The pandemic has impeded the ability of people to meet with lawyers, accountants, and others to sign necessary documents and forms. A good alternative to “wet signatures” is e-signing. Be sure to understand when and how to use this option.
Legal forms
Twenty years ago, the Electronic Signatures in Global and National Commerce (E-Sign) Act was signed into law providing a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce. (States have either adopted the Uniform Electronic Transactions Act or have their owns laws for intrastate commerce transactions.) E-Sign took effect on October 1, 2000. The benefits of e-signing include:
- Efficiency. There is no need to meet in person for written signatures.
- Cost savings. There is no need to mail documents for written signatures.
What is an electronic signature?
It’s “an electronic sound, symbol, 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 and be legally bound.”
What steps are required for e-signing?
Depending on the document involved, prior consent by the party signing the document may be required (e.g., financial institutions must obtain prior consent). Before you ask for an e-signature or provide your own to a document, be sure to understand if all requirements are met so that the signature has legal effect.
What security is necessary?
Record retention of e-signed documents is essential. As with any documents that are stored, be sure to employ necessary security measures to protect their authenticity (e.g., so signatures cannot be changed or deleted).
Foreign commerce
If you do business abroad, you may be able to use electronic signatures on contracts and other documents. The U.S. isn’t the only country allowing e-signing. For example, the UK, Australia, India, and countries in the European Union have adopted e-signing rules. Check CocoSign’s map to see where you can use this option.
IRS forms
Digital signatures have long been used on individual income tax returns. For self-prepared and filed returns the taxpayer uses a self-select pin number. For professionally prepared and filed returns, the tax pro’s PTIN is used. But there are many forms that cannot be filed electronically; paper versions must be submitted.
To help protect the health of taxpayers and tax professionals during the pandemic that could be at risk with in-person contact, the IRS has announced a number of forms that can use digital signatures even though they cannot be filed electronically. These include the application for a change in accounting method, the check-the-box form for selecting entity classification, and estate and gift tax returns. Find a list of the forms from the IRS.
Looking ahead, the list could be expanded. The digital signature option for the list is temporary. Whether the IRS will make this option permanent remains to be seen.
E-sign resources
If you want to have your company’s forms and documents signed electronically by customers, clients, patients, employees, vendors, etc., choose a tool that works for you. Options include:
Final thought
To learn more, read PandaDoc’s The Ultimate Guide to Electronic Signatures. If you still have questions, consult with your attorney.
