Instructions for IRS Form 8275 "Disclosure Statement"

This document contains official instructions for IRS Form 8275, Disclosure Statement - a tax form released and collected by the Internal Revenue Service (IRS), a subdivision of the U.S. Department of the Treasury. An up-to-date fillable IRS Form 8275 is available for download through this link.

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Download Instructions for IRS Form 8275 "Disclosure Statement"

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Instructions for Form 8275
Department of the Treasury
Internal Revenue Service
(Rev. August 2013)
Disclosure Statement
How To File
Section references are to the Internal
Any claim of tax benefits from a
Revenue Code unless otherwise noted.
transaction lacking economic
File Form 8275 with your original tax
substance (within the meaning of
return. Keep a copy for your records.
Future Developments
section 7701(o)) or failing to meet the
You may be able to file Form 8275
For the latest information about
requirements of any similar rule of
with an amended return. See
developments related to Form 8275
law.
Regulations sections 1.6662-4(f)(1)
and its instructions, such as
Any otherwise undisclosed foreign
and 1.6664-2(c)(3) for more
legislation enacted after they were
financial asset understatement.
information.
published, go to
www.irs.gov/
Who Should File
form8275.
To make adequate disclosure for
items reported by a pass-though
Form 8275 is filed by individuals,
What's New
entity, you must complete and file a
corporations, pass-through entities,
separate Form 8275 for items
In the filer identification section,
and tax return preparers. If you are
reported by each entity.
additional lines have been added to
disclosing a position taken contrary to
request the name, employer
a regulation, use Form 8275-R,
To make adequate disclosure for a
identification number (if any), and
Regulation Disclosure Statement,
position or positions related to more
reference ID number of any foreign
instead of Form 8275.
than one foreign entity, you must
entity for which the taxpayer is making
complete and file a separate Form
For items attributable to a
a disclosure on Form 8275.
8275 for each foreign entity.
pass-through entity, disclosure should
be made on the tax return of the
General Instructions
Carryovers, carrybacks, and recur­
entity. If the entity does not make the
ring items. Carryover items must be
disclosure, the partner (or
disclosed for the tax year in which
Purpose of Form
shareholder, etc.) can make adequate
they originated. You do not have to file
Form 8275 is used by taxpayers and
disclosure of these items.
another Form 8275 for those items for
tax return preparers to disclose items
the tax years in which the carryover is
Exception to filing Form 8275.
or positions, except those taken
taken into account.
Guidance is published annually in a
contrary to a regulation, that are not
Carryback items must be disclosed
revenue procedure in the Internal
otherwise adequately disclosed on a
for the tax year in which they
Revenue Bulletin. This can be found
tax return to avoid certain penalties.
originated. You do not have to file
on the Internet at IRS.gov. The
The form is filed to avoid the portions
another Form 8275 for those items for
revenue procedure identifies
of the accuracy-related penalty due to
the tax years in which the carryback is
circumstances when an item reported
disregard of rules or to a substantial
taken into account.
on a return is considered adequate
understatement of income tax for
disclosure for purposes of the
non-tax shelter items if the return
However, if you disclose items of a
substantial understatement aspect of
position has a reasonable basis. It can
recurring nature (such as depreciation
the accuracy-related penalty and for
also be used for disclosures relating
expense), you must file Form 8275 for
avoiding the preparer's penalty
to the economic substance penalty
each tax year in which the item
relating to understatements due to
and the preparer penalties for tax
occurs.
unreasonable positions. See the
understatements due to unreasonable
If you are disclosing a position that
Example below. You do not have to
positions or disregard of rules.
is contrary to a rule, and the position
file Form 8275 for items that meet the
relates to a reportable transaction as
The portion of the
requirements listed in this revenue
defined in Regulations section
accuracy-related penalty
!
procedure.
1.6011-4(b), you must also make the
attributable to the following
CAUTION
Example. Generally, you will have
disclosure as indicated in Regulations
types of misconduct cannot be
met the requirements for adequate
section 1.6011-4(d). See Form 8886,
avoided by disclosure on Form 8275.
disclosure of a charitable contribution
Reportable Transaction Disclosure
deduction if you complete the
Statement, its instructions, Notice
Negligence.
contributions section of Schedule A
2006-6, 2006-5 I.R.B. 385, available
Disregard of regulations.
