A Tax Preparer’s Guide to Electronic Signatures

If you’re a tax preparer, you probably know the pain of trying to collect signatures from your clients. You can schedule appointments to have clients come into your office to sign, but that’s inconvenient. You can mail documents to clients, but then you have to wait days for the signed papers to be returned. There’s a better way to collect signatures in the modern world. Electronic signatures or “e-signatures” allow you to get the signatures you need immediately, without handling paper or scheduling office visits.

What are e-signatures?

Historically, a signature is the way that people have indicated their agreement or acceptance of a document or record. You might execute a contract with a signature. Or you might sign a shipping order to acknowledge receipt of a delivery. Electronic signatures serve the same purpose, but are made in electronic form.

According to U.S. federal law, an electronic signature is “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” That’s a pretty broad definition. In particular, notice that law doesn’t specify exactly what form an e-signature should take. So while we might normally think of an e-signature as looking like our written signature, it doesn’t have to. Verbally agreeing to something via telephone, typing your name onto the signature line of a contract, or checking a checkbox that’s labeled “I agree” might all be equally valid e-signatures, under the right circumstances.

Are e-signatures legally binding?

E-signatures are legally binding. They have explicitly been made so by legislation. In the United States, the Electronic Signatures in Global and National Commerce Act (or the “ESIGN Act”) and the Uniform Electronic Transactions Act (or “UETA”) establish the validity and legal effect of documents and records that are signed electronically. Most other national jurisdictions have similar laws in place.

In other words, an e-signature is just as legally binding as a signature made with pen and ink. E-signatures are admissible in court, and bind the signer just as a “wet ink” signature would. E-signatures can be confidently used to sign contracts, and to receive signatures on engagement letters.

What should a tax preparer look for in an e-signature solution?

There are a lot of e-signature solutions that are available on the market today. Some of these tools are better suited to a tax practice than others. If you’re looking for an e-signature solution, it may not be clear which will best suit your business’s needs.

In the end, several features must be weighed when choosing an e-signature solution for your business. Here are some questions to consider:

Is the tool easy to use?

Even the best e-signature solution is of no use if your clients can’t figure out how to use it. Look for features that allow you to mark where your clients should sign. Also consider how cluttered the user interface is, particularly from a client’s perspective.

Can the tool validate a signature’s authenticity?

The ability to validate the authenticity of a signature is a vital feature of any e-signature tool, but there are several ways this might be done. A tool might provide a log of all document events (such as opening, downloading, or signing a document) which can provide important evidence to support the authenticity of a signature, or a cryptographic “fingerprint” can be used to prove that a document has not been modified since it has been signed.

Does the tool require signers to log in before signing?

Requiring that a user log in using a password can provide additional evidence that a document was signed by that user, but it certainly not required for an e-signature to be legal and valid. The ability to send an e-signature request by email can be a valuable convenience, reducing friction and making it easier for client to sign documents.

How affordable is the tool?

Some electronic signature solutions charge you on a per signature basis, or they might require you to pre-purchase electronic signature requests in blocks of 500. These sorts of pricing models, which seem to be especially prevalent among big providers, aren’t very friendly to budget conscious small businesses.

If budget is an important consideration for your business, it’s often more affordable to look for providers that offer e-signatures as just one offering among many. RelaNet, for example, can provide electronic signatures less expensively since we also provide a number of other services.

Wrapping up

If you have any questions about anything in this article, please get in touch. I would be happy to talk to you about your particular circumstances, and discuss how e-signatures might simplify and expedite your existing business processes.

And if you’re already looking for a e-signature solution for your tax business, I hope that you’ll consider RelaNet. I would be happy to talk to you about RelaNet and how it might help your business, or you can see it in action by requesting a demo below.