1. Form 1040 Electronic Signature Initiatives "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

2. THE RESULTS OF THE PY 2000 ON-LINE ECN PILOT CONTINUED TO SHOW ACCEPTANCE OF ELECTRONIC SIGNATURES • Volumes as of April 20, 2000 were 1,394,715 • Software development companies participated by changing • their tax preparation software • We continued to be challenged by factors outside of the pilot’s • control (e.g., attachments precluding ECN use, cost of filing) • A survey is scheduled for May to evaluate the results formally "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

3. THE PY 2000 PRACTITIONER PIN PILOT WAS EXPANDED AND A GREAT SUCCESS • Volumes as of April 20, 2000 were 5,379,440 • Ten industry partners worked with IRS on the pilot • Taxpayer presence in the office to personally enter the PIN and • preparers mailing in worksheets continued as challenges to overcome • A survey was distributed in March to evaluate the results of the pilot "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

4. PLANS FOR PY 2001 WERE INFLUENCED BY THE • COMMISSIONER’S GUIDANCE REGARDING THE PAPER JURAT • The paper jurat has been identified as a significant obstacle • Form 8453 is also a significant contributor to the cost of processing • electronic submissions for IRS • The paper jurat carries the return signature • Jurat statement • Disclosure consent • Authorization for direct debit/deposit of funds • Authorization to provide debt indicator • The jurat also acts as the transmittal vehicle for Form 1040 attachments "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

5. NINE OPTIONS WERE IDENTIFIED AND EVALUATED AGAINST A SET OF CRITERIA THAT ASSESSED IMPACT ON IRS AND TAXPAYERS • IRS • Implementation Risk • Litigation Risk • Infrastructure Impact • Cost Impact • Taxpayer • Inconvenience • e-Services Support • Cost Impact "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

6. ANALYSIS INDICATED THE IMPLEMENTATION THAT WILL BEST SERVE THE TAXPAYER AND IRS • Short- to Mid-Term • Self-selected PIN with Shared Secret Validation • Long-Term • Digital Signature "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

7. ALMOST 100% OF ALL FORM 1040 FILERS WOULD BE ENABLED WITH AN ELECTRONIC SIGNATURE • All taxpayers are enabled except filers of foreign returns and first time filers under 16 years of age • The PIN is usable on-line or at a preparer’s office • The taxpayer will self-select a PIN and share information from previous year’s return (AGI, Total Tax) • Regular e-file processing will occur except for up-front validation and a Form 8453 indicator being set • Tax booklets and possibly a postcard mailing will provide taxpayers with information "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

8. EVEN WITH THE ACCEPTANCE OF A PIN OR DIGITAL SIGNATURE, SOME ATTACHMENTS STILL REQUIRE A PAPER JURAT • Currently allowed as part of an e-filed return • 2120 Multiple Support Declaration • 8283 Sch B Non-Cash Charitable Contributions, Declaration of Appraisal Summary • 8332 Release of Claim to Exemptions for Children of Divorced Taxpayers • W-2, W-2G, 1099R Forms to support withholding (waiver in effect for PY 1999; request for permanent waiver pending) "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

9. Proposed future implementation • 56 Notice Concerning Fiduciary Relationship • 970 Application to Use LIFO Inventory Method • 982 Reduction of Tax Attributes Due to Discharge of Indebtedness • (Also section 1082 basis adjustment) • 1310 Statement of Person Claiming Refund Due to a Deceased • Taxpayer • 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains • 3115 Application for Change in Accounting Method • 3468 Investment Credit (Attached to 3800 or attached separately) • 3520 Annual Return to Report Transactions with Foreign Trusts "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

10. Proposed future implementation (cont.) • 8609 Low Income Housing Credit Allocation Certificate • 8693 Low Income Housing Credit Disposition Bond • 8847 Sch A Receipt for Contributions to Selected Community Dev. Corps (Attached to 3800 or attached separately) • T (Timber) Forest Industries Schedule • W2-C Statement of Corrected Income and Tax Amounts "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

11. SEVERAL OPTIONS TO ADDRESS THESE ATTACHMENTS HAVE BEEN IDENTIFIED... • Waive submission • Continue to accept as paper attachments to jurat • Enable attachments electronically • Investigate other technologies (e.g., fax, scanning) • Leverage existing information from federal/state agencies …A TASK FORCE LED BY THE DEPUTY CHIEF OPERATIONS OFFICER MET APRIL 6 TO BEGIN INVESTIGATING THESE OPTIONS --- RECOMMENDATIONS DUE SOON "Revolutionizing How Taxpayers Transact and Communicate with the IRS"

12. "Revolutionizing How Taxpayers Transact and Communicate with the IRS"