(Form 1040) and supply all the
at
http://www.irs.gov/irb/2006-05_IRB/
Any substantial understatement of
required information. If you make a
ar10.html, and Notice 2010-62,
income tax on a tax shelter item.
contribution of property other than
2010-40 I.R.B. 411, available at
Any substantial valuation
cash that is over $500, the form
www.irs.gov/irb/2010-40_IRB/
misstatement under chapter 1.
required by the Schedule A
ar09.html.
Any substantial overstatement of
instructions must be attached to your
pension liabilities.
return.
Any substantial estate or gift tax
valuation understatements.
Sep 06, 2013
Cat. No. 62063F
Instructions for Form 8275
Department of the Treasury
Internal Revenue Service
(Rev. August 2013)
Disclosure Statement
How To File
Section references are to the Internal
Any claim of tax benefits from a
Revenue Code unless otherwise noted.
transaction lacking economic
File Form 8275 with your original tax
substance (within the meaning of
return. Keep a copy for your records.
Future Developments
section 7701(o)) or failing to meet the
You may be able to file Form 8275
For the latest information about
requirements of any similar rule of
with an amended return. See
developments related to Form 8275
law.
Regulations sections 1.6662-4(f)(1)
and its instructions, such as
Any otherwise undisclosed foreign
and 1.6664-2(c)(3) for more
legislation enacted after they were
financial asset understatement.
information.
published, go to
www.irs.gov/
Who Should File
form8275.
To make adequate disclosure for
items reported by a pass-though
Form 8275 is filed by individuals,
What's New
entity, you must complete and file a
corporations, pass-through entities,
separate Form 8275 for items
In the filer identification section,
and tax return preparers. If you are
reported by each entity.
additional lines have been added to
disclosing a position taken contrary to
request the name, employer
a regulation, use Form 8275-R,
To make adequate disclosure for a
identification number (if any), and
Regulation Disclosure Statement,
position or positions related to more
reference ID number of any foreign
instead of Form 8275.
than one foreign entity, you must
entity for which the taxpayer is making
complete and file a separate Form
For items attributable to a
a disclosure on Form 8275.
8275 for each foreign entity.
pass-through entity, disclosure should
be made on the tax return of the
General Instructions
Carryovers, carrybacks, and recur­
entity. If the entity does not make the
ring items. Carryover items must be
disclosure, the partner (or
disclosed for the tax year in which
Purpose of Form
shareholder, etc.) can make adequate
they originated. You do not have to file
Form 8275 is used by taxpayers and
disclosure of these items.
another Form 8275 for those items for
tax return preparers to disclose items
the tax years in which the carryover is
Exception to filing Form 8275.
or positions, except those taken
taken into account.
Guidance is published annually in a
contrary to a regulation, that are not
Carryback items must be disclosed
revenue procedure in the Internal
otherwise adequately disclosed on a
for the tax year in which they
Revenue Bulletin. This can be found
tax return to avoid certain penalties.
originated. You do not have to file
on the Internet at IRS.gov. The
The form is filed to avoid the portions
another Form 8275 for those items for
revenue procedure identifies
of the accuracy-related penalty due to
the tax years in which the carryback is
circumstances when an item reported
disregard of rules or to a substantial
taken into account.
on a return is considered adequate
understatement of income tax for
disclosure for purposes of the
non-tax shelter items if the return
However, if you disclose items of a
substantial understatement aspect of
position has a reasonable basis. It can
recurring nature (such as depreciation
the accuracy-related penalty and for
also be used for disclosures relating
expense), you must file Form 8275 for
avoiding the preparer's penalty
to the economic substance penalty
each tax year in which the item
relating to understatements due to
and the preparer penalties for tax
occurs.
unreasonable positions. See the
understatements due to unreasonable
If you are disclosing a position that
Example below. You do not have to
positions or disregard of rules.
is contrary to a rule, and the position
file Form 8275 for items that meet the
relates to a reportable transaction as
The portion of the
requirements listed in this revenue
defined in Regulations section
accuracy-related penalty
!
procedure.
