One of the requirements for a document to be a tax return is that it is signed by the taxpayer under penalties of perjury. Most tax forms that are intended to be tax returns include a declaration at the bottom that includes the penalty of perjury language.
But most tax returns today are filed electronically. Rather than signing with pen and ink, taxpayers sign online or authorize their tax preparers to use electronic signatures or PINs. The transmission or PIN is the signature.
This begs the question, what happens if the taxpayer goes to a tax preparer and there is no evidence that the taxpayer authorized the use of an electronic signature? Can the taxpayer be held liable for errors or omissions on this type of tax return? Can the taxpayer be charged criminally if the tax return is fraudulent? The recent United States v. Uvari, No. 2:18-cr-00253-APG-NJK-1 (9th Cir. Oct. 10, 2024), court case provides an opportunity to consider this question.
Contents
Facts & Procedural History
The taxpayer in this case was a professional gambler. He was charged with filing false tax returns. The court opinion does not say how the returns were fraudulent, but chances are good that there was either omitted income or inflated gambling losses.
The tax return at issue in this case was the taxpayer’s 2011 individual income tax return. The tax return was filed electronically by the taxpayer’s CPA. Rather than having the taxpayer’s physical signature, the return contained only a Personal Identification Number (“PIN”) and the CPA’s Electronic Return Originator (or “ERO”) PIN.
During the criminal tax trial, the government did not produce Form 8879, which is typically used to document a taxpayer’s authorization for electronic filing. The taxpayer was convicted and appealed, arguing in part that the government failed to prove he had verified the return under penalties of perjury.
Filing False Returns
Taxpayers are generally required to file income tax returns. If a return is required, it can be a crime to not file the tax return. But if the return is filed and it qualifies as a tax return, it can also be a crime if the tax return is false or fraudulent.
Section 7206 is the applicable criminal statute. It reads as follows:
Any person who: Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; shall be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of prosecution.
To prove a criminal violation for filing a false tax return under Section 7206(1), the government has to establish several elements. This includes showing that:
- The defendant made and subscribed a return that was incorrect as to a material matter,
- The return contained a written declaration that it was made under penalties of perjury,
- The defendant did not believe the return to be true and correct, and
- The defendant acted willfully with intent to violate the law.
This leads to the question as to what counts as a signature on a tax return?
What Counts as a “Signed” Return?
The traditional physical signature has largely given way to electronic filing. As the IRS agent testified in this case, “the IRS won’t receive a pen and ink signature from you in most cases. It’s always signed by a PIN.”
This can happen in two ways: either the taxpayer inputs their own PIN, or they authorize their tax preparer to enter a PIN on their behalf. In either case, there must be a declaration that the return is being signed under penalties of perjury. Typically, when a tax preparer files electronically on behalf of a taxpayer, they should obtain a signed Form 8879, which documents the taxpayer’s authorization to file electronically and use an electronic signature.
On the civil tax side of it, the courts have previously said that signing the Form 8879 does not transfer the obligation to file to the tax preparer and that the taxpayer still has to verify that the e-Filed return was received by the IRS. Thus, taxpayers cannot avoid the late filing penalty when a tax return is not received due to e-Filing mishaps.
This raises an interesting question: what happens when there is no Form 8879? Was the tax return actually filed if the process required for e-Filing was not followed? In this case, the government did not produce this form. This suggests that the form was never signed by the taxpayer. The absence of Form 8879 might seem to support a defense that the taxpayer never authorized the filing.
The Ninth Circuit court did not agree with this. It concluded that the government need not produce Form 8879 if there is other evidence showing the taxpayer authorized the filing.
Other Evidence of Filing
While there wasn’t a Form 8879 in this case, there was other evidence that the taxpayer authorized the filing. The taxpayer wrote a letter to the IRS in 2017 regarding the 2011 tax return. It stated: “I e-filed the original Form 1040 for 2011 on or about February 1, 2012.” This letter was sent to the IRS by the taxpayer to get the IRS to process the tax return.
The government admitted the letter into evidence in the criminal trial. The court found that a reasonable jury could infer from this statement that the taxpayer either filed the return himself or authorized his accountant to file it. This after-the-fact acknowledgment of the filing was sufficient to establish that the taxpayer had verified the return under penalties of perjury.
Comparison to the Non-Criminal Tax Return Rules
The standards to impose criminal liability are generally higher than those on the civil side. This ruling by the court is consistent with the various court’s holdings as to the non-criminal tax return filing rules, but the court cases are varied based on whether the taxpayer benefits or does not benefit from there being a signature on the tax return.
The tacit consent cases provide an example. These cases involve joint tax returns filed by spouses. The cases generally stand for the proposition that one spouse can bind another spouse by signing their name on a tax return. These cases usually involve situations that benefit the IRS as they are cases where the IRS has more than one taxpayer on the hook if the signature is valid.
The signature requirement in cases involving disputes over civil penalties is similar. Signatures are not always required for liability to attach when it comes to civil penalties. For example, the courts have generally concluded that even the tax preparer’s fraud or bookkeeper’s fraud can in some cases be imputed to the taxpayer. Thus, a taxpayer can even be liable for civil penalties even if they did not have any fraudulent intent. This is apparently true even if the return is e-Filed and not formally signed by the taxpayer.
Compare this to the signature requirements for tax refunds. While a spouse can sign a joint tax return for the other spouse, a tax attorney acting under a valid power of attorney cannot sign a Form 843 refund claim for the taxpayer-client. The rules are a little more nuanced than this for refund cases, however. At least one court has said that if the IRS audits a refund claim and does not require a signature on the return, the IRS can waive the requirement that the taxpayer sign the return by processing the return without a signature. While these refund cases usually benefit taxpayers as if the signature is valid the tax refund can be processed and refunds issued, there are exceptions.
The Takeaway
Signature issues abound when it comes to tax returns. The general rule is that signatures are less important when the facts and circumstances are that not having a signature benefits the taxpayer. When the taxpayer needs a signature to obtain some advantage or benefit, the rules are more strict. That lesson is presented again in this case. As explained by this case, taxpayers cannot always escape criminal liability for false returns if they did not physically sign the tax return. This is true even if the tax preparer failed to obtain Form 8879 signed by the taxpayer. The taxpayer’s own subsequent acknowledgment of the filing can supply the requisite authorization and count as a signature under penalties of perjury.
In 40 minutes, we'll teach you how to survive an IRS audit.
We'll explain how the IRS conducts audits and how to manage and close the audit.