Using Electronic Signatures in TaxDome

The number of returns filed electronically is rapidly growing every year. Are your clients among those who are willing to e-file their tax returns?

What is an electronic signature?

An electronic signature is a symbol or other form data in a digital format that is attached to electronic documents and created by a person with an intent to legally sign something. Often times, eSignatures are in the form of an image of someone’s physical signature.

Electronic Signatures and their Legality

Electronic signatures are legally binding for essentially every business or personal transaction in the United States and around the world.

Why should you use an electronic signature?

You can save a lot of time in your day to day activities by signing documents electronically. If someone sends you a document to sign, you won’t have to print it, sign it, scan it, and then send the document back. Your clients won’t have to take time out of their busy day to come to visit your office, they will be able to sign the document immediately directly on their mobile phone or desktop. Technology is great!

UETA and the ESIGN Act

In the United States, there are four major requirements for electronic signatures to be considered valid under U.S. Law in accordance with the United States Electronic Signatures in Global and National Commerce (ESIGN) Act and the Uniform Electronic Transactions Act (UETA).

• Intent to sign – Electronic signatures, like normal ink signatures, are valid only if each party has a clear intent to sign.
• Consent to do business electronically – Both parties to the transaction must consent to doing business electronically. Business consent can be done by analyzing the circumstances of the interaction, but sometimes there are consumers that require special considerations. Electronic records may be used in transactions with consumers only if the consumer has: Received UETA Consumer Consent Disclosures, agreed to use electronic records for the transaction, and has not withdrawn such consent.
• Association of signature with the record – In order to qualify as an electronic signature under the ESIGN Act and UETA, the system used to capture the transaction must keep a record that reflects the process that helped the signature get created, or generate a text or graphics-based statement (which is added to the signed record) that proves it was executed with an eSignature.
• Record retention – U.S. laws on eSignatures and electronic transactions require that electronic signature records are capable of retention and accurate reproduction for reference by all of the involved parties or persons that are entitled to retain the contract or record.

TaxDome’s electronic signature exceeds these requirements and is warranted for compliance with the ESIGN Act and UETA.

The history of electronic signature law in the United States

The ESIGN Act is a federal law that was initially passed in 2000. It grants legal recognition to electronic signatures and records if all parties to a contract decide to use electronic documents and to sign them digitally.

UETA, a precursor to the ESIGN Act, was introduced in 1999 and has been adopted by 47 U.S. states, as well as the District of Columbia and the U.S. Virgin Islands. UETA states that when a law requires either a writing or a signature, an electronic record or an electronic signature can satisfy that requirement if the parties to the transaction have agreed to proceed in that manner.

UETA and the ESIGN Act formed the legal landscape for use of electronic records and electronic signatures in commerce by stating that electronic records and signatures carry the same weight and have the same legal effect as traditional paper documents and wet ink signatures.* Both laws include these statements:

• No contract, signature, or record shall be denied legal effect solely because it is in electronic form
• A contract relating to a transaction cannot be denied legally solely because an electronic signature or record was used in its formation

The laws for electronic signatures in most countries spells out that there are certain types of documents or document categories for which electronic signatures are not appropriate. Each customer should work with their legal counsel to identify categories of exclusion in their relevant country, but common categories of exclusion are wills and trusts, powers of attorney, and declarations given under oath.

Knowledge-Based Authentication (KBA)

KBA is an additional security measure, necessary for Form 8879. TaxDome offers KBA and is fully compliant with IRS requirements.

Electronic signature laws in other countries

For Canadian TaxDome Users: Electronic Signature has been recognized by law in Canada since 1999, with the passage of the Uniform Electronic Commerce Act.

For England, Wales, and Northern Ireland TaxDome Users: As an EU member, England, Wales and Northern Ireland have legally recognized eSignatures since 2002, with the Electronic Signatures Regulations, which were established after the passing of the EU Directive in 1999.

For European TaxDome Users: All EU member-countries have legally recognized eSignatures after the passing of the EU Directive in 1999.