1

1
e-Signature Initiative Update November 2006
2
Objectives

• Provide an Overview of Scope
• Provide Current Status
• Discuss next steps

3
Background

• ETA e-Signature/e-Authentication roles
• Approve alternative signature solutions for tax
  documents and request for tax data information
• Approve authentication methods for verifying the
  identity of taxpayers and third parties who file,
  pay, communicate electronically with IRS

4
Challenges with e-signatures

• Several electronic signatures methods
• Not all appropriate for business and individual
  filing
• No silver bullet solution
• Modernized e-file
• AGI matching concerns

5
Statistics

• 59.5 million 1040 e-filed returns signed with a
  PIN, of the 73.2 million filed.
• Over 16 million returns were e-filed using
  Self-Select PIN Method.
• Over 43 million returns were e-filed using the
  Practitioner PIN Method.
• 81 percent of e-filed individual income tax
  returns used an alternative signature methods to
  file. (14 increase)

6
e-Signature/e-Authentication Status

• Chevo Consulting assisted IRS in researching
  alternatives for a standard electronic signature
  solution(s) for all e-file and related
  transactions
• Documented an e-Signature Solution Business
  Requirements
• Documented a limited e-Signature Cost-Benefit
  Analysis that analyzed three alternative
  solutions that met business requirements

7
Alternative Solutionsfrom Analysis

• Modified IRS PIN System - Expand, augment and
  modify current IRS PIN systems in order to
  improve usability and reduce support expenses.
• HSPD-12 - Utilize HSPD12 Personal Identity
  Verification (PIV) - I standards and technology
  to register and authenticate Tax Professionals,
  EROs Business filers and the documents they
  transmit. The HSPD12 involves personal identity
  proofing, registration and issuance of computer
  readable identity cards.

8
Alternative Solutionsfrom Analysis (contd)

• e-Authentication with Digital Certificates
  Utilize financial payment industry standards for
  e-authentication by requiring the use of digital
  certificates.

9
A Customer Satisfaction Study For e-Signature

• The Service was interested in getting customer
  feedback on possible future e-Signature options.
  In addition, the IRS was interested in
  determining current levels of customer
  satisfaction with e-Signature options among key
  stakeholder segments.
• Key stakeholders at this time include
• Tax Return Preparers Who Are EROs and prepare
  both Individual and Business returns
• Individual Taxpayers filing via e-file both
  Self-Select PIN Users and Practitioner PIN Users
• And Software Developers for IRS e-file Business
  and Individual Forms

10
Satisfaction and New Concepts

• The study consisted of a 3-cell design, in which
  each of the stakeholder groups were asked about
  their satisfaction with the current PIN methods
  and then exposed to concepts for the following 4
  new methods and asked for their reaction.
• Improved PIN System
• Homeland Security Personal ID Verification
• Digital Certificates
• Credit Card Authentication

11
e-Signature Concepts Presented To Taxpayers

• 1. To make it easier for Taxpayers using e-file
  to electronically sign their Federal Income Tax
  Return, the IRS would improve its Taxpayer PIN
  (Personal Identification Number) system by
  letting Taxpayers register and obtain a PIN that
  IRS would use to validate their identity. This
  PIN registration would also be available while
  using a web-based or personal computer tax
  preparation software.

• 2. To make it easier for Taxpayers using e-file
  to electronically sign their Federal Income Tax
  Return, the IRS would use technology developed by
  Homeland Security to provide you with a
  computer-readable identity card that would let
  you authorize and digitally sign an
  electronically filed tax return. Note this
  would not be a national identity card, since it
  would not be used for any purpose other than
  digitally signing an electronic tax return.

12
e-Signature Concepts Presented To Taxpayers

• 3. To make it easier for Taxpayers using e-file
  to electronically sign their Federal Income Tax
  Return, the IRS would recognize the use of a
  Digital Certificate. A digital certificate is
  similar to an electronic "credit card" that
  establishes your identity and your digital
  signature when you conduct transactions on the
  Internet. The certificate would be issued by a
  trusted third-party and would contain your name,
  a serial number, expiration dates, and your
  digital signature.

• 4. To make it easier for Taxpayers using e-file
  to electronically sign their Federal Income Tax
  Return, the IRS would provide Taxpayers with
  Credit Card Authentication. ? Credit Card
  Authentication means that the IRS would use a
  third-party to verify information from your
  credit card or debit card, along with information
  from your tax return, and know for sure that it
  is you who is signing your electronic tax return.

13
Key Findings

• Prior to looking at Stakeholder reaction to the
  new e-Signature concepts, it was important to
  have as context, their feelings about the current
  IRS e-signature (PIN) methods.
• Judging from their ratings of current methods,
  Taxpayers and Preparers are both highly satisfied
  with the current PIN system and few feel theres
  room for improvement. Satisfaction is lower (and
  suggested improvement higher) among Software
  Developers.

14
Study Participants

• A total of 1,033 interviews were completed
• 503 with Individual Taxpayers
• 252 with Self-Select PIN Users and
• 251 with Practitioner PIN Users.
• 500 with Tax Return Preparers.
• And 30 with Software Developers

15
Satisfied With Current PIN Methods
SOLIDVery/Some What STRIPEDVery Satisfied
16
Find Each New Concept At Least Some What
Appealing

• Improved PIN System

• Homeland Security ID Verification

• Credit Card Authentication

• Digital Certificates

17
Next steps

• IRS will
• bring all electronic signature methods used in
  electronic commerce with the Service under a
  single framework to provide consistency and ease
  of use.
• help taxpayers understand that electronic
  signatures have the same acceptance and legality
  as paper signatures.
• promote electronic signature methods by
  emphasizing their availability and benefits.

18
Next Steps

• Work with other government agencies to pursue
  common approaches to electronic signature
  methods.
• Analyze and document all e-signature/
  e-authentication methods that the IRS has in
  place for electronic transactions and make
  recommendations to new projects and improve
  existing systems.
• Identify opportunities to implement  e-signature
  and e-authentication policies, procedures, or
  methods that will advance the IRS electronic
  agenda.

19
Questions ?

• Contact Information
• Kevin Hatton
• ETA Technology Programs Branch
• 202-283-7877
• Email- Kevin.R.Hatton_at_irs.gov