For tax professionals, encountering clients who cannot successfully complete the Knowledge-Based Authentication (KBA) process is a common challenge during tax season. When a taxpayer fails the identity verification quiz required for e-signatures, you need straightforward solutions that maintain IRS compliance without delaying tax filings. This guide outlines why KBA failures happen and provides IRS-approved alternatives to keep your practice running smoothly.

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Why KBA Failures Happen

Even technologically savvy clients can struggle with KBA for several legitimate reasons:

• Thin credit files: Younger taxpayers, recent immigrants, or those who don't use credit extensively may not have enough credit history to generate adequate verification questions.
• Obscure questions: Questions may reference details that clients simply don't remember.

It's important to note that IRS-compliant KBA specifically allows only three attempts before completely locking out the user. According to the IRS FAQ, if a taxpayer cannot answer the KBA questions correctly after the allowed attempts, they cannot use the electronic signature for Form 8878/8879.

IRS-Approved e-Signature Alternatives

1. Traditional Handwritten Signatures

The most straightforward fallback solution approved by the IRS is obtaining a handwritten ("wet") signature instead. Here's the process:

1. Send Form 8879 as a PDF to your client
2. Have the client print the form
3. Ask them to sign it with ink (a traditional handwritten signature)
4. Instruct them to return the signed form via a secure method (scanning, mail, or clear photo)

The IRS explicitly permits wet signatures on Form 8879 delivered via fax, encrypted email, or secure portal upload as a valid solution. This satisfies the signature requirement without electronic identity proofing, since a wet signature (even if transmitted electronically) is treated as a "hand-signed" form, not an e-signature.  It’s crucial to note that transmitting documents containing Personally Identifiable Information (PII), such as Form 8879, via unencrypted email or text message is not secure and should be avoided. The IRS advises against including sensitive information in unencrypted emails to protect taxpayer data from unauthorized access.  

Pro Tip: Many modern practice management systems like Liscio include mobile scanning and secure upload capabilities that work on phones and tablets, making this process more convenient for clients.

2. In-Person Verification Option

If timing and geography allow, another excellent option is for clients to come to your office and sign in person:

• An in-person e-signature (For example, signing Form 8879 on a tablet while you witness it) does not require KBA
• You can check a photo ID and have the client sign electronically under your supervision
• This method is especially appropriate for local clients who struggled with remote KBA
• In-person signing meets IRS requirements through personal knowledge of identity

Preventive Measures to Reduce KBA Failures

Leverage Prior Relationships for Repeat Clients

For returning clients whose identity you've verified in previous tax seasons:

• Consider supplementing formal verification with a quick video call
• Document that you've worked with the client previously and can personally verify their identity
• Use knowledge of their verified phone number as additional identity confirmation

Important Note: Current IRS rules still require formal verification each year unless signing in person, but documenting your existing relationship with repeat clients provides additional assurance while following required steps.

Document Everything

Regardless of any alternative method you use, thorough documentation is essential:

1. Note in your records why KBA failed
2. Document exactly how the client's identity was verified through alternative means
3. Keep the signed Form 8879 on file according to IRS retention requirements
4. Record dates, times, and methods used for both the failed KBA attempt and the successful alternative

This documentation protects you as an Electronic Return Originator (ERO) in case of any IRS audit of e-file compliance.

Conclusion

KBA failures are a common occurrence during tax season, but they don't have to derail your process or delay filings. By having a clear plan for alternatives—whether that's collecting traditional signatures or arranging in-person signing—you can maintain compliance while providing a smooth experience for your clients.

Remember that many clients who fail KBA on the first try succeed via alternate methods. The key is remaining compliant (no e-signatures without successful verification) while being flexible in your approach to meeting IRS requirements.

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