eSignatures for Business Returns

Technical topics regarding tax preparation.
#1
BFStax  
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Has anyone heard of the IRS's position on allowing esignatures for form 8879 series for 2020 tax returns? There were allowing it during the year for returns filed before Dec 31, 2020 but I never used it. As I prepare for this tax season I want to know if I should buy more KBAs.

And that leads me to my next question: If IRS is allowing esignatures for a business return, how do you verify the signers identity using KBA? I use SmartVault which integrates with DocuSign and I don't have a choice on the KBA, it just sends based on their SSN which is on their tax return.
 

#2
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There's been more than a few threads on this subject. Use the yellow box "KBA business".

To answer your question, last time I looked into the matter it wasn't clear. I tend to think that e-signature is okay and KBA isn't required for 1065, 1120-S, 1120 efile authorizations.

8879 and 8878 for a 1040 must incorporate KBA if the client is executing using remote e-signature.
 

#3
BFStax  
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ManVsTax wrote:There's been more than a few threads on this subject. Use the yellow box "KBA business".

To answer your question, last time I looked into the matter it wasn't clear. I tend to think that e-signature is okay and KBA isn't required for 1065, 1120-S, 1120 efile authorizations.


Apparently I was using the wrong search terms so I appreciate the help. But even so, nothing concrete from our fellow tax experts. Which is what I'm looking for. Why can't the IRS just say "Business returns need to do this", or "No, business returns can't do this". Even their temporary authorization is very vague.

You have an excellent point on the other thread about TurboTax Business. How do they get around this requirement? Do they require returns to be printed and signed and then mailed? I doubt it. So they must be allowing esigned returns and I'm sure Intuit isn't just making a guess at this since they are so big and probably have knowledge from the IRS about what is allowed.
 

#4
BFStax  
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ManVsTax wrote:To answer your question, last time I looked into the matter it wasn't clear. I tend to think that e-signature is okay and KBA isn't required for 1065, 1120-S, 1120 efile authorizations.


Here is an excerpt from an AICPA letter to IRS about this matter on June 4th, 2020. I trust the AICPA tax lawyers and CPAs are much smarter than me and feel footnote 10 is key here. It specifically references the entire series of 8879 including the C, EMP, EO, etc... The entire letter can be read here: https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/20200604-aicpa-comment-letter-irs-guidance-for-electronic-signature.pdf

"Recommendation
The IRS should modify Publications 1345 and 4163 to allow all taxpayers the option to use an esignature for the Form 8878 series and the Form 8879 series (footnote 10) (collectively, “E-file Authorization Forms”) if the software provides the e-signature capability.

Nearly 90% of individual tax returns, well over 80% of partnership, corporation and fiduciary returns, and nearly 70% of not-for-profit entity returns are filed electronically. Furthermore, due to the COVID-19 pandemic, many taxpayers are currently subject to stay-at-home orders or to maintain a minimum of six feet of social distance from others. The modification of Publications 1345 and 4163, allowing for the use of e-signatures on the E-file Authorization Forms, will permanently facilitate individual and non-individual taxpayers to comply with their filing obligations electronically and to meet current public health directives."

"Footnote 10: Form 8879 series includes Form 8879; Form 8879 (SP), IRS e-file Signature Authorization (Spanish version); Form 8879-C, IRS e-file Signature Authorization for Form 1120; Form 8879-EMP, IRS e-file Signature Authorization for Forms 940, 940 (PR), 941, 941 (PR), 941-SS, 943, 943 (PR), 944, and 945; Form 8879-EO, IRS e-file Signature Authorization for an Exempt Organization; Form 8879-EX, IRS e-file Signature Authorization for Forms 720, 2290, and 8849; Form 8879-F, IRS e-file Signature Authorization for Form 1041; Form 8879-I, IRS e-file Signature Authorization for Form 1120-F; Form 8879-PE, IRS e-file Signature Authorization for Form 1065; and Form 8879- S, IRS e-file Signature Authorization for Form 1120-S."

All of that being said, this letter was published in June and the IRS updated their esignature stance in August. But per the IRS site here: https://www.irs.gov/newsroom/irs-approves-temporary-use-of-e-signatures-for-certain-forms which of course was recently updated to allow through June 2021, it says these are forms that are paper filed. When does ANYONE paper file a form 8879 and mail to the IRS? To me this is conflicting information or just generally misleading.

"The below list of forms is available at IRS.gov and through tax professional's software products. These forms cannot be e-filed and generally are printed and mailed. The IRS will not specify which digital signature product tax professionals must use. There are several commercial products available.

The following forms can be submitted with digital signatures if mailed by or on December 31, 2020:

Form 3115, Application for Change in Accounting Method;
Form 8832, Entity Classification Election;
Form 8802, Application for U.S. Residency Certification;
Form 1066, U.S. Income Tax Return for Real Estate Mortgage Investment Conduit;
Form 1120-RIC, U.S. Income Tax Return For Regulated Investment Companies;
Form 1120-C, U.S. Income Tax Return for Cooperative Associations;
Form 1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
Form 1120-L, U.S. Life Insurance Company Income Tax Return;
Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return; and
Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms."
 

#5
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BFStax wrote:You have an excellent point on the other thread about TurboTax Business. How do they get around this requirement? Do they require returns to be printed and signed and then mailed? I doubt it. So they must be allowing esigned returns and I'm sure Intuit isn't just making a guess at this since they are so big and probably have knowledge from the IRS about what is allowed.


I have been curious about this since I switched to LaCerte. They seem adamant that nearly all e-file forms can be signed electronically, but I have not seen clear enough IRS guidance for me to risk it with business returns.

KBA is not set up for business entities in DocuSign since it relies on SSNs to pull information on a taxpayer and verify against credit and other history.

I do not get why the IRS is not entirely eSignature and eFile at this point, across the board. A wet ink signature does nothing to prevent fraud.
 


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