Are DocuSign signatures acceptable

[taxea]

Anyone familiar with this program? I know the IRS accepts faxed forms with original signatures. Does anyone know whether they would accept a form with an electronic/digital signature?
The real estate industry uses this program rather than overnighting documents for signatures. It is really convenient.

[Koss]

Doesn't look like it...

Docusign is a valid and legitimate system for obtaining electronic signatures. I used it once in dealing with a property management company, to sign a contract for a short-term vacation rental.

But I don't think the IRS regulations allow the use of this type of system. Maybe that will change down the road.

Electronic signatures are valid and legally binding, if they meet certain requirements, under a federal law known as ESIGN, or the Electronic Signatures in Global and National Commerce Act (15 USC 7001 et. seq.).

This law makes electronic signatures valid and legally binding, and covers everything from an online signature for a credit card application to the check mark that you fill in every time you agree to the terms and conditions of a software license.

It's a very broad law that preempts, or overrides, most state laws.

But there's a few things it doesn't apply to. One notable exception is wills. You can't electronically sign your will. Other exceptions relate to the requirements of state and local courts. The law is aimed primarily at private industry.

ESIGN does not limit, override, or supersede the authority of federal agencies such as the IRS, SEC, and the FTC.

My reading of the current version of IRS Publication 1346 leads me to the conclusion that there are only two acceptable ways for a client to sign a tax return that is filed electronically. The first, the self-select PIN method, requires that the taxpayer manually enter their PIN into the electronic return. For most of us, this means that the taxpayer has to have physical access to the keyboard in our office. (More on this later.)

The other way is for the taxpayer to authorize the ERO to enter the PIN for the taxpayer. But according to the IRS, this method still requires a handwritten signature from the taxpayer on Form 8878 or Form 8879. The IRS has made it very clear that a scanned or faxed image of Form 8878 or 8879 is acceptable. But before it can be scanned or faxed, the taxpayer still has to put a handwritten signature on it. Pub. 1346 uses the term handwritten, and I don't think it can be interpreted any other way.

As for self-select PIN... There are ways to do this remotely. I don't think it's practical for a small office. HRB developed a web-based platform for it, and I'm not talking about their DIY software. An HRB client can go into a physical office and drop off their stuff, or mail it in if they've been going to the same tax pro for years. When the return is done, the tax pro sends them an e-mail with a link to a secure website, where they pay with a credit card, review the return, and then enter their self-select PIN.

This works; Docusign doesn't. Because unlike Docusign, HRB's platform makes it possible for the taxpayer to sit at their PC at home, and enter their self-select PIN directly into the electronic tax return.. This is because HRB's web-based platform interfaces directly with the tax preparation software that is used at the office. Docusign, as far as I know, can't do that. Docusign could only be used to obtain an electronic signature from the client on Form 8878 or 8879, but the IRS says it has to be a handwritten signature.

This probably a much longer answer than you wanted. What you're looking for--something that is truly, totally paperless, and doesn't require the client to be in your office, is probably coming soon. HRB figured out a way to do it. But right now I think it would be too expensive for a small office.

You could always ask Docusign to develop a customized app for you. But it would have be able to communicate with your tax prep software...

Good luck with that. We'll just have to wait until the tax software developers come up with something.

BMK

[Koss]

Okay, wait a minute...

Theoretically, there is another way it could be done, but not through Docusign.

The IRS allows the use of a signature pad to capture the handwritten signature of the taxpayer. Just like when you use a credit card at the grocery store.

Works great in your office. Eliminates the need to first print and then scan Form 8878 or 8879.

But the whole point of the original post was: Can we get an electronic signature from the client when they are not in the office?

Well, yeah. If the client has a signature pad attached to their computer at home.



We're laughing now.

But stop and think about this. How long have we been doing electronic filing? Since 1986 or something? Just 10 or 15 years ago it probably sounded ridiculous to suggest that in the near future, many home computers would have a camera and a microphone.

Why not a signature pad?

You wouldn't need Docusign. In principle, you could just e-mail Form 8879 to the client, and the client could use whatever software comes with their signature pad to affix their signature and e-mail it back to you.

