Electronic Signatures in the US in the 21st Century

While I was researching how to obtain the appropriate tax forms in the most efficient manner, while working on my top secret project, I searched the web for the pertinent information. I remembered that electronic signatures could be submitted on US federal government forms after an act was passed while I was still on active duty in the military (prior to 1999).

Electronic Signature Misinformation

While doing the research and reading hundreds of pages and documents, I was flabbergasted by the wealth of misinformation about electronic signatures that's out there. I sincerely believe that some of it (but not all of it) is intentional, designed to make money for companies that specialize in digital signatures.

This example, one of many that are completely wrong, was found at Yahoo Answers: Does IRS Form W-9 Need to be Signed to be Legal?

The "best" answer included this: "If you're going to fill out an actual w-9, it needs an actual signature, not a stamp or image pasted in." Wrong!

The other answer, from a "top contributor": "It's not legal unless signed by your hand. Since anyone can capture and paste a JPEG image, it is NOT legal. You must sign the form by hand and transmit the physical form to the recipient. An advance faxed copy is sufficient to make the first payment but you should hold off for the physical form after the first payment." Wrong! Pure shiitake!

Uniform Electronic Transactions Act (UETF)

When in doubt, go to the source. The UETF is the source for the US federal government. The text of the act can be found at: http://www.law.upenn.edu/bll/archives/ulc/fnact99/1990s/ueta99.htm

A quick scan of the document pointed to several passages of interest, but I won't repeat them here. Briefly, you CAN use a signature image and you can use your typed in full name. The situations where neither is authorized is dependent on other requirements.

When I bought my 2nd house, I was able to use images on emailed .jpg files on all except for one document which required a notary signature. That one document forced me to make a special trip to the American Embassy in Manila to get a special power of attorney that I had to FedEx to my wife in Phoenix, Arizona.

Google uses a typed full name as an authorized electronic signature for their AdSense program. The signer's name is pulled from their records while the signer is logged in. The IP address and timestamp are stored along with the signature. I believe the timestamp is required.

My Choices

Since my project includes an affiliate program, to be implemented soon, I'm required to obtain IRS tax information on the affiliates. I can use online substitutes for the W-9, W-8 and other forms. I could do one of two things: One, I could point a link to the official form at the US IRS website, have the member fill it out and email or upload the form. Two, I could have the member fill out the form(s) online and store it in an encrypted form.

I'm choosing the latter in order to remove unnecessary barriers. In order to comply with form requirements, I have a little bit of JavaScript to work on in addition to creating the forms for online use.

Did I ever mention that I hate programming? I only do it when I don't have a choice.

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November 21st, 2008 By RT Cunningham | Untwisted Vortex | Philippines | Categories: Technology | Tags: AdSense, digital signatures, electronic signatures, email, Google, government forms, irs, jpg files, misinformation, signature image, substitutes, tax forms, taxes, top contributor, uniform electronic transactions, yahoo answers | Respond | Trackback URL

cyril from risks of business on 2008-11-21 at 12:43 pm (Reply)

so the US accepts electronic signatures as compliance in filing taxes? That is so real-time. Well, I won't bother to talk about the way we do taxation here in the Philippines.

But aren't you exempted from taxation since you're doing business outside your country?

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RT Cunningham | Untwisted Vortex | Philippines on 2008-11-21 at 12:52 pm (Reply)

Unfortunately, no. Either I have to pay taxes to the US or I have to pay taxes to the Philippines. Since my income comes from the US, it makes sense to pay the US. If I knew how to run the business from the Philippines, I would probably run into a whole new set of problems.

Jeda on 2008-11-21 at 1:44 pm (Reply)

I open a bank account one month ago at Wells Fargo Bank. They captured my signature electronically through a small electronic box screen . I signed my name on the elec. box and it goes directly to the computer system.

Then they print a paper copy of the electronic application form. They give you a copy & the other copy is for their physical file . My signature was NOT SHOWN on the paper, it was shaded or blank out for my security.. So every time you bank, they can compare your signature on the withdrawal slip from the computer screen.

This was new to me because I have not opened a new bank account for over 5 years now. I used to signed my name on the paper form, but not anymore.

kouji from christmas haikus on 2008-11-21 at 5:32 pm (Reply)

good luck with the programming.

i do feel that the solutions presented in yahoo answers really do need to be taken with a grain of salt. actually, for really serious questions, yahoo answers may not be the way to go at all. and after all, as you pointed out, it really is best to go to the source yourself to confirm what the law provides.

