If an employer's electronic system produces a Form W-4 that satisfies the federal electronic-signature requirements, does the New York equivalent, Form IT-2104, automatically satisfy New York's own signature requirements?

Plain-English summary

A petitioner asked the Department whether Form IT-2104 (New York's withholding allowance certificate) could be completed electronically using the same system it planned to use for the federal Form W-4. The petitioner's proposed online tool would let employees complete their withholding forms electronically, using an electronic signature that satisfied the five requirements for a valid federal Form W-4 signature under 26 C.F.R. § 31.3402(f)(5)-(1)(c). Completed forms would be stored electronically and could be printed, with "Electronic Signature on File" appearing in place of a handwritten signature.

The Department concluded that satisfying the federal signature requirements for Form W-4 is a positive sign, but it does not automatically mean the same system is acceptable for New York's Form IT-2104. New York has its own, independent electronic signature and recordkeeping framework: the Electronic Signatures and Records Act (ESRA, State Technology Law Article 3) and its implementing regulations (9 NYCRR Part 540), plus the Tax Department's own recordkeeping regulations for electronic records (20 NYCRR Part 2402). An electronic signature must meet ESRA's definition - an electronic sound, symbol, or process attached to or logically associated with a record and executed with the intent to sign it - and, for governmental entities like the Department, the ESRA regulations require a business analysis and risk assessment when selecting a signature method. If a certification authority is involved in the signing process, additional ESRA regulatory requirements apply as well.

Separately, the Department noted that it has already determined an electronic Form IT-2104 system is acceptable (i.e., not treated as inadequate merely for being electronic) if, beyond meeting ESRA and the Department's recordkeeping rules, it conforms to the requirements of IRS Publication 15-A. On recordkeeping specifically, the taxpayer's electronic system must accurately reflect the information in the records, support and verify the entries on returns, give the Department the means to verify accuracy and integrity (including audit access), and be documented so the Department can understand the technologies and procedures used to maintain it.

In short, the opinion sets out the applicable New York standards without pre-approving the petitioner's specific system - the petitioner still needs to confirm its system actually complies with ESRA, the ESRA regulations, the Department's recordkeeping regulations, and IRS Publication 15-A, and that the electronic IT-2104 contains the same language and information as the paper form.

What this means for you

Employers building electronic withholding-form systems

Don't assume that federal compliance for an electronic Form W-4 signature carries over to New York's Form IT-2104. You need to independently verify that your system satisfies ESRA's electronic signature definition (State Technology Law § 302.3), the ESRA regulations at 9 NYCRR Part 540 (including a business analysis and risk assessment, and any extra requirements if a certification authority is involved), and the Tax Department's electronic recordkeeping regulations at 20 NYCRR Part 2402. Your system should also conform to IRS Publication 15-A and preserve the same content and language as the paper IT-2104.

Accountants and tax professionals advising employers

If a client asks whether their existing federal e-signature/W-4 platform can simply be extended to New York withholding forms, flag that New York law imposes its own, additional signature and recordkeeping requirements. Advise clients to document how their system ensures accuracy and integrity of electronic records and to be prepared to give the Department audit access to those records and supporting documentation if requested.

Common questions

Q: If our electronic system meets the federal requirements for a valid Form W-4 signature, is our electronic Form IT-2104 automatically valid in New York?
A: No. Meeting the federal Form W-4 signature requirements is a positive factor, but New York's Form IT-2104 must independently satisfy ESRA (State Technology Law Article 3), the ESRA regulations (9 NYCRR Part 540), and the Tax Department's electronic recordkeeping regulations (20 NYCRR Part 2402).

Q: What does ESRA require of an electronic signature?
A: Under ESRA § 302.3, an electronic signature must be an electronic sound, symbol, or process attached to or logically associated with the record and executed or adopted by a person with the intent to sign the record.

Q: Does using a certification authority change anything?
A: Yes. If the electronic signing solution involves the services of a certification authority, the system must also meet the additional requirements set out in ESRA Regulation 9 NYCRR § 540.4(d).

Q: What must an employer's electronic recordkeeping system do to satisfy the Tax Department?
A: Under 20 NYCRR Part 2402, the electronic records (alone or with other records) must accurately reflect the information they contain and support the entries on the taxpayer's returns. The taxpayer must give the Department the means to verify the accuracy and integrity of the records, including audit access, and must maintain documentation explaining the technologies and procedures used to manage the electronic records.

