Sometimes good things come out of adversity. During the pandemic, the IRS had no choice but to move to new technologies – including accepting digital signatures. Now the IRS has announced that it is extending “certain temporary flexibilities”. Specifically, it will accept digital signatures “indefinitely until more robust technical solutions are implemented”. In addition, the agency will allow encrypted email when working directly with IRS personnel until 31 October 2025.
The IRS noted that the use of these technologies has been “well received” by tax professionals and taxpayers. Those who used the technologies reported saving time and resources.
“We have heard from tax professionals and taxpayers, as well as our employees, about how the flexibilities have made it easier to comply with tax requirements and communicate with IRS compliance personnel,” said Doug O’Donnell, IRS deputy commissioner for examination and enforcement.
Digital signatures
The Internal Revenue Manual (IRM) has been updated to reflect these changes. Specifically, 10.10.1 of the manual under Chapter 10.10, Identity Assurance, clarifies that alternatives to handwritten signatures are accepted for certain tax forms and that images of signatures and digital signatures are acceptable in compliance interactions. The list of forms, which includes gift tax returns, estate tax returns and Form 8832, Entity Classification Election, is available at IRM Exhibit 10.10.1-2 on IRS.gov.
According to the manual, an alternative signature is a signature other than your original handwritten signature, including electronic signatures. Electronic signatures include (but aren’t limited to) a typed name entered within or at the end of an electronic record, such as typed into a signature block; a scanned or digitised image of a handwritten signature attached to an electronic record; a unique biometric-based identifier, such as a fingerprint, voiceprint, or retinal scan; and a signature generated by third-party software.
It’s worth noting that the IRS is not bound by the IRM (yes, really). Courts have ruled, for example, that “the procedures set forth in the IRM do not have the effect of a rule of law” because it was “not promulgated pursuant to any mandate or delegation of authority from Congress”. Nevertheless, it is widely regarded as a guide to IRS policies and procedures.
Encrypted email
In addition, the IRS has issued Interim Guidance Memorandum PGLD-10-1023-0002, which clarifies that the agency will allow encrypted email when working directly with IRS personnel. This exception is limited to IRS personnel who are working with taxpayers to address compliance or resolution issues in ongoing or subsequent authenticated interactions, including Field Compliance, Independent Office of Appeals, Counsel, and Taxpayer Advocate Service personnel. This temporary interim guidance replaces the memorandum dated 18 November 2021 and will expire on 31 October 2025.
What’s next.
According to O’Donnell, “While these digital flexibilities were critical during the pandemic, it’s equally important to continue to provide options as the IRS moves toward a fully digital environment. We will continue to review our processes to identify areas where we can leverage technology to ease the burden on taxpayers, while maintaining critical security and protections against identity theft and fraud.”
