[Fact Sheet 2011-7]

In a Fact Sheet, IRS has announced that it has eliminated paper signature documents for e-filed returns and that all taxpayers who file their tax returns electronically must now use IRS electronic signatures. In two related Information Releases, IRS has also announced the opening of its electronic filing season and the availability of Free File brand-name software and online forms.

Electronic signature. In the Fact Sheet, IRS announced that to make electronic filing more secure and paperless, it now requires all taxpayers who file their tax returns electronically to also use electronic signatures. Just like automated teller machines, IRS's e-signature process uses Personal Identification Numbers (PINs). If a joint return is filed, each taxpayer must create and use his or her own PIN to sign the tax return. A taxpayer can create an IRS e-signature PIN in two ways: (1) self-select PIN method; or (2) practitioner PIN method.

Self-select PIN method. Taxpayers who prepare their own returns using software must use the self-select PIN method under which they select five numbers (except all zeros) to enter as their electronic PIN signature. To allow IRS to verify their identity, taxpayers must provide their date of birth. and either their adjusted gross income (AGI) listed on their 2009 tax return or the 2009 PIN that they used to e-file their return last year. For joint returns, both taxpayers must create PINs. If a taxpayer has never filed a tax return before, he should use zero as his 2009 AGI (the field blank for a 2009 PIN should be left blank).

Taxpayers who cannot recall their 2009 AGI or their 2009 PIN can obtain a temporary Electronic Filing PIN (EFP) from IRS which can be used in place of the 2009 PIN to complete the self-select PIN method once their identity has been verified. Most tax software will contain a link to the EFP tool or a taxpayer can search IRS's website (www.irs.gov) using the keywords “Electronic Filing PIN Request.” They can also use an automated, self-service telephone assistant by calling 1-866-704-7388. Taxpayers still need to provide some personal information and some tax-related information to allow IRS to verify their identity. They need to know their filing status and the address used on their 2009 tax return.

If a taxpayer is unable to complete the EFP application and cannot locate his 2009 tax return, he can order a transcript which contains his AGI so that he can complete the self-select PIN method. There is no fee for a transcript. IRS has a new process for 2011 that allows taxpayers to order their transcript from IRS.gov (find “online services” on the home page or search “Order a Transcript”). Alternately, a taxpayer can fax or mail Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript, to IRS.

Taxpayers whose spouses are serving in a combat zone and who do not have power of attorney can still create a self-select PIN for their spouse and e-file the return. After e-filing their return, they must submit a signed statement explaining their situation with Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return, and mail it following the instructions. Taxpayers with a power of attorney for a military spouse or anyone who must file a tax return can use the self-select PIN method to sign their return. They must attach the power of attorney to Form 8453 and mail both to IRS.

Practitioner PIN method. Taxpayers who use a volunteer or paid tax preparer may use either the Practitioner PIN method or the self-select PIN method. Under the Practitioner PIN method, a taxpayer can authorize his tax preparer to enter or generate a five-digit PIN on the taxpayer's behalf. The taxpayer must sign Form 8879, IRS e-file Signature Authorization, which the practitioner retains but does not mail to IRS. Some tax preparers may use an electronic signature pad for Form 8879 this year. Taxpayers who are age 16 and younger must use the Practitioner PIN method.

E-file season begins. In IR 2011-4, IRS announced the opening of its 21st season of electronic filing and noted that most taxpayers can file immediately. However, taxpayers who itemize their deductions by using Schedule A, who claim the higher education tuition and fees deduction, or who claim the educator expense deduction generally must wait a few more weeks (until mid-February) to file their returns. That's because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Relief Act) extended a number of tax deductions and credits for 2011 and 2012, including the American opportunity tax credit and the modified child tax credit, which help families pay for college and other child-related expenses.

In IR 2011-5, IRS announced that Free File brand-name software and online forms are now available. Free File software is a product of a public-private partnership between IRS and a consortium of approximately 20 tax software providers who make versions of their products available exclusively at www.irs.gov/freefile. Individuals with AGI of $58,000 or less are eligible for at least one software product, if not more. Each of the Free File software providers sets their own eligibility requirements, usually based on qualifiers such as income, state residency, age or military status.