Instructions for Filing IRS Form 8275

IRS Form 8275, the Disclosure Statement, is a document taxpayers attach to their tax returns to detail a tax position that is unclear or unconventional. Its function is to help avoid certain accuracy-related penalties if the IRS disagrees with the treatment of an item on the return. By explaining the basis for a tax position, the form demonstrates transparency and shows the taxpayer did not intentionally disregard tax rules.

Determining When to File Form 8275

Filing Form 8275 is necessary when a tax position on a return has a “reasonable basis” but is contrary to established IRS guidance, such as revenue rulings and notices. A position has a reasonable basis if supported by authorities like tax laws or court cases. This standard is higher than a position that is merely arguable and requires a well-founded rationale for the tax treatment.

This form is for positions contrary to IRS rules. For positions that contradict a Treasury regulation, Form 8275-R, Regulation Disclosure Statement, must be used instead. Taking a position against a regulation is viewed as a more significant departure from established tax principles.

Proper disclosure on Form 8275 can protect a taxpayer from the accuracy-related penalty, which is 20% of the underpaid tax. This penalty can apply for a substantial understatement of income tax, which for an individual occurs if the tax is understated by more than 10% of the correct tax or $5,000, whichever is greater. A lower threshold of 5% or $5,000 applies for understatements related to the qualified business income deduction. This disclosure serves as a defense against the penalty by showing a reasonable basis, even if the IRS ultimately denies the tax position.

Information Required to Complete Form 8275

Completing Form 8275 requires specific information. Part I, General Information, requires basic identifying details, including the taxpayer’s name and identifying number. You must also specify the tax year and the return to which the form is attached, such as Form 1040 or Form 1120. This section has columns to identify the specific item, its location on the tax return by form and line number, and the dollar amount involved.

Part II, Detailed Explanation, requires a comprehensive narrative explaining the tax position. This explanation must include all relevant facts, a clear description of the position, and the legal basis supporting it. The disclosure should cite specific authorities, such as provisions from the Internal Revenue Code, court decisions, or official IRS administrative pronouncements.

Part III, Information About Pass-Through Entity, must be completed if the disclosure relates to an item from a partnership, S corporation, estate, or trust. The taxpayer must provide the name, identifying number, and address of the pass-through entity. If the entity filed its return electronically, the taxpayer can enter “e-file” for the service center location. If the disclosure involves items from multiple pass-through entities, a separate Form 8275 must be filed for each one.

The Filing Process

Once completed, Form 8275 must be submitted with the tax return. The method of submission depends on whether the return is being filed on paper or electronically.

For those filing a paper tax return, the completed Form 8275 must be physically attached to the return and mailed together with the main tax form, such as the Form 1040.

If the tax return is being filed electronically, a digital copy of the completed Form 8275 must be attached. The taxpayer should complete the form, save it as a PDF, and use the software’s attachment feature to include it with the e-filed return.

After the form is filed, the IRS has the disclosure as part of the official tax record. This does not prevent the IRS from examining the return or disagreeing with the tax position, but it demonstrates the taxpayer was transparent about their position.