Q: Is there any pre-approved standard for an electronic Form IT-2104 system?
A: The Department stated that Form IT-2104 series forms would be acceptable in electronic form if, in addition to meeting ESRA and the Department's recordkeeping regulations, the system conforms in all applicable respects to the requirements in IRS Publication 15-A.

Citations and references

• N.Y. State Technology Law § 301 et seq. - New York's Electronic Signatures and Records Act (ESRA)
• ESRA § 302.3 - statutory definition of "electronic signature"
• 9 NYCRR Part 540 - ESRA regulations governing electronic signatures accepted by governmental entities
• 9 NYCRR § 540.4(c) - requires a business analysis and risk assessment when selecting an electronic signature method
• 9 NYCRR § 540.4(d) - additional requirements when a certification authority is involved in the electronic signature
• 9 NYCRR Part 540.5 - ESRA standards for electronic records
• 20 NYCRR Part 2402 - Tax Department regulations on electronic recordkeeping equivalence to paper records
• 26 C.F.R. § 31.3402(f)(5)-(1)(c) - federal requirements for a valid electronic signature on Form W-4
• IRS Publication 15-A (2009), Employer's Supplemental Tax Guide - federal guidance referenced as the applicable standard for electronic Form IT-2104 systems

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_2009.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a09_5i.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-09(5)I
Income Tax
June 2, 2009

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. I090306A

A petition dated March 6, 2009, received from name and address redacted.(Petitioner), concerns
its proposed implementation of an online tool to allow its employees to complete their federal and state
tax withholding forms electronically. Petitioner requests an opinion indicating whether a Form IT-2104
that is completed using an electronic submission system that satisfies the federal requirements for a valid
electronic signature on the Federal Form W-4 also satisfies the signature requirements for Form IT-2104
under New York law.
We conclude that a Form IT-2104 that satisfies federal requirements for a valid electronic
signature on the Federal Form W-4 under federal law does not necessarily satisfy the signature
requirements for Form IT-2104 under New York law. The signature must also satisfy the requirements
set forth by New York State’s Electronic Signatures and Records Act and the Tax Department’s
electronic recordkeeping regulations.
Facts
Petitioner is considering the implementation of an online tool that will allow its employees to
complete their federal and state tax withholding forms electronically. The electronic submission system
incorporates an electronic signature that according to Petitioner “satisfies the five requirements for a valid
electronic signature on the Federal Employee’s Withholding Allowance Certificate (Form W-4) as
enumerated in the Code of federal regulations (26 C.F.R. § 31.3402(f)(5)-(1)(c)).” The system Petitioner
is designing would store electronic copies of the completed forms that could be printed out. Because the
forms will have been completed electronically, they would have the words “Electronic Signature on File”
(instead of a signature) in the signature field. Petitioner seeks an advisory opinion “whether an IT-2104
which is completed in this manner would fall within the scope of New York’s Electronic Signatures and
Records Act (N.Y. St. Tech. Law §301 et seq.) and therefore be considered fully compliant with
New York’s tax laws.”
Analysis
The fact that the online tool Petitioner anticipates implementing would comply with the federal
requirements for electronic federal withholding tax forms is a positive circumstance from the Tax
Department’s perspective. However, that fact alone does not necessarily mean that the system is
acceptable for New York State withholding forms. As noted in the Petition, New York State has its own
electronic signature and recordkeeping laws and regulations. These must also be complied with. The Tax
Department’s requirements for electronic signatures and records are governed by New York State’s
Electronic Signatures and Records Act (State Technology Law, Article 3; hereinafter referred to as
“ESRA”) and ESRA Regulations (9 NYCRR Part 540), as well as Tax Department recordkeeping
regulations applicable to electronic records (20 NYCRR Part 2402).

