Purpose of Form
Form 8275 is used by taxpayers and tax return preparers to disclose items or positions, except those taken contrary to a regulation, that are not otherwise adequately disclosed on a tax return to avoid certain penalties. The form is filed to avoid the portions of the accuracy-related penalty due to disregard of rules or to a substantial understatement of income tax for non-tax shelter items if the return position has a reasonable basis. It can also be used for disclosures relating to the economic substance penalty and the preparer penalties for tax understatements due to unreasonable positions or disregard of rules.
The portion of the accuracy-related penalty attributable to the following types of misconduct cannot be avoided by disclosure on Form 8275.
- Disregard of regulations.
- Any substantial understatement of income tax on a tax shelter item.
- Any substantial valuation misstatement under chapter 1.
- Any substantial overstatement of pension liabilities.
- Any substantial estate or gift tax valuation understatements.
- Any claim of tax benefits from a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.
- Any otherwise undisclosed foreign financial asset understatement.
Who Should File
Form 8275 is filed by individuals, corporations, pass-through entities, and tax return preparers. If you are disclosing a position taken contrary to a regulation, use Form 8275-R, Regulation Disclosure Statement, instead of Form 8275.
For items attributable to a pass-through entity, disclosure should be made on the tax return of the entity. If the entity does not make the disclosure, the partner (or shareholder, etc.) can make adequate disclosure of these items.
Exception to filing Form 8275
Guidance is published annually in a revenue procedure in the Internal Revenue Bulletin that identifies circumstances when an item reported on a return is considered adequate disclosure for purposes of the substantial understatement aspect of the accuracy-related penalty and for avoiding the preparer's penalty relating to understatements due to unrealistic positions. See the example. You do not have to file Form 8275 for items that meet the requirements listed in this revenue procedure.
Example: Generally, you will have met the requirements for adequate disclosure of a charitable contribution deduction, if you complete the contributions section of Schedule A (Form 1040) and supply all the required information. If you make a contribution of property other than cash that is over $500, the form required by the Schedule A instructions must be attached to your return.
For more information, see Form 8275 Instructions.