Seyfarth Synopsis: Electronic signatures may be the wave of the future for the IRS, and are more necessary now as a result of the remote work environment. The IRS issued some recent guidance, allowing two authorization forms (Forms 2848 and 8821) to be signed electronically. While this guidance is a welcome step in the direction of electronic signature acceptance, the guidance is very limited, and its use may not be as practical as we would have hoped. Many IRS filings related to benefit plans, e.g., determination letter filings and Voluntary Compliance Program filings, require signatures on forms not covered by the guidance. Thus, benefit plan sponsor and administrators will need more comprehensive relief from the IRS before being able to use electronic signatures broadly for common IRS filings for benefit plans.
In the remote working environment of the COVID-19 pandemic, coordinating "wet" ink signatures on IRS forms has presented challenges for clients and their tax professionals alike. In the benefit plan space, the Form 2848, Power of Attorney and Declaration of Representative, is required to authorize the IRS to discuss matters such as a determination letter application or Voluntary Compliance Program submission with the plan sponsor's representative, including their outside legal counsel. The Form 2848 must be signed by both the plan sponsor and its outside representative – a feat that has become harder to coordinate as many of us continue to work remotely from home, and some have questioned whether the IRS would accept an electronic signature on this Form.
New guidance provides clarity on the circumstances in which the IRS will accept electronic signatures on a Form 2848. In News Release IR-2021-20, the IRS announced an online tool for submitting the authorization forms without a handwritten signature. The IRS guidance notes that using the online tool with a Secure Access account is the only method to submit electronic signatures on the Form 2848; a Form 2848 that is mailed or faxed to the IRS still requires "wet" signatures.
That said, plan sponsors, plan administrators, and their representatives will still need to coordinate handwritten signatures on other documents for matters before the IRS. For example, the Form 5300, Application for Determination for Employee Benefit Plan, in the case of a determination letter application, and the penalty of perjury statement, in the case of a VCP, are not covered by the new guidance and still appear to require handwritten signatures.
Additionally, use of the online tool presents its own challenges for plan sponsors and their attorneys alike. To take advantage of the tool, the plan sponsor's attorney must first create a Secure Access account and provide the IRS with certain personal information (such as the attorney's individual tax filing status and a financial account number linked to their name). Similarly, the attorney may be required by the IRS to verify personal identification (for example, by requesting a driver's license) of the individual signing for the plan sponsor before submitting the Form 2848.
Observation: The Secure Access account can be used by individual taxpayers for their own personal income tax purposes, which would explain the requirements to provide a tax filing status and financial account information. These requirements make less sense when the Secure Access account is being used by an attorney to upload forms for a client.
Originally Published by Seyfarth Shaw, February 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
