Almost all of our tax returns that we prepare for farmers are now being electronically filed with the IRS and related state taxing authorities. The form that we need from the client in order to electronically file the return is Form 8879. This form must be signed by an appropriate person for entities and then the taxpayer(s) for individual filing. We do not file this Form with the IRS, but must retain a copy in our records.
Kristy Maitre (formerly with the IRS and now part of Iowa State University's Center for Agricultural Law and Taxation (CALT)) just released a draft of the new instructions for using this form and many of these changes can be painful for tax preparers and their clients.
Electronic signatures are allowed, however, the tax preparer must record the following data:
- Digital image of the signed form;
- Date and time of the signature;
- Taxpayer's computer IP address (remote transaction only);
- Identity verification: taxpayer's knowledge based authentication passes results has been verified and for in person transactions, confirmation that government picture identification has been verified; and
- Method used to the sign the record (e.g., typed name), or a system log, or other audit trail that reflects the completion of the electronic signature process by the signer.
There is an Indentity Verificiation Process that must now ensure the validity of any electronically signed record. If there is more than one signature, then each must be verified.
For taxpayers signing the form in our office, we would be required to inspect a valid government picture identification; compare the picture to the applicant, and record the name, social security number, address and date of birth and other personal information on record are consistent with information provided through record checks with the applicable agency or through credit bureaus or similar agencies. If the preparer is unable to complete identity verification after three attempts, then they must obtain a handwritten signature.
As more and more information goes completely digital, it now will require more and more due diligence on us as tax preparers to confirm the identity of the signers of these forms. There has been way too many cases of stolen identities to obtain fraudulent income tax refunds and due these issues, the IRS will most likely issues these instructions for the 2015 tax season.
I am not looking forward to this, but if it substantially reduces fraud, then it is probably worth it.