Sounds great on paper (pun intended). But the process would have to be encrypted, and the Form 8879 that you send the client would have to be in a format that would allow the client to modify it by adding the image of their signature.

Feels like it's still a good five years away...

BMK

[taxea]

I do use pins but was hoping I could use docusign for random miscellaneous forms that, for the most part would stay in my office. And POA. I guess I will just have to ask the IRS.
Thanks for the responses

[David1980]

I suppose for the actual tax return, you could technically use the self-select PIN method while using some kind of screen sharing application that permits the taxpayer to enter the key presses for their PIN on the 8879. Your software would need to support self-select PIN, you'd need the taxpayer to make the actual key presses, and if the prior year AGI or PIN doesn't match you get a rejected return. But, it should allow you to avoid a signature or the taxpayer's physical presence or faxed documentation for efiling a tax return...

[Koss]

Hmmm... maybe I'm wrong...

I thought I had used DocuSign for a rental contract, and maybe I did. But that was awhile ago, and in any event, I was using a platform controlled by the real estate agency. If it was DocuSign, it was a very different version than what they now offer on their website.

After taking ten or twelve paragraphs to say no, the IRS will not accept this, I decided to actually visit the DocuSign website.

Blows my mind. Maybe this would work, especially for forms that do not have to be submitted to the IRS. Most of my clients would not understand how to use this. And I'm not sure about the encryption level when it comes to the process that DocuSign uses for e-mailing, uploading and downloading. But it's an impressive product.

I am referring to the free, consumer-grade product called DocuSign Ink. This platform allows the user to upload a PDF that needs to be signed, and then drag-and-drop an image of their signature to the place where the signature belongs. The PDF that you upload does not have to be a "fillable" form. You can put the signature anywhere on the document. And then you can save it, as a new PDF, with the signature included. And then do whatever you want with it, such as e-mail it or fax it using a fax server.

Pretty impressive. It eliminates the cumbersome steps of printing, signing and then scanning a document.

The part that I didn't grasp until now is that the "signature" that you add to the form using DocuSign can come from one of three sources:

(i) A selection of artificial, stock handwritten images generated by DocuSign based on the letters of the name you enter. These are better, and look a little more authentic, than the "cursive" fonts in MS Word. But not much better.

(ii) A signature image created by DocuSign when you draw your own signature into a field using the mouse. Or maybe a stylus if you are using a tablet? And you don't have to do it each time. DocuSign saves your signature in your account.

(iii) A signature image that you upload. Again, it is saved in your account, so you don't have to upload it each time.

I don't plan to try to use this product with clients this season. But I'm definitely going to take much closer look at this. And I might experiment with it for certain documents that are not tax forms.

With respect to whether the IRS would accept it in an audit or compliance review of e-file protocol, I think the maybe a case could be made that the second and third options meet IRS requirements. I don't like the first one because it isn't generated by the person's handwriting. But the second and third methods are arguably a handwritten signature, generated using technology that is substantially similar to the stylus and signature pad that is used for signing credit card slips at retail stores.

Somehow I thought DocuSign used an entirely digital process, like most online "click here to agree" buttons. Sometimes these online forms make you type your name and the date. That just isn't a handwritten signature, and no one is going to convince me that it would meet IRS requirements.

But the second and third signature methods in DocuSign have the effect of affixing an image that is generated by manual motion of the person's hand. So this might come within the meaning of a handwritten signature.

When DocuSign adds the signature image to the form, it adds a legend above and below it that contains the words "DocuSigned by," and an ID number. This informs anyone who looks at the form that it was signed using a digital process. But the image, when you use the second or third option, is unmistakably a signature generated by the motion of the person's hand.

Clearly, this is an evolving area of the law. So I'm not drawing any conclusions. But this might be a solution for a lot of what we do.

BMK

[Koss]

Further thoughts

I'm committed to doing everything in my office (and even in my personal life) as paperless as possible, so this is a topic that I am very interested in. I am moving to paperless processes in a slow and cautious manner, without leaping before I look.

