Form 8275, titled "Disclosure Statement," is used by taxpayers and tax return preparers to disclose tax positions or items that are not otherwise adequately disclosed on a tax return. Its primary purpose is to avoid certain accuracy-related penalties under Internal Revenue Code (IRC) section 6662(i), particularly those related to substantial understatement of income tax or disregard of rules, provided the position has a reasonable basis. It is also used for disclosures related to the economic substance penalty and preparer penalties for unreasonable positions or disregard of rules.
Who Should File Form 8275?
- Individuals, corporations, pass-through entities, and tax return preparers may file Form 8275.
- It is required when disclosing a position that is not adequately disclosed on the tax return and is not contrary to a regulation. If a position is contrary to a regulation, Form 8275-R (Regulation Disclosure Statement) must be used instead.
- For items attributable to a pass-through entity, disclosure should ideally be made on the entity’s return. If the entity does not disclose, the partner, shareholder, or other owner may file Form 8275 for those items.
When and How to File
- File Form 8275 with your original tax return. You may also file it with an amended return if applicable (see Regulations sections 1.6662-4(f)(1) and 1.6664-2(c)(3)).
- Keep a copy for your records.
- Complete a separate Form 8275 for each pass-through entity or foreign entity involved. For multiple foreign entities, file a separate form for each.
- Include the same reference ID number used on any related information return (e.g., Form 5471) when disclosing positions related to foreign entities.
Exceptions to Filing
- You do not need to file Form 8275 if the item is adequately disclosed under guidance published annually in a revenue procedure (available in the Internal Revenue Bulletin). For example, completing the Gifts to Charity section of Schedule A (Form 1040) with all required information and attachments may satisfy disclosure requirements for charitable contribution deductions.
- If you filed Schedule UTP (Form 1120), Uncertain Tax Position Statement, you may not need to file Form 8275 to satisfy disclosure requirements under section 6662(i).
Disclosure Requirements
- Provide detailed information in Parts I, II, and III (if applicable). Your disclosure must include the name of the item, its nature, and relevant facts affecting its tax treatment.
- Use Part IV or continuation sheets if additional space is needed. Label each sheet with your name and identifying number.
- Carryover or carryback items must be disclosed in the year they originated; no additional Form 8275 is needed in subsequent years when they are used. However, recurring items (e.g., depreciation) require filing Form 8275 each year they occur.
Penalties That Cannot Be Avoided by Filing Form 8275
- Negligence or disregard of regulations.
- Substantial understatement on tax shelter items.
- Gross valuation misstatements or non-arm’s length pricing.
- Overstatements of pension liabilities or estate/gift tax valuations.
- Claims from transactions lacking economic substance (section 7701(o)).
- Undisclosed foreign financial asset understatements.
- Inconsistent estate basis or overstatements under section 170(p).
Source:
Form 8275 Instructions (PDF)
Disclaimer: Always verify details with current Federal or State Department of Revenue Forms and Instructions. For complex tax situations, consult a CPA or tax attorney.