New Client verification

[Gretel]

New Clients-In Person Transactions
The ERO must inspect a valid government picture identification; compare picture to applicant; and record the name, social security number, address and date of birth. Verify that the name, social security number, address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases.

I just got this in the e-mail. This is the first I heard about this. Short of running background checks, can one just call the DMV and verify this information? What do you do?

[kathyc2]

It appears this is the expanded version of what you referenced. https://www.irs.gov/uac/electronic-s...-8878-and-8879 It states: "For in-person transactions, the identity verification through a record check is optional."

[Rapid Robert]

I just got this in the e-mail. This is the first I heard about this.

It would help if you provided the source of the email. Maybe it was just spam.

Kathyc2 post seems on target. I wonder why someone would bother with an electronic signature for an in person transaction? Faster, easier, cheaper to simply have them sign the piece of paper if they are present in person.

If you are using one of the well-known professional software programs and the vendor supports remote e-sign of the tax return using KBA, I think you can be confident they are meeting the IRS requirements.

[Gretel]

Am I having it all wrong? The source is Bob Jennings, very reputable but maybe I misunderstood. I thought this means that a verification needs to be done for any new client coming into my office. Since e-filing is mandatory, in my mind it's the same, verifying for tax return preparation or for e-filing.

I just looked at form 8879 instructions: You should confirm the identity of the taxpayer(s). It does not say how to do this.

[Gretel]

More

https://www.irs.gov/uac/new-electronic-signature-guidance-for-the-irs-efile-signature-authorization

It says that the ERO must verify the identity before an e-sign signature can be accepted. But again, no mention of how to confirm. Why should a driver's license not be good enough?

[Rapid Robert]

https://www.irs.gov/uac/new-electron...-authorization

It says that the ERO must verify the identity before an e-sign signature can be accepted. But again, no mention of how to confirm. Why should a driver's license not be good enough?

The terminology is confusing, and it's also confusing what we "should" do (as in IRS recommended best practice) vs. what we are required to do by law/regulation.

I'll try to break it down, updates & clarifications welcome.

1) we all understand about wet-ink signing a paper-filed return.

2) To efile a return, we must use a signing method that is not paper based. That method is the PIN method. An efiled return is signed by a PIN. There are two methods, self-select PIN, and Practitioner PIN.

2a) Form 8879 is not a tax return, so signing the form is not the same as signing your tax return. What the form does is authorize the signing of the return using the PIN, which may be entered by the taxpayer or generated and entered by the ERO.

From the form itself, "I further acknowledge that the personal identification number (PIN) below is my signature for my electronic income tax return and, if applicable, my Electronic Funds Withdrawal Consent."

Note again, the PIN is the actual signature of the efile return. The 8879 merely authorizes the specific PIN(s) to be used.

3) Form 8879 itself can be wet-signed on paper, or scanned/faxed copies of wet-signed paper are acceptable. We know that 8879 does not normally need to be sent to IRS, because it is not the return signature. The IRS has the signature already, which is the PIN.

4) New, in the last few years, a Form 8879 can itself be e-signed. This means the taxpayer is e-signing the authorization to sign the efile using the PIN, so we now have two levels of electronic signatures.

4a) To e-sign the Form 8879, the IRS has mandated certain conditions, usually known as Knowledge Based Authentication (KBA). This requires taxpayer to answer some questions that only the taxpayer would typically know ALL the answers to, such as some address you lived at many years ago, or the size of a monthly mortgage payment, or the name of a lender you used in the past. The theory is a fraudster might know some of the answers, but not all of them.

So in conclusion, while we should verify identity of new clients, we are not required to, we do not HAVE to see their driver's license. When I used to work for a tax prep chain, we were not required to check ID, and I'm sure the tax prep chain would make a big fuss about it if it was a requirement.

However, if we want to allow the client to e-sign the Form 8879, then we do need to verify identity and signature.

Personally, I have clients I have never met in person, and I have never seen their driver's license. The fact that they can provide me with copies of prior year returns and current year W-2s, etc, gives me a lot of confidence that they are who they say they are. Also, my practice is such that it is highly unlikely that a fraudster would seek me out in the first place, or that I wouldn't quickly suspect a problem.