I am budget-oriented and cost conscious, and I have simply refused to buy the full version of Adobe, or any other application that supports extensive modification and manipulation of PDFs. I do have a basic program that allows me to take documents from Word, Excel, or almost any other program, and transform them into PDFs, with or without encryption.

With that being said, I have just begun to discover how easy it is, for things like simple business letters, to affix a signature image using Microsoft Word, by simply inserting a picture into the text. The picture can be a JPEG file. It is remarkably easy to insert a scanned image of my signature this way. And it eliminates the need to print, sign and scan the document before I fax it. Because our fax is paperless. It's a fax-through-email server. Of course, in some cases, I just e-mail it.

In my previous post, I suggested that on a Form 8879, a client could use a signature pad attached to their PC at home. However unrealistic this may be right now, it is clear from the IRS pubs that this would be acceptable.

In a sense, the technology used by DocuSign is a signature pad that is incorporated into the browser.

The fact that the DocuSign platform saves the signature image, so that it can be used over and over, raises some very subtle and very technical issues. There are no clear answers. This is the bleeding edge of technology, and the law simply hasn't caught up.

DocuSign definitely attaches an image of the person's signature, and that image is generated by the person's handwriting. They might be using a mouse instead of a pen, but that's no different than the stylus at the grocery store.

But on a signature pad at the grocery store, the customer has to generate a signature image each time. So even though it is a signature that is captured with digital imaging, it is, in some sense, an original signature.

And this is qualitatively different from what happens in DocuSign. At the grocery store, you have to manually sign the pad to create a signature image, in real time, on the spot. You can't select a pre-existing image that you created a month ago, or a year ago, and "attach" that image to the electronic credit card slip.

When you sign a signature pad, you are creating a new signature image. With DocuSign, you are affixing, or attaching, an image that is already on file. (Unless, of course, you just happen to be using DocuSign for the first time, or you have decided to upload a new signature image for some reason.)

The IRS regs explicitly authorize the ERO to use a "facsimile" or "mechanical" signature on Form 8879. This includes, but is not limited to, the use of a rubber stamp. The IRS guidelines do not allow this type of signature for the taxpayer.

It is an arcane and incredibly subtle distinction. And as a practical matter, the IRS might not make an issue out of it, unless the taxpayer asserted that they had never actually signed the document in question.

I'm not going to be the test case.



There is a difference. We'll just have to wait for the law to catch up with the technology.

I recently saw an administrative disciplinary case in which an attorney was disbarred from practice before the IRS by the Office of Professional Responsibility. There were many violations, but most of them involved an ongoing pattern of irregularities in Forms 2848, over the course of many years. The real problem was that he had people working for him, under his direct supervision, who had no licensure, and they were signing Form 2848, and identifying themselves as enrolled agents. He knew about this and he actively encouraged it. And that's just inexcusable.

But the findings in the case also noted that on many occasions, the attorney or his staff had affixed a client's signature to Form 2848 by cutting and pasting the signature from some other form, and then photocopying the Form 2848 before submitting it to the IRS.

No joke.


That clearly crosses the line, because the act of affixing the signature was performed by someone other than the taxpayer.

Would this be acceptable if the taxpayer himself had done the cutting and pasting?

No one would do that, of course. Why in heaven's name would I literally, physically cut and paste my own signature from an older, pre-existing document onto a new document, when I could just sign the new document instead?

Ummm... Maybe in some sort of bizarre, mind-bending emergency situation in which I just happen to have scissors and tape, but I don't have a writing instrument.

Cutting and pasting your own signature is exactly what you do when you use DocuSign. It is virtual scissors and tape.

I don't have an opinion as to whether the IRS would accept it as a valid signature.

But in most common law contexts, it is clear that these are valid signatures.

BMK

[Koss]

An evolving metaphor...

There are many on this board who are older than I am.

But I am old enough to remember when the phrase cut and paste had no association with word processing or digital imaging. The phrase only referred to a physical process that involved scissors and tape (or glue).

When I was a graduate student in the early 90s, I was still writing research papers using something called a typewriter.

For one paper, I used some intricate diagrams, with highly specialized symbols from logic and mathematics, to construct a table. I physically cut and pasted these diagrams into the paper, using diagrams that I had photocopied from a textbook. I had to leave the right amount of blank space below my text, and then I had to photocopy it to make it look good.

