How does the e-signature option work? Taxpayers, who currently use Forms 8878 or 8879 to sign electronic Forms 1040 federal tax returns or filing extensions, can use an e-signature to sign and electronically submit these forms to their Electronic Return Originator (ERO). Can all taxpayers use the e-signature option? No. The e-signature option is only available to taxpayers e-filing their tax returns through an ERO, who uses software that provides identity verification and e-signature. To meet e-signature requirements, the ERO must be able to record the taxpayer’s name, social security number, address and date of birth electronically for identity verification purposes. Are taxpayers required to sign Forms 8878 or 8879 electronically? No. Taxpayers may continue to use a handwritten signature and return the form to the ERO in-person, via U.S. mail, private delivery, fax, e-mail, or an Internet website. What e-signature methods are available? The software the ERO chooses to use dictates the e-signature method used to sign the form. Regardless of the method used, the electronic record must be tamper proof once it is e-signed. Some examples of methods used to capture an e-signature include: A handwritten signature captured on an e-signature pad; A handwritten signature, mark, or command input on a display screen using a stylus device; A digitized image of a handwritten signature that is attached to an electronic record; A typed name; A shared secret such as a PIN, password, or secret code, used to sign the electronic record; A digital signature; or A mark captured as a graphic. What are the ERO’s responsibilities with regard to e-signature? If the taxpayer uses the e-signature option, the ERO must use software that includes identity verification. The software must record the following data: Digital image of the signed form; Date and time of the signature; Taxpayer’s computer IP address (remote transaction only); Taxpayer’s login identification — user name (remote transaction only); Results of the identity verification check validating that the taxpayer’s ID verification was successful; and The e-signature method used to sign the record. The ERO is also responsible for maintaining a tamper-proof record in a secure, access-controlled storage system for 3 years from the due date of the return or 3 years from the IRS return receipt date, whichever is later. ERO's must be able to retrieve and reproduce legible hard-copies of the signed form. How should the software perform identity verification? As part of identity verification, the software may create what is known as a “soft inquiry” in the credit reporting industry. A credit reporting company uses information from the taxpayer’s credit report to generate knowledge based authentication questions. This action may create an entry on the credit report called a “soft inquiry”. Typically, the knowledge based authentication questions address the taxpayer’s personal and financial history. These are usually multiple choice questions such as the name of their mortgage lender, type of car financed, a former address or phone number. The taxpayer is expected to answer the questions correctly. This is not a credit check. However, taxpayers who cannot complete the identity verification check cannot use e-signature. Is identity verification a one-time event? No. Identity verification must be completed every time a taxpayer electronically signs Form 8878 or 8879, with two exceptions. If a taxpayer e-signs the form in the physical presence of the ERO, and the taxpayer has a multi-year business relationship with the ERO, then no further identity verification is needed. A multi-year business relationship is one in which the ERO has originated tax returns for the taxpayer for a prior tax year and has identified the taxpayer using the identity verification process. What is an “e-signature via remote transaction” in relation to Forms 8878 or 8879? A remote transaction for e-signature is one in which the taxpayer is electronically signing the form and the ERO is not physically present with the taxpayer. Note: A remote transaction for e-signature purposes does not include handwritten signatures on Forms 8878 or 8879, sent to an ERO by hand delivery, U.S. mail, private delivery service, fax, e-mail or an Internet website. What is identity verification failure? When an ERO uses tax preparation software to electronically sign Form 8878 or 8879, the software enables identity verification using knowledge based authentication questions. If the taxpayer fails to provide the correct answers to the knowledge based authentication questions after three attempts, the ERO must get the taxpayer’s handwritten signature.