This year I offered e-sign of Form 8879 to my clients using my vendor's solution, cost me $5/client but I consider well worth it for convenience and quick turnaround, client does not need a printer/scanner/fax. More than 80% of my clients used the e-sign option.

There are several benefits to me as well, I am much more confident that each spouse is actually signing since they each have a separate KBA process to complete. I am provided automatic date/time stamps of when they signed, what their network address was, etc. And most importantly, since they had to pass KBA before I filed the return, I am now actually verifying their identity much more thoroughly than I previously have.

[Rapid Robert]

Preparing vs. signing

verifying for tax return preparation or for e-filing.

Just to be nit picky with the language: you absolutely do not need to verify anything at all to create a tax return. It's only when you get to the signing part, which is usually the last step, that you would have to be concerned with verifying identity.

I sometimes prepare returns for entirely fictional people, such as "Joe Taxpayer", "Maria Taxpayer", and the like, using entirely made-up data. However, I never sign them, which is just as well because they never pay me.


As a side comment, rather than make another post: this whole ID verification thing really only matters for people with refunds, anyway. Many of my clients have a balance due on their return. Is a fraudster going to pay me to file a return that results in a balance due? (trying to harm someone by filing a fake return would be a different matter, but I haven't heard of any such cases). I also require payment of my fee before filing, so the fact that they pay me electronically under their own name is something I consider to be another form of ID verification.

[TAXNJ]

Am I having it all wrong? The source is Bob Jennings, very reputable but maybe I misunderstood. I thought this means that a verification needs to be done for any new client coming into my office. Since e-filing is mandatory, in my mind it's the same, verifying for tax return preparation or for e-filing.

I just looked at form 8879 instructions: You should confirm the identity of the taxpayer(s). It does not say how to do this.

Since you know the source of your email and confidence you say about the source have you tried contacting them for clarification ? Might be best way to get the answer versus the reply post dissertation you are getting.

[taxea]

New Clients-In Person Transactions
The ERO must inspect a valid government picture identification; compare picture to applicant; and record the name, social security number, address and date of birth. Verify that the name, social security number, address, date of birth and other personal information on record are consistent with the information provided through record checks with the applicable agency or institution or through credit bureaus or similar databases.

I just got this in the e-mail. This is the first I heard about this. Short of running background checks, can one just call the DMV and verify this information? What do you do?

DMV records are confidential...they will not verify for you.

[Gretel]

Thank you

Rapid Robert, thank you so much for the extended explanation, it helped a lot.

All other responders also thank you, your input is valuable. I will vary with Bob Jennings since the e-mail advise not combined with all of the context surely is confusing.

[Rapid Robert]

Since you know the source of your email and confidence you say about the source have you tried contacting them for clarification ? Might be best way to get the answer versus the reply post dissertation you are getting.

Some topics are too complicated for short and sweet answers. The details may be too numerous for some to follow. I was laying out the whole picture, since the poster is not the only tax pro who hasn't really dug into what it means, technically, to sign an efiled return and to e-sign a Form 8879, and what the differences are. If the fellow who sent his generic marketing email to the poster has more details to share for free, I would welcome them.

[TAXNJ]

Some topics are too complicated for short and sweet answers. The details may be too numerous for some to follow. I was laying out the whole picture, since the poster is not the only tax pro who hasn't really dug into what it means, technically, to sign an efiled return and to e-sign a Form 8879, and what the differences are. If the fellow who sent his generic marketing email to the poster has more details to share for free, I would welcome them.

The reply post was directed to the Original Poster which partly said "Since you (Original Poster) know the source of your email and confidence you say about the source have you tried contacting them for clarification." Thinking that would clear any confusion by replying back to the source where the confusion is or was created.

Your points are fine and well taken by the Original Poster.

[Gretel]

Source

Rapid Robert, thank you so much for the extended explanation, it helped a lot.

All other responders also thank you, your input is valuable. I will vary with Bob Jennings since the e-mail advise not combined with all of the context surely is confusing.

Here is the source: Pub. 1345 - pg. 23