Tax season: The IRS officially accepts eSignatures as legally binding

Like it or not, tax season is upon us once again: a time of year when the only thing more painful than paying your dues is filing endless paperwork.

The Internal Revenue Service (IRS) expects to process over 150 million individual returns this year. That’s a lot of taxpayers, but the good news is, you can use e-signatures to simplify the back-and-forth required by tax return paperwork. In fact, the IRS is strongly encouraging people to file their tax returns electronically to receive a faster refund.

E-signatures make the process so seamless and convenient that the number of returns filed electronically skyrocketed from just 25,000 in 2014 to nearly 100 million in 2017. 

But before you hit the web and sign up for an e-signature service, there is one critical consideration to keep in mind: you should be looking for a solution that will keep your confidential data secure, especially given the fact that one in every 15 people was a victim of tax-related identity theft in 2017.

The best way to ensure your security is to choose an e-signature solution that meets the IRS standards for e-signatures.

Here are 3 rules that the IRS has laid out as a guideline for eSignature security:

1) Identify the taxpayer who signed the document

The e-signature solution must record each signer’s personal information, including their date of birth, name, social security number, and address. It also verifies the taxpayer’s identity by checking if the information they provide is consistent with the data received from record checks with credit bureaus or similar databases.

With remote signing, the e-signature solution must use knowledge-based authentication (KBA) to verify the taxpayer’s identity. This process typically involves asking the signer a series of detailed questions generated using information found in public databases. This information typically cannot be known by anyone other than the signer.

In keeping with the requirements put forth by the National Institute of Standards and Technology, the e-signature solution must keep a record of the signer successfully passing this authentication test. However, if a signer doesn’t clear the questions within 3 tries, he or she must authorize the documents with a handwritten signature.

2) Ensure eSignature validity while keeping the document tamper-proof

In order to maintain the integrity of these electronic records, the e-signature solution must ensure that the e-signature provided by the taxpayer is valid. This verification is completed by linking the e-signature to its associated electronic record.

It should also be impossible to remove, copy, or transfer the e-signature to falsify a digital record. In other words, the e-signature solution must employ techniques that prevent the document from being modified in any manner.

3) Provide a digital paper trail

In order to comply with IRS requirements, the e-signature solution must record a digital image of the signed form. It must also include other details such as the date and time at which the document was signed, the taxpayer’s IP address, his or her username (login details), and the KBA results following the completed identity verification process.  

It is also critical to ensure that your chosen e-signature solution offers a digital audit trail confirming that the signer completed the entire process. This way, the Electronic Return Originator (ERO) will be able to provide proof for the IRS if needed.  

While the adoption of e-signature solutions for tax documents is still in its early stages, this technology has the power to make the filing process more convenient than ever before.


Looking for an eSignature solution to make tax season more bearable? Check out Signeasy today!



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