With so many of us moving to a #firmofthefuture business model, the use of e-signatures for Forms 8878 & 8879 are becoming more common. The Internal Revenue Service issued e-signature guidance on November 5, 2018 that provides the acceptable method for your practice. There are many questions around this topic, and we are here to help answer them.
The IRS is strict about the e-signatures for Form 2848 (Power of Attorney) and does not accept this form of signature from a taxpayer. Those forms still require a physical hand-written signature. For the Forms 8878 & 8879, it isn’t complicated to understand what methods are acceptable. They range from an original signature to a mark captured as a scalable graphic. But what is most important is what the software records when the signature is completed. Straight from the IRS guidance, you will find the following data MUST be recorded:
Essentially, the increased awareness of cyber-crime and identity theft has risen at such a rapid rate, the IRS is working hard to protect taxpayers from this crime. They are requiring we, the professionals, to assist them in this fight by giving us guidance on the best way to minimize the risk of a breach. The discussion around the tax professionals as targets for these crimes has been going on for a long time. It is now time to implement a system that will minimize that risk and protect you from potential fraudulent activity including the violation of an innocent spouse situation or a stolen identity and subsequent tax return fraudulent filing act.
As for item 6, how many times have you documented your client's government issued identification when they sign the 8879!? And to make matters a little scarier, according to Publication 3112, page 28-29, if the IRS calls you and requests a copy of the 8879 that you just transmitted and cannot provide the identity verification information in the list above, you could be sanctioned. Can you image getting a letter from the IRS stating that you are on hold from e-filing for 30 days? Or, imagine the IRS denying your participation for a length of years?
Thankfully, we as preparers, do not need to be IT specialist to make all these requirements happen.
These blogs are written by QuickBooks ProAdvisors