On March 11, the IRS updated Publication 1345, Handbook for Authorized IRS e-File Providers of Individual Income Tax Returns (the updated publication is only available in electronic form on the IRS website).
Some interpreted these changes to mean that the IRS is accepting e-signatures on Form 8879, IRS e-file Signature Authorization. However, a careful review and analysis of the changes suggests that the IRS has only clarified two Form 8879 rules:
- The IRS explained that preparers can accept copies of signed e-file authorization forms. For example, clients can fax or email a copy of their Form 8879 that contains a handwritten signature. This clarifies the often misunderstood notion that preparers need to receive the original, signed document before transmitting the return.
- Only the Self-Select PIN method provides for a completely paperless process where clients can authorize transmission without a handwritten signature on an e-file authorization form. NOTE: There are additional steps to validate your client's identity and your client must appear in person for part of the process.
There were also two key changes to the e-file/signature process for the less commonly used Form 8878, IRS e-file Signature Authorization for Form 4868 or Form 2350 (see IRS expands use of electronic signatures for more details):
Our advocacy team will be reaching out to the IRS to request additional clarity on this new guidance. We will keep you updated through the e-Alert. A longer, more expansive discussion of these rules is in development and is scheduled to be released in the May Tax Adviser. We are also developing an in-depth webcast for late May or early June to review these updated electronic signature rules and provide a comprehensive walk through of the e-file process, signature requirements and tax return preparer due diligence standards under these revised guidelines.
- Form 8878 is only required if the taxpayer is authorizing a payment by direct debit when e-filing his or her extension. So, extensions can be e-filed without obtaining a signed e-file authorization form if there is no payment due or payment is being made using another method (e.g., client will mail a check, or pay by EFTPS or by credit card).
- The IRS now allows a digital signature on Form 8878 (e.g., client signs using an electronic signature pad). It is important to note that digital signature guidance specifically identifies the Form 8878, but does not currently address Form 8879. The inference is that digital signatures are not yet authorized for tax returns signatures, only for extensions.