1.6011-4(b), you must also make the
attributable to the following
CAUTION
Example. Generally, you will have
disclosure as indicated in Regulations
types of misconduct cannot be
met the requirements for adequate
section 1.6011-4(d). See Form 8886,
avoided by disclosure on Form 8275.
disclosure of a charitable contribution
Reportable Transaction Disclosure
deduction if you complete the
Statement, its instructions, Notice
Negligence.
contributions section of Schedule A
2006-6, 2006-5 I.R.B. 385, available
Disregard of regulations.
(Form 1040) and supply all the
at
http://www.irs.gov/irb/2006-05_IRB/
Any substantial understatement of
required information. If you make a
ar10.html, and Notice 2010-62,
income tax on a tax shelter item.
contribution of property other than
2010-40 I.R.B. 411, available at
Any substantial valuation
cash that is over $500, the form
www.irs.gov/irb/2010-40_IRB/
misstatement under chapter 1.
required by the Schedule A
ar09.html.
Any substantial overstatement of
instructions must be attached to your
pension liabilities.
return.
Any substantial estate or gift tax
valuation understatements.
Sep 06, 2013
Cat. No. 62063F
Accuracy­Related Penalty
The reasonable cause and
1. 10% of the tax required to be
good faith exception does not
shown on the return for the tax year
!
Generally, the accuracy-related
apply to any portion of an
(or, if greater, $10,000), or
penalty is 20% of any portion of a tax
CAUTION
underpayment attributable to a
2. $10,000,000.
underpayment attributable to:
transaction that lacks economic
1. Negligence or disregard of rules
substance under section 7701(o).
Reduction of understatement. The
or regulations,
amount of the understatement will be
Adequate disclosure. Generally,
2. Any substantial understatement
reduced by the part that is attributable
you can avoid the disregard of rules
of income tax,
to the following items.
and substantial understatement
3. Any substantial valuation
An item (other than a tax shelter
portions of the accuracy-related
misstatement under chapter 1 of the
item) for which there was substantial
penalty if the position is adequately
authority for the treatment claimed at
Internal Revenue Code,
disclosed and the position has at least
the time the return was filed or on the
4. Any substantial overstatement
a reasonable basis.
last day of the tax year to which the
of pension liabilities,
return relates.
Reasonable basis. Reasonable
5. Any substantial estate or gift tax
An item (other than a tax shelter
basis is a relatively high standard of
valuation understatement, or
item) that is adequately disclosed on
tax reporting that is significantly higher
6. Any claim of tax benefits from a
this form if there is a reasonable basis
than not frivolous or not patently
transaction lacking economic
for the tax treatment of the item. (In no
improper. The reasonable basis
substance, as defined by section
event will a corporation be treated as
standard is not satisfied by a return
7701(o), or failing to meet the
having a reasonable basis for its tax
position that is merely arguable.
requirements of any similar rule of
treatment of an item attributable to a
If the return position is reasonably
law.
multi-party financing transaction
based on one of the authorities set
entered into after August 5, 1997, if
The penalty is 40% of any portion
forth in Regulations section
the treatment does not clearly reflect
of a tax underpayment attributable to
1.6662-4(d)(3)(iii) (taking into account
the income of the corporation.)
one or more gross valuation
the relevance and persuasiveness of
For corporate tax shelter
misstatements in (3), (4), or (5) above
the authorities, and subsequent
transactions (and for tax shelter items
if the applicable dollar limitation under
developments), the return position will
section 6662(h)(2) is met. The penalty
of other taxpayers for tax years
generally satisfy the reasonable basis
also increases to 40% for failing to
ending after October 22, 2004), the
standard even though it may not
adequately disclose a transaction that
only exception to the substantial
satisfy the substantial authority
understatement portion of the
lacks economic substance in (6)
standard as defined in Regulations
accuracy-related penalty is the
above. See Economic substance,
section 1.6662-4(d)(2). For details,
reasonable cause exception. For
below. The penalty is 40% of any
see Regulations section 1.6662–4(d).
more details, see Reasonable cause
portion of an underpayment that is
If you failed to keep proper books
exception (earlier), section 6662(d)
attributable to any undisclosed foreign
and records or failed to substantiate
and Regulations section 1.6664-4.
financial asset understatement.
items properly, you cannot avoid the
penalty by disclosure.
