New Tax Department Guidance on Digital Signatures in the COVID-19 Era

As taxpayers begin adjusting to these strange times, it seems the NYS Tax Department is trying to do the same. The Department just issued guidance in Notice N-20-3 which temporarily allows taxpayers and their appointed representatives to use digital signatures on various tax forms. This comes on the heels of last week’s Executor Order 202.15 from New York’s Governor Andrew Cuomo, which authorized the Department to “accept digital signatures in lieu of handwritten signatures on documents related to the determination or collection of tax liability” until May 9, 2020, but then punted to the Department to hammer out the logistics and issue appropriate guidance.

Under Notice N-20-3, digital signatures may be used on most but not all New York tax forms. This list includes E-File Signature Authorizations, Consents to Extend the Statute of Limitations for Assessment, Statements of Proposed Audit Changes, Consents to Field Audit Adjustments and Requests for Conciliation Conferences, among others. While Powers of Attorney are the only form that Notice N-20-3 specifically excludes from the new digital signature authorization, there could be others, since this Notice doesn’t apply to the Division of Tax Appeals and Tax Appeals Tribunal, and it is not clear whether they will accept digitally-signed forms, unless they are specifically authorized to do so which did not happen in this notice.

Notice N-20-3 also specifically addresses approaches to submitting digitally-signed forms to the Department electronically, without the need to send a separate hard copy. This includes the existing methods, such as fax and secured messaging systems (e.g., MoveIt and Aspera). But notably, Notice N-20-3 contemplates sending documents to the Department via e-mail and in doing so notes that the “choice to transmit documents to Tax electronically is solely that of the taxpayer.” Of course, safeguarding sensitive information will remain paramount in these situations. Presumably this also applies to the submission of other documents to the Department, meaning that auditors can accept emails from representative or taxpayers with audit-related documents as well.

Some additional take-aways and pointers on using digital signatures:

• Notice N-20-3 indicates that the Department will be accepting “digital signatures that use encryption techniques to provide proof of original and unmodified documentation on one of the following file types: tiff, jpg, jpeg, PDF, Microsoft Office suite, or Zip.”
• The digitally-signed documents must be submitted with a verification statement in the cover letter or accompanying e-mail. The suggested language in Notice N-20-3 is “The attached [name of document] includes [name of taxpayer/POA]’s valid signature and the taxpayer/POA intends to transmit the attached document to the Department of Taxation and Finance.”
• Much, but not all, of Notice N-20-3 appears to model similar guidance issued in a memorandum last month by the IRS for federal tax purposes.
• Nothing in this Notice addresses or changes the fact that taxpayers and representatives can still electronically submit signed documents via PDF or fax, as has always been the case. Sometimes auditors insist on having the actual original signature on a signed document, such as a Closing Agreement, but for many other documents that require signature, the Department has and presumably will continue to accept copies of signed documents as well. This Notice relates merely to “digital” signatures, which may be needed if a taxpayer or representative does not have ready access to a printer or scanner.

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