We have been exposed to eSignature technology and its growing acceptance for almost 15 years. There’s no reason to rehash the inefficiencies of a manual retention system, but it’s good to note how the efficiencies of an electronic document solution meet the weaknesses of any hard copy solution head-on: a savings of time, a reduction of storage risk and a conservation of natural resources, being the most obvious. Now that the IRS has issued regulations to provide for eSignature acceptance for Form 8879 and 8878, the electronic signature debate is no longer academic for federal return preparers.
Many accounting firms already use eSignature technology for forms in their practice, including annual engagement letters, audit-related confirmations and even internal human resource documents, such as handbooks or employment offers. Even if we leave the nuts and bolts of eSignature technology to the software developers, three key elements of any electronic solution that concern accountants are reliability, security and availability. Improvements in eSignature software, increased specificity of applications for eSignature solutions, and the availability of inexpensive and efficient cloud based structure have established eSignature as a reliable, secure and accessible solution.
Reliability. The acceptance of eSignature was memorialized for interstate and international contracts federally in 2000. The E-SIGN Act allows the use of electronic records to satisfy any statute, regulation or rule of law requiring that records and signatures be provided in writing, as long as the consumer has affirmatively consented to such use and has not withdrawn such consent. The states followed suit by adopting the Uniform Electronic Transactions Act, or similar rules, to ensure intrastate records and signatures are similarly enforceable when stored electronically.
The E-SIGN Act confirmed that electronic records and signatures are on a legal par with their tangible counterparts, and that a contract or record of transactions may not be denied legal effect or ruled unenforceable simply because it is in electronic form. Many commercial transactions are now routinely signed via eSignature in real estate, insurance, mortgage banking, employment services and even healthcare. The wide legislative acceptance of eSignature makes them as reliable as handwritten signatures, in terms of legal status.
Security. eSignature services providers use various verification strategies to ensure the identity of the signor. Some common authentication methods include email/password, SMS text PIN delivery and dynamic knowledge-based authentication (KBA). KBA uses known information about a signor, usually gleaned from a credit report or property records. For non-notarized transactions, the authentication methods listed here probably do a better job of avoiding forgery than simply mailing or faxing documents for a signature.
Availability. The ability to access original documents is critical for accountants. Perhaps, the greatest advantage to the adoption of electronic data technology is the ability to retain copious information without the daunting physical space and organization necessary for hard-copy solutions. An eSignature solution uses the same storage infrastructure as existing electronic data. Whether the solution is cloud-based or housed on your own server, the ability to produce, review or copy electronically stored information is established.
While it may take some time for accountants to have their client sign forms in the virtual environment, the advantages far outweigh the drawbacks. Not only will you become more efficient, but you’ll also remain compliant, too.
Editor’s Note: For tax year 2014, Intuit will include an IRS-approved eSignature service for Form 8879 in it’s professional tax products. Review the features and benefits in depth at the following pages: