8879 to sign digital Forms 1040 file extensions or national tax returns can use an e-signature and submit those formsto their Electronic ReturnOriginator (ERO). 2.
Not really. A taxpaying citizen can use a handwritten signature and mail, e-mail, etc., the form to the originator. 3.
Not all taxpayers can sign digitally. Only individuals filing tax returns digitally via an ERO can use an e-signature. The ERO relies on software that offers ID authentication and allows one to sign electronically. Before a taxpayer uses an e-signature, the originator must be able to verify their name, SSN, address and birth date electronically to confirm your identity. 4.
In cases where the taxpaying fellowchooses to sign electronically, the originator must leverage software with identity verification features. The tool must be able to capture the following data a) Digital copy of the signed up form; b) Day& time of signing; c) The taxpaying citizen’s IP address (only if you’re filing remotely); d) Taxpaying citizen’s login ID — user name (only if you’re filing remotely); e) Findings of the ID authentication confirming that the individual’s verification was a success. f) The electronic signature method the taxpayer uses to authenticate the document. After a taxpayer has signed, the Electronic Return Originator’s critical role is to maintain an impenetrable copy of the doc in a secure storage center for 3 years from the due return date or from the date in the return receipt. The originator must be well-placed to retrieve and producelegal hard-copies of the electronically signed form. 5.
Your originator’s software determines the e-signing method you can use to sign the form. No matter the approach used, the electronic copy must be impenetrable once signed. Here’s a list of methods you can use; a) A handwritten signature on an e-signing pad; b) A digital signature; c) A digitized picture of a handwritten signature tied to an electronic record; d) A handwritten mark, signature or command input on screen with a stylus pen; e) A typed name; f) A mutual secret like a passcode, PIN, etc., used to a sign a digital copy; 6.
The software conducts a “soft inquiry” through credit reporting agencies. The agency uses info from a taxpaying individual’s credit report to develop knowledge-based verification question. More often than not these knowledge-based verification questions pertain to a taxpayer’s financial and personal background. Many times, authentication includes multichoice questions likea taxpayer’s mortgage lender, model of the care financed, a former phonecontact or address. The taxpaying individualmustrespond to all questions accurately. And while this process has nothing to do with a credit pull, anyone who fails the process can’tsign their tax form electronically. 7.
Yes. ID verification must happen every time a taxpaying citizen signs Form 8878 or 8879, but with one exemption. If the individual electronically signs the form in front of an ERO—who has filed their tax returnsbefore—then no further ID authentication is needed. Working with an ERO for years means they alreadysubjected you to a thorough verification process. 8.
Before signing electronically, an originator’s software prompts a taxpaying citizen to complete an ID verification process. These authentication process includes knowledge-based questions that the taxpayer must answer correctly. Failure to provide accurate responses after 3 tries means the taxpayer doesn’t qualify to sign electronically—and must present their handwritten signature to the Electronic Return Originator. That’s pretty much everything a taxpayer should master about e-signatures and IRS e-filing. Nevertheless, it’s also important to understand how e-signature technology works and its critical role in ensuring a frictionless tax process.
The IRS only approved the use of electronic signature onForms 8878 and 8879 after determining that it is—indeed—a tamper-proof way to validate documents. So what are the salient features of e-signatures that makes them a convenient way to verify official docs? 1.
The IRS mandates tax E-signature vendors to customize their ID verification processes to meet certain requirements, starting with basic information a taxpayer can identify personally. The taxpaying citizen must give their full name, SSN, address, and birth date, and all infomust match with the datain the official records from credit agencies. The software must also be able to capture and store this data securely. And if the taxpayer is signing remotely, the e-signature tool should allow knowledge-based verification to further confirm the signer’s identity. Image Alt Tag: Electronic signature for online tax. During this process, a taxpayer responds to a list of questions created from the data in official records. These questions are specific to an individual and normally not known to the taxpayer alone. Failure to provide accurate responses after 3 tries means the “signer” doesn’t qualify to sign electronically—and must present their handwritten signature to the Electronic Return Originator. The e-signature tool must also record the results of a successful verification attempt. All these measures pillared by IRS regulations make e-signatures a trustworthy and perfectly legit way to sign documents. 2.
The IRS mandates that each e-signature should betied to its corresponding electronic record, or proof be provided that the signature is authentic. An electronic signature should non-removable, impossible to copy, or transfer to forge a digital document. After signing, the e-signature tool must protect the docand make it tamper-proof so that that the data within is non-modifiable. The databank must also include a retrieval tool that can produce legitimate hard copies of digital records. 3.
The IRS mandates that the e-signing tool capture (1) the digital image of the signed, (2) taxpaying-citizen’s computer IP address, (3) date & time of signing (4)Taxpaying-individual’s login user name, (5) knowledge-based authentications The tax originator must store this data and be able to retrieve it any time as requested. With this kind of digital paper trail, it is almost impossible to find cases of forgery. 4.
Though the IRS offers a solidtax e-signing process, it fails to consider the permanency of the e-signature. And when it comes to taxes, payers want to be sure they can prove the validity of their e-signature now and in the far future. Luckily e-signatures offer a solution especially if the ERO uses a tool that is independent of the venders sever. Here’s how it works; For a dependent e-signature, the ERO must follow a link to the service provider’s server to gain access to the digital trail of ane-signature—in order to prove its validity. While this can suffice for short-term needs, its long-term effectives and validity isquestionable. For instance, what happens when the ERO cuts tieswith the e-signature provider? In such cases a dependent link may interfere with an electronic signature’s validity and mess up the whole process. That’s why EROs should opt for an independent e-signature solution that isn’t dependent on a vender’s server. Independent e-signatures rely on public key infrastructure tech to add permanent legal proof to a signed doc, That is to say the electronic signature exists freely and does not rely on a provider or an internet connection and its authenticity can be retrievedonline or offline, when necessary. In this case, you copy remains intact even if the e-signature provider chooses to delete their copies of the available legal proof. Lastly, independent electronic signatures are based onglobal document management standards which makes them acceptable and recognizable. This will further support the longevity of your validated documents. Final Words Now you know that filing taxes electronically is not any different than the manual approach, in terms of authenticity and longevity. That means your records remain valid and defensible, whether you use e-filing or go the old way.