IRS Expands List of Forms that can be Signed Digitally

The IRS’s latest release, dated September 10, augments the list of IRS forms that may be submitted with an “electronic or digital signature,” so long as they are sent via postal mail to the appropriate IRS service center by December 31, 2020. IRS guidance is clear that the temporary allowance for electronic signatures does not change the requirement that these forms be filed electronically. The authorization changes the IRS’s previous policy by allowing the covered forms to be electronically signed before being printed and mailed.

The IRS’s decision to temporarily allow for electronic execution of certain forms is intended to help protect taxpayers and tax professionals during the COVID-19 pandemic by reducing the need for in-person contact.

What is meant by “electronic” or “digital” signing?

The IRS guidance is not explicitly clear about whether “electronic” or “digital” signatures include scanned images of handwritten signatures, though a conservative reading of the relevant guidance would suggest that scanned or photographed handwritten signatures are not what the agency intended to permit. The IRS guidance from both August and September refers to “electronic or digital signatures” and further notes that, “[e]lectronic and digital signatures appear in many forms when printed and may be created by many different technologies. No specific technology is required for this purpose during this temporary deviation.” This suggests that the IRS contemplates “electronic or digital signatures” as including only signatures created using encryption technology, such as DocuSign. An example of this type of electronic signature can be seen on the updated August 28 IRS Memoranda, to which Deputy Commissioner Lough affixed her signature using an encrypted format.

Furthermore, in a June 12 Memorandum to services and enforcement employees, the IRS notified employees that they may accept “images of signatures (scanned or photographed)” as well as “Digital Signatures that use encryption techniques (for example, DocuSign)” on certain tax forms, thus appearing to draw a distinction between the two formats. Read together with the more recent guidance, it would seem as if the IRS contemplates a meaningful distinction between encrypted signatures, as opposed to scanned images or photographs of handwritten signatures, and that the August 28 and September 10 guidance only applies to the former.

Which IRS forms are covered?

The following forms were approved for execution via digital signature on August 28, 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
• Form 8453 series, Form 8878 series, and Form 8879 series regarding IRS e-file Signature Authorization Forms.

The following forms were added to that list on September 10, 2020:

• Form 706, U.S. Estate (and Generation-Skipping Transfer) Tax Return
• Form 706-NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return
• Form 709, U.S. Gift (and Generation-Skipping Transfer) Tax Return
• Form 1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons
• 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.

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