The US Internal Revenue Service (IRS) extended its temporary approval of accepting digital signatures on certain IRS forms until December 31, 2021 (see Memorandum NHQ-10-1220-000, the Memorandum). This Memorandum has also extended the policy to include “electronic signatures,” and the list of IRS forms has been expanded to include Code Section 83(b) election statements.
As highlighted in a prior September 10, 2020 LawFlash on this same topic, the IRS had announced on August 28, 2020 the temporary approval of the use of digital signatures in a news release (IR-2020-194, the News Release). This News Release allowed a limited number of IRS forms to be digitally signed. The Memorandum is broader in scope and provides some clarity on what type of signatures are acceptable. In addition to digital signatures, the Memorandum specifically includes electronic signatures, and the IRS acknowledges that both electronic and digital signatures can appear in “many forms” and “may be created by many different technologies.” The Memorandum further states that the IRS is not requiring any specific technology for purposes of producing an electronic or digital signature during this temporary acceptance period. Thus, it appears the IRS is accepting images of signatures (scanned or photographed) and digital signatures (those using encryption techniques). Although the IRS does not specify which electronic or digital signature product to use, tax professionals may want to store a copy of the electronic transmission of the signed form should further authentication be required at a later date.
The Memorandum also expands the number of IRS forms that may be electronically or digitally signed (full list included below). In addition to Form 8832, Entity Classification Election, which allows an eligible entity to elect how it will be classified for US federal tax purposes, the IRS is now accepting digital or electronic signatures on Internal Revenue Code Section 83(b) election statements, which allows a taxpayer to elect to report income from the transfer of property for the performance of services in the year of such property transfer. All IRS forms submitted under this temporary IRS policy must be signed and postmarked on August 28, 2020 or later.
The Memorandum explains that the IRS is extending this temporary policy as a continued response to COVID-19 in order to minimize the need for in-person contact. Thus, although the IRS has now extended this temporary policy a couple of times since it was first introduced in August 2020, this policy may not be continued, at least not in this current form, after December 31, 2021.
The following are the forms listed in the Memorandum:
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