Economic substance. To satisfy the
Tax shelter items. A tax shelter,
disclosure requirements under section
for purposes of the substantial
Substantial Understatement
6662(i), you may adequately disclose
understatement portion of the
An understatement is the excess of:
with a timely filed original return
accuracy-related penalty, is a
(determined with regard to
1. The amount of tax required to
partnership or other entity, plan, or
extensions) or a qualified amended
be shown on the return for the tax
arrangement, with a significant
return (as defined under Regulations
year, over
purpose to avoid or evade federal
section 1.6664-2(c)(3)) the relevant
income tax. For transactions on or
2. The amount of tax shown on the
facts affecting the tax treatment of the
before August 5, 1997, a tax shelter is
return for the tax year, reduced by any
transaction.
a partnership or other entity, plan, or
rebates.
arrangement, whose principal
Note. If you filed a Schedule UTP,
There is a substantial
purpose is to avoid or evade federal
you may not need to file Form 8275 to
understatement of income tax if the
income tax.
satisfy the disclosure requirements of
amount of the understatement for any
A tax shelter item is any item of
section 6662(i). See the Instructions
tax year exceeds the greater of:
income, gain, loss, deduction, or
for Schedule UTP.
1. 10% of the tax required to be
credit that is directly or indirectly
shown on the return for the tax year,
Reasonable cause exception.
attributable to the principal or
or
Generally, no accuracy-related
significant purpose of the tax shelter
penalty will be imposed on any portion
to avoid or evade federal income tax.
2. $5,000.
of an underpayment if you show that
Tax Return Preparer Penalties
An understatement of a corporation
there was reasonable cause for that
(other than an S corporation or a
A preparer who files a return or claim
portion and that you acted in good
personal holding company, as defined
for refund is subject to a penalty in an
faith with respect to that portion.
in section 542) is substantial if it
amount equal to the greater of $1,000
exceeds in any year the lesser of:
or 50 percent of the income derived
­2­
Part II
(or to be derived) by the tax return
Use Part IV on page 2 if you need
preparer, with respect to the return or
more space for Part I or II. Indicate the
Your disclosure statement must
claim, for taking a position which the
corresponding part and line number
include a description of the relevant
preparer knew or reasonably should
from page 1. You can use a
facts affecting the tax treatment of the
have known would understate any
continuation sheet(s) if you need
item. To satisfy this requirement, you
part of the liability if:
additional space. Be sure to put your
must include information that
name and identifying number on each
There is or was no substantial
reasonably can be expected to
sheet.
authority for the position.
apprise the IRS of the identity of the
The position is a tax shelter (as
item, its amount, and the nature of the
Reference ID number. If you are
defined in section 6662(d)(2)(C)(ii)) or
controversy or potential controversy.
filing Form 8275 to disclose a position
a reportable transaction to which
Information concerning the nature of
related to a foreign entity for which an
section 6662A applies and it was not
the controversy can include a
information return (such as Form
reasonable to believe that the position
description of the legal issues
5471) is filed, enter on Form 8275 the
would more likely than not be
presented by the facts.
same reference ID number for the
sustained on its merits.
foreign entity that is entered on the
Unless provided otherwise in
The position disclosed as provided
information return.
the General Instructions
!
in section 6662(d)(2)(B)(ii), is not a tax
If you are filing Form 8275 to report
above, your disclosure will
shelter or a reportable transaction to
CAUTION
a position or positions related to
not be considered accurate unless the
which section 6662A applies, and
multiple foreign entities, file a
information described above is
there was no reasonable basis for the
separate Form 8275 for each foreign
provided using Form 8275. For
position.
entity.
