IRS testing asks taxpayers to sign on the on-line dotted line

IRS is conducting a three-site test of electronic signatures for
paperless tax filing.

Ordinarily, each taxpayer who files an electronic return must sign and mail a separate
paper form to the IRS. But filers at the three test sites can simply sign on-screen to
authenticate their returns.

IRS spokesman Steve Pyrek said the tests, known as DigEST, for digital electronic
signature tests, are going on at one H&R Block tax preparation office and at two
southern military bases that sponsor voluntary income-tax assistance for low-income

All three sites fill in the returns on electronic forms. When a return is complete, the
preparer gives the taxpayer the option of signing electronically. If the taxpayer agrees,
a pen-style mouse is used to sign the electronic version of Form 8453 on a Wacom
Technology digitizing tablet.

PenOp Inc. of New York designed the software for IRS. Benjamin Wright, a lawyer who
helped work out legal issues for the test, called the scheme "a good solution for the
masses. How do you present the idea of a digital signature to an unsophisticated audience?
You can't ask them for a traditional code-based digital signature. You can't ask them to
open a third-party key escrow account."

Besides emulating the way people already sign documents, the test builds in some
protection against fraud by requiring the form to be signed at the tax preparation site.
Witnesses see it happen, and the preparer has worked with the filer's tax records.

The software creates a "biometric token" for the digital signature,
encrypting both form and signature for transmission to the IRS' Tennessee Computer Center
in Memphis. The form's "claimed ID" can include the signature as well as other
information such as an e-mail address or digital identification code and a time-stamp.

The PenOp software runs on any Microsoft Windows computer and can be integrated with
other types of documents. It can use RSA Data Security Inc.'s MD5 checksum algorithm to
link an individual act of signing to a single document, preventing reuse of the signature.
There is optional signature recognition: If a new signature doesn't match a reference
copy, the software estimates the probability of a match.

"It's too early to tell how the test is going," Pyrek said. "The IRS
will decide later this year whether to expand it to additional sites. Consumer acceptance
will be a major factor."

About the Author

Shawn McCarthy, a former writer for GCN, is senior analyst and program manager for government IT opportunities at IDC.

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