IRS will test the use of PINs as electronic signatures in two pilots for 1998returns

The IRS will run two pilots this tax season in which it will accept personal
identification numbers as electronic signatures.

In the first pilot, more than 8,000 approved tax preparers can let taxpayers choose
PINs and use them to sign their 1998 tax returns, said Robert Barr, the IRS’
assistant commissioner for electronic tax administration.

Each PIN will be used only one time, and tax preparers will be responsible for
authenticating a taxpayer’s identity, IRS officials said.

Barr said the PINs are more secure than signatures because taxpayers are returning the
PINs the IRS sent to them. The service will authenticate each return using a PIN, a Social
Security number and other key pieces of information, he said.

The second pilot will be for individuals who did not use a tax preparer last year but
did use a computer. The IRS is sending those taxpayers a trifolded and sealed postcard
containing a PIN they can use to sign their electronically filed returns, Barr said.

“These are the very essential steps we need to take to eliminate all the paper.
Now it takes two or three steps. I say two or three because you have to sign and mail that
form, and, if you owe money, you have to write a check,” Barr said.

Tax preparers had been asking for an alternative to the paper signature form.

“We are making electronic filing more attractive to tax preparers by eliminating
paperwork and reducing costs,” IRS commissioner Charles Rossotti said.

Taxpayers eligible for the pilots are those who need to attach only W-2, W-2G and
1099-R forms to their returns, IRS officials said.

For the pilot with tax preparers, the IRS selected more than 8,100 preparers from more
than 9,100 that expressed interest. It whittled the number based on preparers’ past
performance in the electronic filing program.

Because a tax preparer usually handles 200 or more returns a season, it is a pretty big
pilot, Barr said.

Taxpayers, using the approved tax preparers and meeting the requirements, will fill out
a worksheet selecting a PIN number to sign their 1998 tax returns. Tax preparers will also
sign the return using their own PIN, a combination of their IRS-given electronic filing
identification number and an additional five characters.

The IRS selected 8 million individuals receiving PINs for direct electronic filing
based on whether they used a computer for their 1997 returns. “If they filed
electronically [and mailed their signatures in] or even used a software package to do
their taxes and then printed and mailed it, the IRS sent them the trifolded
postcard,” Barr said. Married couples received two PINs, he said.

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