After initially beginning a temporary acceptance of certain e-signatures during 2020 as a response to the COVID-19 pandemic, then extending that program twice, dropping the “temporary” designation in the most recent extension, the IRS now appears to have made the program permanent in IRS Fact Sheet 2021-12.[1]

The IRS justifies allowing e-signatures on certain forms as follows:

To help reduce burden for the tax community, the IRS allows taxpayers to use electronic or digital signatures on certain paper forms they cannot file electronically. The agency is balancing the e-signature option with critical security and protection needed against identity theft and fraud. Understanding the importance of electronic signatures to the tax community, the IRS offers an overview about using them on certain forms.[2]

The Fact Sheet provides that it will accept a “wide range of electronic signatures.” The notice goes on to list the following specific methods that are deemed acceptable:

• A typed name typed on a signature block

• A scanned or digitized image of a handwritten signature that’s attached to an electronic record

• A handwritten signature input onto an electronic signature pad

• A handwritten signature, mark or command input on a display screen with a stylus device

• A signature created by a third-party software.[3]

While the Fact Sheet does not bar the use of other forms of e-signatures, professionals likely will want to use one of the specifically approved methods, if possible, to eliminate the risk of the IRS claiming the specific method used is not appropriate.

The Fact Sheet notes that various methods can be used to capture the e-signature:

The IRS doesn’t specify what technology a taxpayer must use to capture an electronic signature. The IRS will accept images of signatures (scanned or photographed) including common file types supported by Microsoft 365 such as tiff, jpg, jpeg, pdf, Microsoft Office suite or Zip.[4]

One missing format on that list is the HEIC (High-Efficiency Image Format) image format used by default by iPhones and other Apple products running recent versions of the company’s operating systems (such as iOS 11 and later versions), so most likely they should be converted to JPEG or PDF for permanent storage if a professional receives files in that format. 

Apple switched to that format as it is more space efficient, but support outside of Apple products is more limited, specifically causing issues for Windows users who don’t resort to third party software.  The lack of native Windows support likely explains why the IRS does not list this format in its list of clearly acceptable formats.

The IRS added more forms to those for which e-signatures will be accepted as the program was extended.  The list of forms for which the IRS will deem electronic signatures acceptable are, as of September 1, 2021:

• Form 11-C, Occupational Tax and Registration Return for Wagering;

• Form 637, Application for Registration (For Certain Excise Tax Activities);

• Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return;

• Form 706-A, U.S. Additional Estate Tax Return;

• Form 706-GS(D), Generation-Skipping Transfer Tax Return for Distributions;

• Form 706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust;

• Form 706-GS(T), Generation-Skipping Transfer Tax Return for Terminations;

• Form 706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts;

• Form 706 Schedule R-1, Generation Skipping Transfer Tax;

• Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return;

• Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return;

• Form 730, Monthly Tax Return for Wagers;

• Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;

• Form 1120-C, U.S. Income Tax Return for Cooperative Associations;

• Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation;

• Form 1120-H, U.S. Income Tax Return for Homeowners Associations;

• Form 1120-IC DISC, Interest Charge Domestic International Sales – Corporation Return;

• Form 1120-L, U.S. Life Insurance Company Income Tax Return;

• Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;

• Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;

• Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;

• Form 1120-RIC, U.S. Income Tax Return for Regulated Investment Companies;

• Form 1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B);

• Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship;

• Form 1128, Application to Adopt, Change or Retain a Tax Year;

• Form 2678, Employer/Payer Appointment of Agent;

• Form 3115, Application for Change in Accounting Method;

• Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts;

• Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner;

• Form 4421, Declaration – Executor’s Commissions and Attorney’s Fees;

• Form 4768, Application for Extension of Time to File a Return and/or Pay U.S. Estate (and Generation-Skipping Transfer) Taxes;

• Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues;

• Form 8038-G, Information Return for Tax-Exempt Governmental Bonds;

• Form 8038-GC; Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales;

• Form 8283, Noncash Charitable Contributions;

• Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms;

• Form 8802, Application for U.S. Residency Certification;

• Form 8832, Entity Classification Election;

• Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent;

• Form 8973, Certified Professional Employer Organization/Customer Reporting Agreement; and

• Elections made per Internal Revenue Code Section 83(b).[5]

The IRS Fact Sheet indicates that these are forms that cannot be filed using IRS e-file.[6]  Thus, it seems unlikely that the IRS will allow e-signatures to be used for forms that can be electronically filed with the IRS and that any form on this list that is later added to IRS e-file may be removed from the list.

Advisers must take care not to use this option for any forms not on the list.  As we reported in July, the use of an unapproved signature method can cause the filing to be rejected as lacking a signature.[7]

[1] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021, https://www.irs.gov/newsroom/details-on-using-e-signatures-for-certain-forms

[2] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021

[3] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021

[4] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021

[5] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021

[6] “Details on using e-signatures for certain forms,” FS-2021-12, September 1, 2021

[7] See Ed Zollars, CPA, “Digital Signature on 2014 and 2015 Amended Returns Was Not a Valid Signature,” Current Federal Tax Developments website, July 15, 2021, https://www.currentfederaltaxdevelopments.com/blog/2021/7/15/digital-signature-on-2014-and-2015-amended-returns-was-not-a-valid-signature