Beginning January 7, 2013, the Internal Revenue Service (IRS) has expanded its acceptance of electronic signatures on IRS Forms 4506-T and 4506T-EZ through the Income Verification Express Services (IVES). This policy update from the IRS will further streamline business processes to quickly and efficiently sign time sensitive forms, reduce IRS rejection rates due to errors and improve the overall experience for borrowers.
In addition to the ESIGN Act, the IRS has created a set of requirements for IVES participants to follow to electronically sign 4506-T and 4506-EZ forms. These requirements are intended to protect borrower information through data integrity and authentication. eSignOnline offers a complete approach that meets or exceeds both the ESIGN Act and each of the IRS’ guidelines summarized below.
Item 1: Authentication
“Authentication: IVES participants must validate that the signer is who they say they are and that the document has made it into the correct hands. The most common form of authentication is “Two Factor,” referring to something the signer has (e.g. emailed successfully into their in-box) and something the signer knows (e.g. a pass code). Other common authentication options include: Knowledge based Authentication (KBA) where the signer is presented with multiple choice questions, and Single Sign-On (SSO), where “keys” or credentials are passed along from another web-site.”
What this means to you is that you MUST use at least one signer authentication method (we already satisfy the other requirement for you by “emailing successfully into the signer’s inbox”). When using eSignOnline, as you add signers to a new signing session, you will add a singer and then select one of the authentication methods. The most secure and advanced method is called “Knowledge Based Authentication” as noted above and is the one we highly recommend to use. This is a premium service with a fee, as we work in conjunction with third party credit agencies who display the personal questions to the signer. How do you prove to the IRS or auditor that you have fulfilled “Two Factor” authentication? You simply show them the certificate of authenticity that is accompanied with every signed document that shows the authentication method used to identify each signer.
Item 2: Consent
When using eSignOnline, your signer must agree to a consumer disclosure and consent to sign electronically before they are presented the documents to proceed.
Item 3: Electronic Signature
Electronic signatures captured using eSignOnline meet and exceed the requirements set forth in the ESIGN law. Signers can either place their handwritten signature (via a touch screen device or stylus) or select from predefined electronic signature fonts that display their name.
Item 4: Tamper Proof Seal
When you open the signed documents from eSignOnline, you will see a blue bar in your PDF reader program indicating that the documents have been “signed and all signatures are valid” with a signature panel for more details. This indicates that the document has not been tampered with since it left the eSignOnline platform.
Item 5: Non-Repudication
For each signing inside eSignOnline, there is an accompanying Certificate of Authenticity and audit log of all events associated with the signing. By law, documents electronically signed are legally binding with the backing of the ESIGN and UETA acts.
Item 6: Document Retention
Even though eSignOnline retains a copy of all signed documents inside your account for as long as you are a member, we highly recommend your organization to retain the signed documents in your company document repository for a minimum of 2 years as per the IRS guidelines.
Item 7: Quality Review
Per the guidelines, IVES participants must use an independent party to periodically audit and ensure all electronic signature requests meet all requirements by the IRS as well as follow the reporting guidelines and monthly sample size review. The audit includes reviewing both your company’s as well as the eSignOnline application’s process for capturing and retaining electronically signed documents. Here are some suggested firms that may offer the independent audit as a service.
Locke Lord LLP – http://www.lockelord.com/
Buckley Sandler LLP – http://www.buckleysandler.com/
Wolters Kluwer – http://www.wolterskluwer.com/
To read the full list of the IRS requirements, please visit http://www.irs.gov/Individuals/Income-Verification-Express-Services-(IVES)–Electronic-Signature-Requirements