IRS Announces Option for Tax Professionals to Upload Forms 2848 and 8821 to the Agency
The IRS announced a new electronic option for submitting Forms 2848 and 8821 online in News Release IR-2021-20.[1] The release describes the option as follows:
The Internal Revenue Service today rolled out a new online option that will help tax professionals remotely obtain signatures from individual and business clients and submit authorization forms electronically.
Tax professionals can find the new “Submit Forms 2848 and 8821 Online” on the IRS.gov/taxpros page. Tax professionals must have a Secure Access account, including a current username and password, or create an account in advance of submitting an online authorization form.
“This online tool will allow tax professionals to safely obtain signatures from individual and business clients and upload authorization forms,” said Chuck Rettig, IRS commissioner. “This is a first step in our ongoing efforts to expand digital options for tax professionals using electronic signatures and online uploads.”
The project is a result of the Taxpayer First Act that requires the IRS to expand use of taxpayers’ electronic signatures on authorization forms. This online option also will help protect taxpayers and tax professionals by more easily allowing remote transactions.[2]
The new system will accept Forms 2848 and 8821 using either handwritten or electronic signatures:
The taxpayer and the tax professional must sign Form 2848. If the tax professional uses the new online option, the signatures on the forms can be handwritten or electronic. Form 8821 needs only the taxpayer’s signature. If using the new online option, the taxpayer’s signature can be handwritten or electronic.[3]
The new system can be used to withdraw previous authorizations but cannot be used to ask questions or address other issues.[4]
While the IRS will continue to accept mailed or faxed authorization forms, signatures on such forms must be handwritten—electronic signatures cannot be used on these forms.[5]
Electronic Signatures
The IRS, in a separate FAQ, notes that an electronic signature is not the same as a digital signature:
An electronic signature is an electronic symbol attached to an electronic record that a person will sign. A digital signature is a type of electronic signature.[6]
So, while digital signatures (such as those provided by services such as DocuSign, RightSignature, etc.) would qualify as an electronic signature, simpler versions will also work. The FAQ provides the following description of such electronic signatures:
An electronic signature is a way to get approval on electronic documents. It can be in many forms and created by many technologies. You do not need specific technology to create electronic signatures. Electronic signatures can be:
1. A typed name that is typed on a signature block
2. A scanned or digitized image of a handwritten signature that is attached to an electronic record
3. A handwritten signature input onto an electronic signature pad
4. A handwritten signature, mark, or command input on a display screen with a stylus device
5. A signature from third-party software.[7]
While such signatures can be used in the new submission system, they cannot be used with faxed powers of attorney:
For security reasons, all forms mailed or faxed to the IRS must have a “wet” ink signature.[8]
It seems reasonable to assume the same security concerns would prevent an IRS employee whom the professional contacts on the phone from accepting the copy of the form with an electronic signature faxed directly to them when it is discovered the power of attorney has not yet been processed.
That may be a real problem for the use of such signatures, since the FAQ also notes that the new submission process will not result in the faster processing of such forms:
We process forms in the order we receive them, no matter how they are submitted (mail, fax, online). Forms submitted online are reviewed and processed by IRS employees in the same way as those submitted by fax or mail.[9]
Authentication Requirements for New Clients
The electronic signature option does come with additional steps that must be completed for new clients:
If the tax professional uses the electronic signature option for a new client, the tax professional must first authenticate the client’s identity. For details on this process, see the “Authentication” section in the online option’s Frequently Asked Questions.[10]
Specifically, the professional must authenticate the following clients per the referenced FAQ:
You must authenticate a taxpayer’s identity when they electronically sign the form in a remote transaction (e.g., not in person) and you do not have a personal or business relationship with them.[11]
The IRS provides the following guidance on how to authenticate an individual taxpayer’s identity:
If you do not have personal knowledge of the taxpayer’s identity, you must authenticate their identity if they’re signing the authorization form in a remote transaction.
