Form 8879 and Its Variants: What You Need to Know
As a tax preparer, Form 8879 is your client's authorization to electronically file their return. Understanding which variant to use ensures compliance with IRS requirements:
Practice Tip: Generate the correct form variant automatically by selecting the appropriate return type in your tax software. Most professional tax preparation software will produce the correct form based on the entity type.
Implementing Electronic Signatures in Your Practice
IRS-Compliant E-Signature Solutions
Your electronic signature solution must:
- Verify signer identity before signature capture
- Create and maintain an audit trail
- Securely store e-signed documents
- Be accessible to clients remotely
Using a tax-specific solution such as Liscio that walks the client through their tax return will ensure that the entire tax preparation process and e-signature requirements are fulfilled as efficiently as possible. By leading the user directly to the signature lines, the issue of confusion and skipping over all of the content is avoided, reducing downstream problems that cost both the client and the preparer more time, such as a client signing without reviewing critical return information.
Failure to check items such as current address, amount due, and the accuracy of the return itself leads to calls into the office to ask about the status of a refund, problems noted with address and bank account data, and the need to amend returns with incorrect data.
Setting Up Your E-Signature Workflow
- Configure your tax software for electronic signature integration. Be sure to select a 8879 tax delivery solution that personalizes the delivery process and has the following features:
- Security that meets all IRS and FTC requirements.
- Inclusion of KBA capabilities.
- Audit trail functionality.
- Requires client to confirm they have reviewed their returns.
- Client dashboard with key return details (amount due, refund, estimated tax payment amounts, etc.).
- Client portal for clients to access their signed return 24/7
- Establish clear procedures for staff to follow when requesting signatures.
- Create client instructions explaining the e-signature process if not using Liscio.
- Test your system before tax season begins. This will ensure that you and your team can fully leverage all efficiencies available in your tax automation workflow prior to working with client tax returns.
- Train all staff on proper e-signature protocols to ensure they understand the compliance requirements and client communication processes.
Remote Signature Collection Procedure
Step-by-Step Implementation Guide
- Prepare the return and generate Form 8879 through your tax software
- Send signature request through your Smart tax delivery automation platform
- Monitor progress
- Download and store the signed document in your permanent file storage
- Transmit the return to the IRS
Identity Verification Requirements for Remote Signatures
For new clients:
- Knowledge-Based Authentication (KBA) is required
- Five questions drawn from financial history must be presented
- Client must correctly answer at least four questions
- Three failed attempts require fallback to manual signing
For returning clients signing remotely:
- The same KBA requirements apply unless you implement continuous authentication.
- Ensure that they have taken care of any necessary updates for the purposes of IRS identification verification (i.e. I.D. Me) at the start of tax engagements.
Your Compliance Responsibilities
Electronic Return Originator (ERO) Requirements
As an ERO accepting electronic signatures, you must:
- Verify the identity of each taxpayer before accepting their e-signature
- Document identity verification method used for each client
- Maintain security of all personally identifiable information (PII)
- Keep records of all signed forms for at least three years
- Create audit trails linking signatures to documents and verification methods
- Follow IRS guidelines for information security
- Use only compliant e-signature solutions that meet technical requirements
Required Documentation and Record Keeping
For each electronically signed Form 8879, maintain:
- Complete e-signed document with all required fields
- Identity verification records showing method used
- System metadata showing date, time, and IP address
- Documentation of any issues or exceptions
- Secure, searchable storage system with backup capability
Handling Special Situations
In-Person vs. Remote: What's Different
Joint Return Protocols
For married filing jointly returns:
- Each spouse must separately verify their identity and sign
- Both spouses must complete the process before filing
- Maintain separate records for each spouse's verification and signature
Problem-Solving Guide for Common Issues
Best Practices for Implementation
Efficiency Tips
- Batch processing: Send signature requests for multiple clients at once
- Template messages: Eliminate the need to create your own standardized instructions for clients by using Liscio’s built-in customizable Smart Tax Delivery templates to personalize the return delivery process
- Status tracking: Implement system alerts for unsigned documents by using a tax specific system that allows tracking by Contact, by Client, Type, and Due Date.
- Auto-reminders: Set up automatic follow-ups for pending signatures
- Client education: Consistently message the convenience and security benefits of your systems and processes to maximize client engagement and build your brand
Security
- Enable two-factor authentication
- Ensure your technology provider(s) are SOC 2 compliant
- Document your processes in your Written Information Security Plan
FAQ for Tax Preparers
Q: What must I document for IRS compliance?
A: Document the identity verification method used, signature capture details (date, time, IP address), and maintain the signed Form 8879 for at least three years.
Q: Can I accept a photo of a signed Form 8879 from a client?
A: Yes. It is considered a manual signature and is acceptable. You still need to securely store the image for three years and ensure it's transmitted securely.
Q: What if my client starts but doesn't complete the e-signature process?
A: Follow up with the client to determine any issues they're experiencing. If they can't complete the electronic process, provide an alternative manual signing option.
Q: Am I liable if a client's identity is stolen through my e-signature process?
A: Potentially. Following IRS requirements creates a safe harbor, but you should maintain cyber liability insurance and follow the recommended security practices.
Q: How do I handle power of attorney (“POA”) situations with Form 8879?
A: The person with power of attorney can sign, but you must obtain and keep a copy of the POA authorization and follow normal identity verification procedures for the POA holder.
