IRS E-SIGNATURE POLICY: ENSURE REASONABLE STANDARDS
Threatens (future state)
Recent pronouncements by Chief Counsel and ongoing work on in-house solutions THREATEN the adoption of electronic signatures and records by potentially disallowing them in all instances other than those transactions initiated or supported by IRS information technology systems.
In December 2016 the IRS Chief Counsel released Advice 201650019, which ruled on the issue of whether electronic signatures could be used on Form 2878 – Power of Attorney. In recommending that electronic signatures should not be accepted on the form, the chief counsel further recommended that “an electronic signature should only be accepted by the Service when there are published guidance or IRM provisions that specifically authorize use of an electronic signature for the specific form involved.” While the advice states that it remains a business decision whether to accept use of electronic signatures on any specific form,” it recommends that “[i]n those cases dealing with high-risk documents, taxpayers should either be required to sign by non-electronic means or the Service should institute heightened authentication, security procedures, and electronic signing processes to protect the Service against the risk of disavowal by the taxpayer.” In the meantime, work on Revenue Procedure governing electronic signatures has been underway for some time, but the subject matter now falls under Identity Assurance, a directorship that was formed in response to a GAO directive last year. While the draft Rev. Proc. has not been released for public comment, there is a high likelihood that it will call for 100% IRS oversight of electronic signatures on all forms, possibly threatening transaction workflows that do not currently include the IRS as a direct participant.
Internal Revenue Bulletin 2017-5 summarized temporary regulations and stated that the Treasury Department and the IRS have determined that valid electronically signed withholding certificates may be accepted by a withholding agent if the withholding certificates reasonably demonstrate to the withholding agent that they have been electronically signed by the recipient identified on the form or a person authorized by the recipient to sign the form (by, for example, a signature block that includes a time and date stamp and a statement that the certificate has been electronically signed and the name of the person authorized to sign the form). If the withholding certificate contains only a typed name in the signature line and no other information regarding the method of signature, a withholding agent cannot treat the withholding certificate as validly signed. There is much confusion about what is meant by “signature block”, and whether and how indicia of electronic signing are to be implemented in compliance with the temporary regulation.
Inform key influencers of the existence and value of 3rd party-initiated electronic signatures and records. Seek broader allowance for electronic means of signing and storing forms, short of specifying procedures for every form individually.