Sometimes, good things can come from adversity. During the pandemic, the IRS had no choice but to begin to move towards new technologies—including accepting digital signatures. Now, the IRS has announced that it is extending “certain temporary flexibilities.” Specifically, they will accept digital signatures “indefinitely until more robust technical solutions are deployed.” Additionally, the agency will allow encrypted email when working directly with IRS personnel until Oct. 31, 2025.
The IRS noted that the use of those technologies was “well received” by tax professionals and taxpayers. Those who used the technologies reported that they saved time and resources.
“We heard from tax professionals and taxpayers as well as our employees about how the flexibilities made it easier to comply with tax requirements and communicate with IRS compliance personnel,” said Doug O’Donnell, IRS Deputy Commissioner for Services and Enforcement.
The Internal Revenue Manual (IRM) has been updated to reflect these changes. Specifically, 10.10.1 in the manual under chapter 10.10, Identity Assurance, makes clear that alternatives to handwritten signatures will be accepted for certain tax forms, and images of signatures and digital signatures will be acceptable in compliance interactions. The list of forms, which includes gift tax returns, estate tax returns, and Form 8832, Entity Classification Election, among others, is available at IRM Exhibit 10.10.1-2 on IRS.gov.
According to the manual, an alternative signature is one other than your original, handwritten signature, including electronic signatures. Electronic signatures include (but aren’t limited to) a typed name that is typed within or at the end of an electronic record, such as typed into a signature block, a scanned or digitized image of a handwritten signature attached to an electronic record, a unique biometric-based identifier, such as a fingerprint, voice print, or a retinal scan, and a signature created by a third party software.
It’s worth noting that the IRS is not bound by the IRM (yes, really). Courts have ruled in cases like that “the procedures set forth in the IRM do not have the effect of a rule of law” since it “is not promulgated pursuant to any mandate or delegation of authority by Congress.” Nevertheless, it is widely regarded as a guide for IRS policies and procedures.
In addition, the IRS has published Interim Guidance Memorandum PGLD-10-1023-0002, which makes clear that the agency will allow encrypted email when working directly with IRS personnel. This exception is limited to IRS personnel working with taxpayers to address compliance or resolve issues in ongoing or follow-up authenticated interactions, including field compliance, Independent Office of Appeals, Counsel, and Taxpayer Advocate Service personnel. This temporary interim guidance supersedes the Nov. 18, 2021, memorandum and will expire Oct. 31, 2025.
According to O’Donnell, “While these digital flexibilities were critical during the pandemic, it’s equally important to continue to offer 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 reduce burden on the tax community while maintaining critical security and protections against identity theft and fraud.”