To authenticate the taxpayer’s identity for remote transactions, take these steps:
1. Inspect a valid government-issued photo identification (ID) of the taxpayer and compare the photo to the taxpayer via a self-taken picture of the taxpayer or video conferencing to compare. Examples of government-issued photo ID include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport;
2. Record the name, Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN), address, and date of birth of the taxpayer; and
3. Verify the taxpayer’s name, address and SSN or ITIN through secondary documentation, such as a federal or state tax return, IRS notice or letter, Social Security card or credit card or utility statement. For example, suppose a taxpayer changed their address in 2020. In that case, a 2019 tax return can be used to verify the taxpayer’s name and SSN or ITIN, and a recent utility statement can be used to verify the taxpayer’s new address.[12]
The IRS provides the following steps to authenticate a business taxpayer’s identity:
To authenticate a business entity taxpayer’s identity for remote transactions, take these steps:
1. Confirm the individual has an authorized covered relationship with the business entity.
· Corporation:
An officer having authority under applicable state law to bind the corporation,
Any person designated by the board of directors or other governing body,
Any officer or employee on a written request signed by any principal officer and attested to by the secretary or other officer,
Any bona fide shareholder of record owning 1% or more of the outstanding stock of the corporation.
· S Corporation:
Any person who was a shareholder during any part of the period covered by the return during which an election under section 1362(a) was in effect;
Any person authorized by applicable state law to act for a dissolved corporation; or
Any person who has a material interest that will be affected by information contained therein.
· Partnership:
Any person who was a member of the partnership during any part of the period covered by the return.
2. Inspect a valid government-issued photo identification (ID) of the individual authorized to represent the business entity taxpayer and compare it to a self-taken picture or video conferencing image of the authorized individual. Examples of government-issued photo ID include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa or passport;
3. Record the name, Employer Identification Number (EIN), and address of the business entity taxpayer; and
4. Verify the business entity taxpayer’s name, EIN, and address through secondary documentation, such as a tax information reporting form (e.g., W-2, 1099, etc.), IRS notice or letter, or utility statement.[13]
The IRS provides that professionals should use the steps for business entities to authenticate a tax-exempt organization as well.[14]
The IRS also notes that the professional must retain proof of the authentication, stating that “[b]ooks or records relating to a form or its instructions must be retained as long as their contents may become material in the administration of any Internal Revenue law.”[15]
Advantages of the New Option and IRS’s Future Plans
The IRS touts the new system as providing the following advantages to tax professionals:
The new online option negates the need for specific equipment (e.g., fax machines, scanners), saves tax professionals’ time in obtaining signatures, reduces person-to-person contact, and allows complete flexibility in completing the form anywhere, anytime, for both the tax professional and client.[16]
This program represents an intermediate step in the IRS’s goal of moving toward a fully online option for signing and submitting such forms. The News Release notes:
The “Submit Forms 2848 and 8821 Online” option is a step towards to a broader IRS effort to expand options for electronic signatures on authorization forms as required by TFA.
This summer, the IRS plans to launch the Tax Pro Account. Its initial functionality will allow tax professionals to initiate a third-party authorization on IRS.gov and send it to a client’s IRS online account. Individual clients will access their online account and digitally sign the authorization, sending it to be recorded on the CAF. The IRS expects this new method will dramatically speed processing and allow for almost immediate authorization. More information about the Tax Pro Account and the extent of its initial functionality will be announced in the future.[17]
[1] News Release IR-2021-20, January 25, 2021, https://www.irs.gov/newsroom/new-irs-submit-forms-2848-and-8821-online-offers-contact-free-signature-options-for-tax-pros-and-clients-sending-authorization-forms (retrieved January 28, 2021)
[2] News Release IR-2021-20, January 25, 2021
[3] News Release IR-2021-20, January 25, 2021
[4] News Release IR-2021-20, January 25, 2021
[5] News Release IR-2021-20, January 25, 2021
[6] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[7] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[8] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[9] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[10] News Release IR-2021-20, January 25, 2021
[11] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[12] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[13] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[14] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[15] Submit Forms 2848 and 8821 Online, IRS website, January 28, 2021, https://www.irs.gov/tax-professionals/submit-forms-2848-and-8821-online#2848-8821-faqs (retrieved January 28, 2021)
[16] News Release IR-2021-20, January 25, 2021
[17] News Release IR-2021-20, January 25, 2021