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Stephen from Manzanillo Mexico on 2008-11-21 at 10:19 pm (Reply)

Taxes, yuck. I have to start thinking about that again. It gets complicated when you start making money online, and living abroad as I do also.

I hate the whole "learn the hard way" approach you have to take when it comes to figuring out what to do with taxes.

My latest blog post: Revolution Day in Manzanillo Mexico

Bonnie from Data Entry Services on 2008-11-21 at 11:13 pm (Reply)

I should have known this because I think I have done it but I just hadn't thought about it. Sometimes we are so "cattle being led." Very interesting though.

Aaron from HR Software on 2008-11-22 at 12:46 am (Reply)

As far as I know TurboTax and other online tax preparation software simply use a typed name and date as a valid electronic signature. I wouldn't imagine you would need more than that unless you want to be very very thorough.

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steve from trade show tips on 2008-11-22 at 5:30 am (Reply)

hi RT,
Your post has my head spinning. It hurts to just read it. I hate dealing with tax forms and other government regulations and paperwork. I swear they make it even more complicated just to create jobs for people. Argghhhhh…
~ Steve, the crotchety trade show guru and dispenser of trade show tips

My latest blog post: Unused Gift Cards and Stores Going Out of Business

trade show displays on 2008-11-22 at 5:44 am (Reply)

hi RT,
I forgot to add that you have written a great article on Electronic Signature requirements, and that I will remember it if I ever need it (sort of like I'm referring back to your blogging tips posts now, didn't need or understand them back then).
I also just wanted to see if the phrase I'm using for my comment is having any asskickme issues. Thanks for indulging me. Steve (aka trade show displays)

Jason M. Lemkin on 2008-11-22 at 6:19 am (Reply)

Re: "'m required to obtain IRS tax information on the affiliates. I can use online substitutes for the W-9, W-8 and other forms. I could do one of two things: One, I could point a link to the official form at the US IRS website, have the member fill it out and email or upload the form. Two, I could have the member fill out the form(s) online and store it in an encrypted form" …

If you want to save yourself the trouble of building this, we've already done this at EchoSign with our post-PDF-form-to-widget product. You can get W-9s and all the rest electronic filled out and e-signed using our widget.

You can see an example here: http://www.formerator.com

Best & thanks from EchoSign.com electronic signature

RT Cunningham | Untwisted Vortex | Philippines on 2008-11-22 at 7:33 am (Reply)

I checked out EchoSign.com before deciding to do it the way I'm doing it. No offense, but I'm not going to use 3rd party services on a secure site. I'm a control freak.

tv on 2008-11-22 at 2:17 pm (Reply)

W9 forms are such a hassle

Angela from Backlinks on 2008-11-22 at 5:09 pm (Reply)

I don't program much, either. I DO like the idea of electronic signatures, though. I know that extra security would have to be enabled, but with the Internet allowing us to conduct all sorts of business all over the world, this sort of thing is really necessary nowadays.

TJohns on 2008-11-23 at 1:00 am (Reply)

Unfortunately, this discussion is adding to the 'lack' of information about what is important for an e-signature. An electronic signature is a PROCESS, it is not sufficient to only claim that an image of a signature, or text, or an 'X' could be an e-signature. They ALL COULD BE. But then again, they all might NOT be also. This is not the real problem.

Let’s just go with an 'X' for your signature. If you want to have your ‘x-signed’ document qualify to be admissible in court, and to adhere to the Federal ESIGN act in order to be seen in the eyes of the law as a signed writing, AND you want to win your case on evidence, your 'X' needs to be part of a process:

