The IRS projects the number of individual taxpayers filing their taxes electronically will surpass 50 percent for the first time.

As the number of e-filers has grown, a frequent question raised by MACPA members is how to best handle obtaining the client’s signature. Even in a paperless environment, tax preparers must obtain a client’s signature on the proper paper form before the return is transmitted.

Let’s review a typical situation. You met with the client and gathered all the necessary information to prepare an accurate return. The prepared return has made it through the quality review process, and it’s time to review the return (a jointly filed Form 1040) with the clients. The meeting is scheduled not only to review the tax return, but also to obtain signatures on Form 8879 to e-file the tax return.

Your client shows up, but one of the parties has opted out of the meeting, now what? What about the 8879? Situations like this early in the filing season are easily handled, but what of the same situation two days or even the day before the filing deadline? What requirements for e-filing are imposed on you, the Electronic Return Originator (ERO)?

This information can be found in a variety of sources, but two resources that may be most helpful are Publication 1345 (Revised 11-2004) and Revenue Procedure 2000-31. Both are available at www.irs.gov.

First, a brief review of Taxpayer Responsibilities:

• Verify the accuracy of the prepared return, including direct deposit information.
• Check the appropriate box in Part II to authorize the ERO to enter their PIN or do it themselves.
• Indicate or verify their PIN when authorizing the ERO to enter it.
• Sign and date Form 8879.
• Return the completed Form 8879 to the ERO.

Some of the more common questions addressed by the IRS related to the ERO include the following:

Can the taxpayer give you their PIN (Personal Identification Number) verbally to enter in their electronic record?

Yes. A taxpayer may give you their PIN verbally; however, you must receive a completed Form 8879, IRS e-file Signature Authorization, from the taxpayer before you transmit the return or release it for transmission to the IRS. If it’s a joint return, both the taxpayer and spouse must sign a completed form.

When does the taxpayer complete Form 8879?

If you prepared the return, the taxpayer must complete Form 8879 after they have reviewed the prepared return. If the taxpayer provided a completed return for transmission, the Form 8879 and PIN selection can be completed without reviewing the electronic return. You must receive the completed Form 8879 from the taxpayer before you transmit the return or release it for transmission to the IRS. Tax return line items in Part I must be entered on Form 8878 before the taxpayer signs.

Can a taxpayer complete Form 8879 and fax it to the ERO?

Yes. Form 8879 can be signed and returned to the ERO via fax transmission. However, the ERO must retain Form 8879 in their file for three years from the Return Due Date or IRS Received Date, whichever is later.

Is it acceptable for an ERO and/or software program to generate or assign the five-digit PIN the taxpayer will use to sign his e-file return?

Yes, an ERO may determine the taxpayer's PIN if certain conditions are met. In all instances, the taxpayer shall retain the right to select his or her own PIN. If the taxpayer agrees to allow the ERO to determine the taxpayer PIN, the taxpayer will consent to the ERO's choice by completing and signing a Form 8879, which contains the taxpayer PIN used as the return signature. The taxpayer PIN can be systemically generated or manually assigned by the ERO.

Is it acceptable for the ERO to choose the same PIN for multiple clients?

Yes, it is acceptable to assign the same PIN for multiple clients.

What is my responsibility as a return preparer using Form 8879?

As a return preparer, your responsibility is to provide the taxpayer with Form 8879 along with their return for review. You are required to generate or enter the header information, all five tax return line items in Part I, and the ERO firm name in Part II. You may also systemically generate or manually assign the taxpayer's PIN in Part II.

Do I provide a copy of the completed Form 8879 to the taxpayer for their records?

Provide a copy of the completed Form 8879 for those taxpayers requesting one. You may provide a copy to other taxpayers, but you are not required to do so.

Is it acceptable to electronically image and store Form 8879 and Form 8878 (IRS e-file Signature Authorization for Extension of Time to File) and meet the document retention requirement?

Yes. An ERO may electronically image and store Forms 8879 and 8878 if the ERO's storage system satisfies the requirements of Rev. Proc. 97-22, Retention of Books and Records. In brief, the electronic storage system must ensure an accurate and complete transfer of the hard copy or computerized records to an electronic storage media. In addition, all records reproduced by the electronic storage system must exhibit a high degree of legibility and readability (including the taxpayer's signature) when displayed on a video display terminal and when reproduced in hard copy.

Why is a Form 8878 needed for Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) filers if there is no signature requirement on Form 4868?

A Form 8878 is required by Form 4868 filers when they will make an electronic funds withdrawal and they want to authorize the ERO to enter the taxpayer's PIN. Form 8878 is not required for Form 4868 when there is no electronic funds withdrawal.

Must I print a new Form 8879 and ask for new signatures if tax or AGI changes after the taxpayers sign the Declaration of Taxpayer (Form 8879)?

Taxpayers must sign a new declaration if the electronic return data on individual income tax returns changed after taxpayers signed the Declaration of Taxpayer and the amounts differ by more than $50 to “total income” or “AGI,” or $14 to “total tax,” “Federal income tax withheld,” “Refund,” or “Amount you owe.”