-2•

TSB-A-09(5)I
Income Tax
June 2, 2009

Electronic Signatures

ESRA provides that "Electronic signature" means “an electronic sound, symbol, or process,
attached to or logically associated with an electronic record and executed or adopted by a person with the
intent to sign the record.” ESRA §302.3. Accordingly, any electronic signature that Petitioner decides to
implement must comply with the requirements of this definition. New York State Office for Technology
("OFT"), designated by ESRA as "electronic facilitator," has also promulgated ESRA Regulations (9
NYCRR Part 540). The ESRA Regulations contain requirements governing the electronic signatures that
governmental agencies may use or accept. Among other things, they require governmental entities to
conduct "a business analysis and risk assessment when selecting an electronic signature to be used or
accepted by that governmental entity." §540.4 (c). With regard to electronic income tax withholding
allowance and exemption forms (all Form IT-2l04 series forms, including the IT-2104), the Tax
Department has concluded that, in addition to meeting the requirements of ESRA and the Department's
recordkeeping regulations, such forms would be acceptable if created in an electronic system that
conforms, in all applicable respects, to the requirements set forth in federal Publication l5-A.1 By
"acceptable," we mean that the records would not be deemed inadequate merely because they are in
electronic format.
The ESRA Regulations also set forth a number of specific additional requirements which must be
complied with "where the governmental entity agrees to accept an electronic signature that involves the
services of a certification authority" (see 9 NYCRR §540.4 (d)). With respect to this latter set of
requirements, if the electronic signing solution Petitioner proposes to use involves the services of
a certification authority, then it would need to meet the requirements outlined by ESRA Regulation
§540.4 (d), in addition to the other requirements of ESRA.
•

Electronic Recordkeeping

ESRA and its Regulations also set forth standards regarding electronic records, which must be
complied with. (See 9 NYCRR Part 540.5) As mentioned above, the Tax Department has promulgated
its own regulations defining the requirements that must be met for the Department to consider records
maintained in an electronic recordkeeping system as the equivalent of records maintained in a paperbased recordkeeping system. (See 20 NYCRR Part 2402) Essentially, the Department's regulations
require a taxpayer using electronic recordkeeping systems to ensure that the electronic records alone, or in
conjunction with other records, accurately reflect the information they include, and contain sufficient
information to support and verify tax payments and/or entries on the taxpayer's returns or informational
reports. Further, the taxpayer must provide the Department, upon its request, with the opportunity and, if
necessary, the means to ensure the accuracy and integrity of the electronic records. This may include, but
not be limited to, making available whatever facilities and computer resources may be necessary for the
Department to carry out its audit procedures. Finally, the taxpayer must maintain, and make available to
the Department if requested, documentation that explains the specific technologies, technical
specifications and procedures the taxpayer uses to retain and otherwise manage its electronic records, and
how these technologies, specifications and procedures ensure the accuracy and integrity of the taxpayer's
electronic records. The taxpayer must also ensure that the electronic records contain sufficient

1

IRS Publication 15-A (2009) Employer’s Supplemental Tax Guide at p. 2-3. See http://www.irs.gov/pub/irspdf/p15a.pdf. These requirements, set out in Publication 15-A, are derived from the federal regulation mentioned in
the Petition.

TSB-A-09(5)I
Income Tax
June 2, 2009

-3-

information to support and verify the entries made on the taxpayer's returns and to determine the correct
tax liabilities.
Petitioner will need to review the above-referenced requirements to determine whether the
proposed system complies. Ultimately, in order to be "accepted" by the Tax Department, the system must
be compliant with ESRA, the ESRA Regulations, and the Department's recordkeeping regulations, and
conform to the requirements set forth in IRS Publication 15-A as applicable to the New York State
income tax withholding and exemption forms. As Petitioner recognizes, New York State has its own
forms, and the electronic versions of these forms must contain the same language and information as
required by the paper versions.
In providing this opinion, the Tax Department has merely set forth the applicable standards that
must be met by an electronic system. The system would, of course, have to work in practice and produce
appropriate records that comply with the laws and regulations described above. In the event of a problem,
during an audit or otherwise, with the records created or produced by the electronic system, the Tax
Department would, of course, have available to it all of the rights and remedies it has in the case of a
records failure with a paper-based recordkeeping system.

DATED: June 2, 2009

NOTE:

/S/
Jonathan Pessen
Director of Advisory Opinions
Office of Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to
the facts set forth therein and is binding on the Department only with respect to
the person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued
or for the specific time period at issue in the Opinion.