Somehow, the professor was impressed. He wanted to know how I got those fancy tables into the paper. MS Word certainly existed at the time, but it didn't have the capabilities it has today.

I told the prof that I had cut and pasted the images. And he wanted to know more. He wanted to know how. And I had to explain that I had literally cut and pasted the stuff out of a book.

And that guy was quite a bit older than me. But he was an academic, and he clearly had an interest in the evolving technology of word processing.

Today, if you ask a twenty year old what is meant by cut and paste, they may well think that this phrase refers exclusively to functions in word and data processing.

Which reminds me of how my father told me a few years ago that he had a conversation with a seven year old nephew who thought he was kidding around when my dad told him that there was no internet when he was growing up.

Jeez, I feel old now.

Are scissors and tape still on the list of school supplies for kids in elementary school?

BMK

[Gary2]

When I was a graduate student in the early 90s, I was still writing research papers using something called a typewriter.

For one paper, I used some intricate diagrams, with highly specialized symbols from logic and mathematics, to construct a table. I physically cut and pasted these diagrams into the paper, using diagrams that I had photocopied from a textbook. I had to leave the right amount of blank space below my text, and then I had to photocopy it to make it look good.

Somehow, the professor was impressed. He wanted to know how I got those fancy tables into the paper. MS Word certainly existed at the time, but it didn't have the capabilities it has today.

I told the prof that I had cut and pasted the images. And he wanted to know more. He wanted to know how. And I had to explain that I had literally cut and pasted the stuff out of a book.

And that guy was quite a bit older than me. But he was an academic, and he clearly had an interest in the evolving technology of word processing.

Perhaps because when I was a graduate student, in the late 70s and early 80s, we already had document preparation systems such as Runoff, Scribe, TeX and eventually LaTeX, the last two having as their original design goal the ability to typeset textbooks containing mathematical formulae. I don't know how good they were at diagrams back then, but they could certainly handle the variety of mathematical symbols and placements. They weren't GUI bases systems, and thus had a steep learning curve. (I never did become proficient at LaTeX.) I'm sure most academics in computer science were aware of these tools, and probably many in math and math-oriented sciences, but because of the learning curve, I can understand some of them being excited if they thought one of their students had either managed to climb the curve or adapt the tools into the desktop systems of the time.

[Gary2]

As for self-select PIN... There are ways to do this remotely. I don't think it's practical for a small office. HRB developed a web-based platform for it, and I'm not talking about their DIY software. An HRB client can go into a physical office and drop off their stuff, or mail it in if they've been going to the same tax pro for years. When the return is done, the tax pro sends them an e-mail with a link to a secure website, where they pay with a credit card, review the return, and then enter their self-select PIN.

Note that the DIY software (all brands) has essentially the same problem. The still has to type a PIN into either the locally installed software (for the stuff purchased on CDs) or into the web site (for the products that work entirely online), so that the PIN can be transmitted to the IRS. It's not a huge technology problem, but presumably has to be done by your software provider.

A bigger problem is that this doesn't work for all 43 states with some income tax (plus DC). It works for many that accept the federal PIN or some other system, but there are still states that require a physical signature for returns that are not DIY.

[JohnH]

Back when we physically cut and pasted documents, it was a good idea to do the cutting with an exacto knife rather than scissors, angling the blade slightly in order to get a fade, and to cut in a circular patter rather than square edges. It was also a good idea to paint the edges of the pasted paper with white-out before photocopying. This would usually make the cut disappear completely.

It sure is a lot easier now to just click on the right icons. Wonder why they never thought to put those icons on typewriters...

[taxea]

Koss DocuSign do have a program dedicated to RE docs. More recently they have included the ability for users to email other forms for signatures. What I like is that they have created a new utility that sends with the document in the email so one can use it to sign the document. The person you are sending the email to does not have to download this program. The email gives all instructions for signing.
I didn't want to pay for the original program so i called them and they told me they have a PPD option. While considering this option I received an email explaining the free program.
If you send me your email I will forward the email to you.
taxea@hawaii.rr.com