Tax season is a hectic time for accountants and tax preparation experts. It's between the 1st of January and the 15th of April each year. During this time, taxpayers make the previous year's financial statement and financial reports and file their tax returns.
While a few do their tax filing by themselves, many rely on accountants and tax preparers to ensure that the paperwork is filed accurately and increase the financial results from the return.
Electronic signatures can be beneficial to accountants as well as tax professionals. This is because it gives greater convenience and exceeds clients' expectations with ease. Signatures online also allow them to reduce time and money and make sure that there is no waste.
Tax season is here, and even though the IRS has accepted electronic signatures on forms 878 and 8879 from 2014, accounting firms have not yet switched to electronic signatures. Using the manual, ineffective methods to complete tax returns is a waste of time and money. It also increases the possibility of error and risk and can result in an unpleasant experience for customers.
Technological advancements have made tax filing and return submission on the internet a lot easier. To file e-filing tax returns for income, taxpayers must attach their digital signature on their tax return to prove the document. In the IT Act 2000, a digital signature has the same status as a standard signature. It confirms the authenticity of the taxpayer who signed the tax return's documentation in a secure setting that is not a victim of fraud.
The Rise of Digital Signature in Tax Returns
Digital signatures, given by Certification Authorities, contain particulars such as the name of the taxpayer public key, the name of the Certification Authority, the expiration date of the public key, the digital signature, and the serial numbers. Dodging digitally signed documents and asserting that they are authentic digital signatures is impossible, as several checks are established to prove similar. Documents signed digitally are secure from further changes and additions following the signing.
Under the updated section 44AB in the Income Tax Act, it is required for professionals or a person with an income gross of more than 25 lakhs of Rs. or more to file a file income tax electronically. And more to income tax e-file. Rs.1 Crore or more annual turnover have to complete ITR online.
Some of the Challenges that Tax Payers Face While Filing Tax
Here are a few problems with taxation using paper.
Security and Privacy
Tax forms sent to clients via fax, mail, or email can reveal the customer's personal information. With the increasing threat of identity theft, customers need to be assured that their tax documents will not be stolen or distributed, and their signatures will not be falsified.
Customer Expectations and Experience
The clients are more mobile and expect the accountants they employ to be technically adept. Eighty-three percent of accounting professionals agree that clients demand more from them than they were in the past five years. Everybody wants their tax filing to be as efficient as possible, and getting Signatures for paper-based copies could take much time. Since firms are shifting from hourly billing to value-based, clients are now expected to pay flat fees for services, requiring accountants to increase the efficiency of their processes.
Accountants need to set realistic expectations regarding turnaround times. Customers often request that their tax returns be filed ASAP without knowing how many clients you've got and the time frame for turnaround. With a concise time, frame to file, lost paperwork mistakes, documents, or a client who takes too long to fill in complex forms can completely disrupt the process.
e-Signing of 8879 and 8878 Tax Forms
The forms 8878 and 8879 are IRS electronic signature authorization forms. Form 8879 allows an ERO to input the taxpayer's PIN on their tax returns for income.
Form 8878, however, is used to extend the time required to return files. It also permits an ERO to enter the recipient's PIN on electronic forms such as 4868 or 2350.
According to the latest IRM electronic signature regulations, individuals must physically complete the authorization form and deliver it orally to the ERO office. ERO.
If you are unsure of your taxpayer identification, you may complete the blank form w9.
Benefits of Using E-signatures During Tax Season
Digital advancements have made tax filing, and filing returns online significantly simpler. To file income tax returns electronically, taxpayers only must attach their digital signature on the form.
Under The Information Technology Act, 2000 electronic signature software confirms that the person who received it has authenticated tax return documentation and has not changed while in the course of transport.
Tax preparers will be able to eliminate the stress of printing, sending emails, or faxing forms for legal purposes by using electronic signatures. Here are some benefits accountants and tax preparers can anticipate from e-signature technology.
As technology has advanced for communication within communities, the legally binding signing of documents has progressed. While it was confirmed that the Internal Revenue Service introduced electronic filing in 1986, it wasn't until after the introduction of electronic signatures in 2014 that the number of returns filed electronically grew to close to 100 million in 2017.
Through electronic signatures, clients can complete their tax returns in a short time, and tax preparers can efficiently serve more clients. This can save them money and time and money and avoid any trouble.
Boost Data Security
Because of the increasing cyber-security risks online due to the growing cybersecurity risks online, the IRS has gone to the extreme to protect tax returns that are electronically signed. Taxpayers must also comply with specific rules.
Certain kinds of digital Signatures can be more secure. For instance, digital signatures are highly secure compared to a standard e-signature.
Therefore, be aware of the e-signature you fill out your tax return paperwork. Digital signatures are entirely safe from cyber-attacks. This allows taxpayers to safely transfer and receive tax documents that contain sensitive information such as Social Security numbers and financial records.
Under the IRS's original legal requirement for e-filing, the signer's identity is required to be confirmed. The verification process is carried out by linking the e-signature with the electronic record associated with it. To accomplish this verification, the following methods of authentication are employed:
- a) Knowledge-Based Authentication
K.B.A. can be described as an authenticating method used to prove that the individual authentically identifying themselves is who they say they are. The I.R.S. typically used this form of authentication in cases where the person remotely e-signs forms such as 8878 or 8879.
It asks the person signing to enter correct details, like D.O.B. or another, before opening any document. If all the details are correct, the person is then asked to respond to simple questions based on an online database of public documents.
- b) Email-Based Authentication
In this type of authentication, the person signing the document must establish their identity by clicking an email link. Then, the person signing must sign a consent form to sign and receive tax documents electronically.
In addition, the I.R.S. additionally requires signatures to be tamper-proof to ensure the integrity of data in the documents. The tamper-proof option is available for digital signatures.
It ensures that intruders are not granted access to the document and cannot make changes to the original document. The I.R.S. will also require documents that have been signed to include an audit trail complete which records detailed information such as the date and date of document creation, execution, the signer's I.P. address, who saw the document, and so on.
The I.R.S. has a requirement that the audit trail and tax filing documents be kept in files for a minimum of two years. They can also be stored online to reduce paper use and storage space.
Speed up the Entire Workflow
The physical tax documents by the traditional procedure typically take months or weeks for the tax returns. But, the standard procedure of signing, printing, and sending your tax documents in the mail is not necessary when you sign taxes electronically.
This means that online signatures are fast and efficient alternatives to the tedious tax filing process. It is possible to electronically send all essential documents to your clients quicker than you could distribute them by hand. This lets you complete everything within a few weeks or less than days. Additionally, the need for paper is significantly decreased.
Make Customer Experience Pleasant
As you may have noticed, most clients are on smartphones and expect their accountants to be technologically adept. Eighty-three percent of accounting professionals agree that clients want more from them now. Tax-filing without paper permits accountants to fill in complex forms for their clients ASAP.
Electronic signatures enable clients to view their signatures electronically, sign, and send their tax returns and other required forms regardless of where they are. This can increase the overall satisfaction of your customers.
The Key Takeaway
Everyone is looking for the tax filing process to be as fast and efficient. However, collecting the signatures of paper documents of tax returns takes longer and can become chaotic. The best method to reduce time and boost efficiency during tax time is to switch to electronic signatures.
Using an electronic signature procedure also decreases the risk of making mistakes. Clients can sign electronically with confidence that their personal information is secure, increasing client satisfaction and less administrative burden.