Fact Sheet – Electronic Signatures on Form 2848 Power of Attorney and Declaration of Representative The COVID-19 pandemic has adversely affected the ability of taxpayers and their representatives to meet personally to exchange information and execute tax documents. Online electronic signature facilitators like DocuSign and HelloSign have received increasing acceptance in business, generally, but until now, they were not acceptable ways of executing tax documents. Effective January, 2021, Form 2848, Power of Attorney and Declaration of Representative may be executed electronically, provided:
  • The Form 2848 is submitted online to www.irs.gov/submit2848.
  • The third party submitting the Form 2848 on behalf of the taxpayer attests that s/he authenticated the taxpayer’s identity. The third party must authenticate the taxpayer’s identity if Form 2848 is electronically signed in a remote transaction unless the third party has personal knowledge allowing the third party to authenticate the taxpayer’s identity (for example, through a previous business relationship; a personal relationship, such as an immediate family member; or a similar relationship, such as between an employer and an employee).
In order to authenticate the individual taxpayer’s identity, the third party must:
  • Inspect a valid government-issued photo identification (ID) and compare the photo to the taxpayer via a self-taken picture of the taxpayer or video conferencing. Examples of government-issued photo ID include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa, or passport;
  • Record the name, social security number (SSN) or individual taxpayer identification number (ITIN), address, and date of birth of the taxpayer; and
  • Verify the taxpayer’s name, address, and SSN or ITIN through secondary documentation, such as a federal or state tax return, IRS notice or letter, social security card, or credit card or utility statement. For example, if a taxpayer changed their address in 2020, a 2019 tax return can be used to verify the taxpayer’s name and taxpayer identification number, and a recent utility statement to verify the taxpayer’s address.
To authenticate a business entity taxpayer’s identity for remote transactions, the third party must:verify through documentation that the individual has an authorized covered relationship with the business. For a Corporation, the following individuals have authorized covered relationship with the business:
  • An officer having authority under applicable state law to bind the corporation.
  • Any person designated by the board of directors or other governing body.
  • Any officer or employee on written request signed by any principal officer and attested to by the secretary or other officer.
  • Any bona fide shareholder of record owning 1% or more of the outstanding stock of the corporation.
  • If the corporation is an S corporation, any person who was a shareholder during any part of the period covered by the return during which an election under section 1362(a) was in effect, any person authorized by applicable state law to act for a dissolved corporation, or any person who has a material interest that will be affected by information contained therein.
For a Partnership, any person who was a member of the partnership during any part of the period covered by the return has an authorized covered relationship with the business. Once the third party has verified that the person has an authorized covered relationship with the business, s/he must.
  • Inspect a valid government-issued photo ID of the individual authorized to represent the taxpayer (for example, corporate officer, partner, guardian, tax matters partner, partnership representative (PR) (or designated individual (DI), if applicable), executor, receiver, administrator, trustee) and compare the photo to the authorized individual via a self-taken picture of the authorized individual or video conferencing. Examples of a government-issued photo ID include a driver’s license, employer ID, school ID, state ID, military ID, national ID, voter ID, visa, or passport.
  • Record the name, employer identification number (EIN), and address of the business entity taxpayer.
  • Verify the business entity taxpayer’s name, EIN, and address through secondary documentation, such as a tax information reporting form (for example, W-2, 1099, etc.), IRS notice or letter, or utility statement.
This information is provided by Tarlson & Associates, an independent certified public accounting firm which serves individuals, businesses, estates, trusts and nonprofits worldwide. We have significant experience assisting our clients with evaluating their options when hiring employees and engaging contractors. Please let us know if we can be of further assistance in assisting with your reporting of Independent Contractor Payments.