COVID-19 has forced taxpayers and their hired preparers to maintain social distance during return completion this year. Electronic tax processes have helped, but some forms require real signatures, meaning in-person contact. Until now. The IRS is temporarily accepting electronic signatures on certain documents that still must be snail mailed.
Some, including me and many in the tax professional community, have long argued that the Internal Revenue Service has been its own worst enemy when it comes to moving the agency into electronic era.
Sure, Uncle Sam's tax collector has been encouraging, and in some instances forcing, taxpayers into digital transactions, from filing returns and reports to paying business and individual tax bills.
But in other areas, the IRS has remained staunchly old-school. Much of its contact with filers and their representatives is via paper documents sent through the U.S. Postal Service.
And in many cases, it still requires real pen-to-paper signatures on documents that must then be faxed. Yes, faxed.
However, that literally inked John Hancock requirement is changing. At least temporarily.
The IRS has informed employees (and us) that it now will allow digital signatures on certain forms that cannot be filed electronically.
COVID-19 health precaution: The reason is, like so many of this year's tax modifications — both in the Internal Revenue Code and IRS processes — is because of the coronavirus pandemic.
"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," said Sunita Lough, Deputy Commissioner for Services and Enforcement, in an Aug. 27 memo to IRS personnel.
Tax pros were the drivers of this change. Lough, who affixed her digital signature to the memo, noted the concerns the agency had heard from taxpayer representatives about securing handwritten signatures during this health crisis on forms that must be filed or maintained on paper.
"To alleviate these concerns while promoting timely filing, we are implementing a temporary deviation with this memorandum that allows taxpayers and representatives to use electronic or digital signatures when signing [certain] forms that currently require a handwritten signature," wrote Lough.
Hint of possible permanence: IRS Commissioner Chuck Rettig reiterated the reasons for the electronic change.
"Expanding the use of digital signatures is an important step during COVID-19 to help tax professionals," said Rettig in announcing the e-signature move. The change will help to reduce in-person contact and lessen potential coronavirus exposure to taxpayers and tax professionals, with both groups working remotely to file necessary tax forms in a timely fashion.
Rettig also said the IRS would "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."
I'm taking Rettig's remarks as hope that at least in some of these new form filings, e-signatures could become permanently accepted.
10 temporarily affected forms: For now, though, the additionally acceptable e-sigs are only temporary and only on certain forms.
- 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.
Each of these forms cannot be e-filed. They generally must be printed, either from IRS.gov or through tax professional software, and snail mailed. The IRS will not specify which digital signature product tax professionals must use.
Note, too, that the above digitally signed forms must be mailed to the IRS by or on Dec. 31, 2020.
Millions of e-sigs already accepted: Making the change to more electronically signed forms is not a stretch.
In 2019, the IRS accepted more than 138 million electronically filed 1040 forms. Through July 24 this year, the agency has received almost 144 million returns. The 2020 increase includes returns filed electronically by folks who normally don't submit 1040s so that they could get the special COVID-19 Economic Impact Payments.
All of these individual tax returns use an electronic signature when e-filed. That's done either by using a taxpayer's self-selected personal identification number (PIN) when the filer completes the return on his/her own or, if the filing is done by a professional, a tax-preparer selected PIN.
In the overall annual filing scheme, the IRS says that more than 90 percent of Form 1040s are filed electronically. That's a habit the agency is continues to recommend, in these coronavirus or more normal tax times.
The IRS' own Free File option is still available for eligible taxpayers who got an extension until Oct. 15 to file their 2019 returns.
You also might find these items of interest:
- 7 ways, including electronically, to pay your tax bill
- IRS and tax software companies called out for Free File shortfalls
- Form 1040-X now can be e-filed, but just (for now) to correct 2019 return mistakes
|Coronavirus Caveat & More Information
In 2020, we're all dealing with extraordinary circumstances,
both in our daily lives and when it comes to our taxes.
The COVID-19 pandemic and efforts to reduce its transmission
and protect ourselves and our families means that,
for the most part, we're focusing on just getting through these trying days.
But life as we knew it before the coronavirus will return,
along with our mundane tax matters.
Here's hoping that happens soon!
In the meantime, you can find more on the virus and its effects on our taxes
by clicking Coronavirus (COVID-19) and Taxes.