1. Your process must secure the document so that when you place your X into it, some system can determine if the underlying document was modified since the 'X' was attached. This is usually accomplished by a combination of encryption and hashing to continually monitor the record. [If this is not provided, you may have a hard time getting the documents admitted as evidence, or convincing someone that it was not changed during the process.]
2. Your 'X' must be adopted by the signer, and show’intent to be bound'. In short, the process must be one that illustrates that the signer a) wanted the ‘X’ to be their signature, and b) used it to demonstrate intent to be bound by the contract. [Merely typing in a box does not demonstrate intent.]
3. If this is a consumer transaction, the signer must BEFORE signing: a) agree to do business electronically, and b) demonstrate they have the technical ability to do so. [This often forgotten at the contract sender’s peril because it is very specifically called out in ESIGN.]
4. The signing process must identify who the signer is. HOW MUCH authentication you choose to use is directly related to how much evidence you want to have if you ever go to court. If all you have is ‘ralph233@yahoo.com’, good luck. Minimally you need email, IP address, and ideally one other form of authentication such as a PIN. For valuable transactions, you will want a 3rd party authentication service.
5. The signing process should not leave doors open for the signer to claim they did not see some of the document, signed by accident (one click), or that the document they signed looked totally different than what they were given later.
6. The record needs to be tamper evident, showing if the signaure was changed, data changed, etc. If so that fact must be obvious.
7. The WHOLE PROCESS must have an audit log that is tracking all of this from initial consumer consent, how the signer authenticated, when the process happened, what signature they adopted, and continue to track things through the last view of the document. This audit log also needs to be tamper-evident if you want a court to accept it. This is going to be your critical document in a dispute.
8. On the comment about the fear of using 3rd party systems for this transaction. In fact, legal departments in Fortune 10 companies will tell you using a 3rd party signing service such as DocuSign will DECREASE your legal risk because this process is managed by a neutral 3rd party. The risk is higher if you run this whole thing yourself, because as they say, that would be the "fox guarding the henhouse"..

These steps will provide the necessary infrastructure wrapped around your 'X' signature to ensure that the 'X' will qualify as a signed writing. These steps do not have to add complexity to the transaction, as a matter of fact; they can be hidden behind a will designed process – just look at DocuSign(www.docusign.com). Unlike EchoSign, that skips steps, and is more clickwrap than ESIGN, DocuSign creates a valid ESIGN contract, and is more familiar to the signer. For your W9 - Use PowerForms to make your W9 ‘DocuSignable’, and post it on your web site. The web service takes care of all the rest.

And then yes, an ‘X’ can be your signature.

RT Cunningham | Untwisted Vortex | Philippines on 2008-11-23 at 1:19 am (Reply)

I specifically didn't get into the process. In my particular case, I can be reasonably sure as required by law, that the submitter of the document is who he or she says they are. 3rd party authentication will have already been accomplished prior to getting to the point where they even have access to the forms.

Anyone getting into this needs to go to the source, and that's the point.

Seonewbie on 2008-11-24 at 2:09 am (Reply)

I remember using my typed name as signature in most affiliate programs

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Caroline from debit card loans on 2008-11-24 at 5:10 pm (Reply)

I always thought that a digital signature was more of a code rather than an actual representation of a signature.

For example if you were to submit some information electronically then your username/password/security code would act as your signature. The theory being only you would know this information.

As it was mentioned a traditional signature could so easily be forged.

mn mls on 2008-11-25 at 9:17 am (Reply)

i have to admit, i am a big fan of electronic signatures. especially in the real estate world, we are starting to see them become more common in various markets around the country.

Terry from Green Lighting on 2008-11-25 at 11:27 pm (Reply)

Taxes are fun when you make money online

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daniel from climbing gear shoes on 2008-11-26 at 3:23 am (Reply)

I was always able to send in my tax return via the net with an electronic signature, until I got married. My wife's boss doesn't have a tax ID number other than his social, and so we have to send ours in the mail every year. Kinda stinks.

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greg from best outdoor hdtv antenna on 2008-11-26 at 1:34 pm (Reply)

I don't see how so many people at Yahoo Answers get as high up as they do posting BS information. I also don't understand why electronic signatures can't be a simple check box. Yes, I signed it. I know what you mean about the companies making money though.

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Mmorpg Free Reviews on 2008-11-26 at 11:39 pm (Reply)

i think electronic sig's is a good tech advancement

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Robin loves Glass mirrors on 2009-01-06 at 12:00 pm (Reply)

I don't program much, either. I DO like the idea of electronic signatures, though. I know many people who study it.

Also I know that extra security would have to be enabled, but with the Internet allowing us to conduct all sorts of business all over the world, this sort of thing is really necessary nowadays.

An American Living in the Philippines

Electronic Signatures in the US in the 21st Century