E-signatures: Bolstering your Tax game
It is that time of the year again. Americans living in the United States and those living abroad have to file a U.S. federal tax return. Each year the last day of filing your tax falls on April 15, unless it is a weekend or holiday. For 2022, the deadline to file your income tax is April 18. The tax brackets and rates have been adjusted for inflation for the 2021 tax filing that takes place in 2022, while the standard deduction increases to $12,550. Filing tax returns overseas or remotely is a bit complex, though. To reduce this burden on the taxpayer community, the IRS allows taxpayers to file tax returns electronically using electronic or digital signatures. Dive into this blog to discover everything you need to know about e-filing your income tax return in 2022.
Are you eligible to file a tax return?
The first thing that might come to your mind is to check whether you are eligible to file an income tax return this year or not. So, if you are looking to file a tax return this year, verify these points to ensure if you are eligible for taxation or not.
- Gross income:
Gross income defines the total income you earn in the form of money, property, goods, and services that aren’t exempt from tax. So, first, verify if your gross income is taxable or not.
- Self-employed persons:
If you are self-employed and your business provides services, your gross income from the company is the gross receipts. Moreover, if you are self-employed in an industry that deals with manufacturing, mining, or merchandising, your gross income would be the entire sales minus the cost of goods sold. Both the cases require you to add income from investment and outside sources.
- Filing status:
Your filing status is specified based on whether you are married or single at the end of your tax year, which is December 31 for most taxpayers.
It would be best to consider your age to verify your eligibility for taxation. For example, if you are retired, determine if the retirement amount is taxable or not.
For the year 2022 taxation, the year 2021 tax brackets and rates are as follows:
|Tax Rate||Taxable Income Bracket for Single Filers||Taxable Income Bracket for married couples filing jointly|
|10%||$9,950 or less||$19,900 or less|
E-sign your Tax Return
On December 31, 2021, the IRS allowed taxpayers to use electronic signatures or digital signatures on certain paper forms to reduce the burden on the taxpayer community. The IRS maintains an e-signature option with critical security and protection to safeguard against identity theft and fraud. The agency is also studying further possible extensions to this option. An overview of using electronic signatures on specific forms is available here.
If you are filing your tax return electronically, using an electronic signature is a must. You can electronically sign the tax return with a personal identification number (PIN). Below are the PIN methods to use:
- Self-Select PIN (SSP):
The taxpayer must select a five-digit PIN that will serve as an electronic signature for the individual. This five-digit PIN could be of any five numbers except all zeros. You must authenticate your identity using your date of birth and either your SSP or adjusted gross income (AGI) for the prior year. If you are filing a tax return jointly, both persons involved need to enter their own SSP to sign the tax return.
- Practitioner PIN:
The second electronic signature option to electronically file a tax return is the Practitioner PIN method, which requires you to authorize your tax practitioner to enter or generate your PIN. You won’t need to provide your date of birth, SSP, or AGI in this method. However, you will need to provide a signed authorization form, Form 8879, the IRS e-file Signature Authorization, to your tax professional for verifying your identity. Like SSP, you need to choose any five numbers except all zeros to create your PIN and provide a signed authorization form to your tax professional.
Both primary and secondary taxpayers under the age of 16 who have never filed an individual tax return and who didn’t file in the previous year, respectively, are eligible to use the SSP method to sign the return using tax preparation software electronically. Both of these taxpayers may still e-file with the help of a paid preparer who uses the Practitioner PIN method.
If you are required to submit supporting paper documents, you can still e-file your tax using Form 8453, U.S. Individual Income Tax Transmittal for an IRS e-file Return. In addition, the IRS suggests keeping a copy of your tax return and Form 8879 to help you sign your next year’s e-file return electronically.
Acceptable electronic signature types
The IRS has allowed filing your tax return electronically and also accepts several forms of electronic signatures. Electronic signatures can be in several forms designed by various technologies. Electronic signatures accepted by the IRS are:
- Typed name: You can type your name on the signature block
- Scanned image: You can use a scanned or digitized image of a handwritten signature attached to an electronic record
- Handwritten: You can use a handwritten signature input on an electronic signature pad
- You can also use a signature created by a third-party software
- You can use handwritten signature input on a display screen with a stylus device
E-signature on certain paper-filed forms
The IRS allows certain paper-filed forms to be signed electronically using an electronic or digital signature. According to the IRS, allowing documents to be e-signed remotely will help taxpayers and tax professionals reduce the need for in-person contact. Below are a few of the forms that can be signed electronically or digitally:
- Form 706 - U.S. Estate (and Generation-Skipping Transfer) Tax Return
- Form 706 - NA, U.S. Estate (and Generation-Skipping Transfer) Tax Return, Estate of Nonresident Not a Citizen of the United States
- Form 709 - U.S. Gift (and Generation-Skipping Transfer) Tax Return
- Form 1066 - U.S. Income Tax Return for Real Estate Mortgage Investment Conduit
- Form 1120 - ND, Return for Nuclear Decommissioning Funds and Certain Related Persons
- Form 1120 - RIC, U.S. Income Tax Return for Regulated Investment Companies;
- Form 1120 - REIT, U.S. Income Tax Return for Real Estate Investment Trusts
- Form 1120 - L, U.S. Life Insurance Company Income Tax Return
- Form 1120 - PC, U.S. Property and Casualty Insurance Company Income Tax Return
- Form 1120 - C, U.S. Income Tax Return for Cooperative Associations
- Form 1128 - Application to Adopt, Change or Retain a Tax Year
- Form 3115 - Application for Change in Accounting Method
- Form 8832 - Entity Classification Election
- Form 8802 - Application for U.S. Residency Certification
- Legally binding digital signatures
DrySign is compliant with various electronic signature laws, such as the E-Sign Act and the UETA, making it legally binding and enforceable.
- Group sign
Whether filing an individual tax return or joint return, you don’t have to worry about the electronic signature. DrySign allows multiple signatories to sign the documents online.
- Smart dashboard
DrySign provides an intelligent dashboard that allows you to have a broader view of your digital signing history along with the status tracking feature and document overview. Additionally, it will help you easily e-sign your next year’s tax return and view electronic records.
- Notifications and reminders
It is crucial to file your tax return on time. DrySign allows you to set reminders and receive real-time notifications to stay updated.
- Powerful audit trails
DrySign allows you to track and verify your document status with robust audit trails and solid time stamps.
Get DrySign and Keep Calm!
DrySign provides a wide range of features to help you simplify the tax filing process, which can be quite a stressful situation for many. DrySign works with superior digital security and flexibility and facilitates efficient workflows. Additionally, DrySign electronic signatures are compliant with U.S. electronic signature laws. Are you still considering different electronic signature options? Get DrySign and Keep calm!
DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.