example, your disclosure will not be
The penalty will not apply if it can
considered adequate if you attach a
Part I
be shown that there was reasonable
copy of an acquisition agreement to
cause for the understatement and that
your tax return to disclose the issues
Column (a). If you are disclosing a
the preparer acted in good faith.
involved in determining the basis of
position contrary to a rule (such as a
In cases where any part of the
certain acquired assets. If Form 8275
statutory provision or IRS revenue
understatement of the liability is due
is not completed and attached to the
ruling), you must identify the rule in
to a willful attempt by the return
return, the disclosure will not be
column (a).
preparer to understate the liability, or
considered valid even if the
Column (b). Identify the item by
if the understatement is due to
information described above is
name.
reckless or intentional disregard of
provided using another method, such
rules or regulations by the preparer,
as a different form or an attached
If any item you disclose is from a
the preparer is subject to a penalty
letter.
pass-through entity, you must identify
equal to the greater of $5,000 or 50
the item as such. If you disclose items
percent of the income derived (or to
from more than one pass-through
Part III
be derived) by the tax return preparer
entity, you must complete a separate
Line 4. Contact your pass-through
with respect to the return or claim.
Form 8275 for each entity. Also, see
entity if you do not know where its
This penalty shall be reduced by the
How To File on page 1.
return was filed. However, for partners
amount of the penalty paid by such
Column (c). Enter a complete
and S corporation shareholders,
person for taking an unreasonable
description of the item(s) you are
information for line 4 can be found on
position, or a position with no
disclosing.
the Schedule K-1 that you received
reasonable basis, as described
Example. If entertainment
from the partnership or S corporation.
immediately above.
expenses were reported in column
If the pass-through entity filed its
A preparer is not considered to
(b), then list in column (c) “theater
return electronically using e-file, enter
have recklessly or intentionally
tickets, catering expenses, and
“e-file” on line 4.
disregarded a rule if a position is
banquet hall rentals.”
adequately disclosed and has a
Paperwork Reduction Act Notice.
If you claim the same tax treatment
reasonable basis.
We ask for the information on this
for a group of similar items in the
form to carry out the Internal Revenue
Note. For more information about the
same tax year, enter a description
laws of the United States. You are
accuracy-related penalty and preparer
identifying the group of items you are
required to give us the information if
penalties, and the means of avoiding
disclosing rather than a separate
you wish to use this form to make
these penalties, see the regulations
description of each item within the
adequate disclosure to avoid the
under sections 6662, 6664, and 6694.
group.
portion of the accuracy-related
Columns (d) through (f). Enter the
penalty due to a substantial
Specific Instructions
location of the item(s) by identifying
understatement of income tax or
the form number or schedule and the
Be sure to supply all the information
disregard of rules, or to avoid certain
line number in columns (d) and (e)
for Parts I, II, and, if applicable, Part
preparer penalties. We need it to
and the amount of the item(s) in
III. Your disclosure will be considered
ensure that you are complying with
column (f).
adequate if you file Form 8275 and
these laws and to allow us to figure
supply the information requested in
and collect the right amount of tax.
detail.
­3­
You are not required to provide the
individual circumstances. The
Recordkeeping
3 hr., 35
. . . . . . .
information requested on a form that
estimated burden for individual
min.
is subject to the Paperwork Reduction
taxpayers filing this form is approved
Learning about the law
Act unless the form displays a valid
under OMB control number
or the form
1 hr.
. . . . . . . .
OMB control number. Books or
1545-0074 and is included in the
Preparing and sending
records relating to a form or its
estimates shown in the instructions for
the form to the IRS
1 hr., 6 min.
. .
instructions must be retained as long
their individual income tax return. The
as their contents may become
estimated burden for all other
If you have comments concerning
material in the administration of any
taxpayers who file this form is shown
the accuracy of these time estimates
Internal Revenue law. Generally, tax
below.
or suggestions for making this form
returns and return information are
simpler, we would be happy to hear
confidential, as required by section
from you. See the instructions for the
6103.
tax return with which this form is filed.
The time needed to complete and
file this form will vary depending on
­4­
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