Instructions for Form 8275

(Rev. January 2021)

(For use with Form 8275 (Rev. August 2013))

Disclosure Statement

Department of the Treasury

Internal Revenue Service

Section references are to the Internal 

Revenue Code unless otherwise noted.

Future Developments

For the latest information about 

developments related to Form 8275 

and its instructions, such as 

legislation enacted after they were 

published, go to IRS.gov/Form8275.

General Instructions

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.

• Negligence.

• Disregard of regulations.

• Any substantial understatement of 

income tax on a tax shelter item.

• Any substantial or gross valuation 

misstatement (including 

misstatements attributable to 

non-arm's length prices) 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 

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requirements of any similar rule of 

law.

• Any otherwise undisclosed foreign 

financial asset understatement.

• Any inconsistent estate basis.

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 

unreasonable positions. See the 

Example below. You do not have to 

file Form 8275 for items that meet the 

requirements listed in this revenue 

procedure. This revenue procedure 

can be found on the internet at 

IRS.gov.

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), supply all required 

information, and attach all related 

forms required pursuant to statute or 

regulation.

How To File

File Form 8275 with your original tax 

return. Keep a copy for your records. 

You may be able to file Form 8275 

with an amended return. See 

Regulations sections 1.6662-4(f)(1) 

and 1.6664-2(c)(3) for more 

information.

To make adequate disclosure for 

items reported by a pass-though 

entity, you must complete and file a 

separate Form 8275 for items 

reported by each entity.

To make adequate disclosure for a 

position or positions related to more 

than one foreign entity, you must 

complete and file a separate Form 

8275 for each foreign entity.

Carryovers, carrybacks, and recurring items. Carryover items must be 

disclosed for the tax year in which 

they originated. You do not have to file 

another Form 8275 for those items for 

the tax years in which the carryover is 

taken into account.

Carryback items must be disclosed 

for the tax year in which they 

originated. You do not have to file 

another Form 8275 for those items for 

the tax years in which the carryback is 

taken into account.

However, if you disclose items of a 

recurring nature (such as depreciation 

expense), you must file Form 8275 for 

each tax year in which the item 

occurs.

If you are disclosing a position that 

is contrary to a rule, and the position 

relates to a reportable transaction as 

defined in Regulations section 

1.6011-4(b), you must also make the 

disclosure as indicated in Regulations 

section 1.6011-4(d). See Form 8886, 

Reportable Transaction Disclosure 

Statement, and its instructions; Notice 

2006-6, 2006-5 I.R.B. 385, available 

at IRS.gov/irb/2006-05_IRB/

ar10.html; and Notice 2010-62, 

2010-40 I.R.B. 411, available at 

IRS.gov/irb/2010-40_IRB/ar09.html.

Accuracy-Related Penalty

Generally, the accuracy-related 

penalty is 20% of any portion of a tax 

underpayment attributable to:

Oct 20, 2020 Cat. No. 62063F
1. Negligence or disregard of rules 

or regulations;

2. Any substantial understatement 

of income tax;

3. Any substantial valuation 

misstatement under chapter 1 of the 

Internal Revenue Code;

4. Any substantial overstatement 

of pension liabilities;

5. Any substantial estate or gift tax 

valuation understatement;

6. Any claim of tax benefits from a 

transaction lacking economic 

substance, as defined by section 

7701(o), or failing to meet the 

requirements of any similar rule of 

law;

7. Any undisclosed foreign 

financial asset understatement; or

8. Any inconsistent estate basis.

The penalty is 40% of any portion 

of a tax underpayment attributable to 

one or more gross valuation 

misstatements in (3), (4), or (5) above 

if the applicable dollar limitation under 

section 6662(h)(2) is met. The penalty 

also increases to 40% for failing to 

adequately disclose a transaction that 

lacks economic substance in (6) 

above. See Economic substance 

below. The penalty is 40% of any 

portion of an underpayment that is 

attributable to any undisclosed foreign 

financial asset understatement.

Economic substance. To satisfy the 

disclosure requirements under section 

6662(i), you may adequately disclose 

with a timely filed original return 

(determined with regard to 

extensions) or a qualified amended 

return (as defined under Regulations 

section 1.6664-2(c)(3)) the relevant 

facts affecting the tax treatment of the 

transaction.

Note. If you filed a Schedule UTP 

(Form 1120), you may not need to file 

Form 8275 to satisfy the disclosure 

requirements of section 6662(i). See 

the Instructions for Schedule UTP 

(Form 1120).

Reasonable cause exception. 

Generally, no accuracy-related 

penalty will be imposed on any portion 

of an underpayment if you show that 

there was reasonable cause for that 

portion and that you acted in good 

faith with respect to that portion.

The reasonable cause and 

good faith exception does not 

apply to any portion of an 

underpayment attributable to a 

transaction that lacks economic 

substance under section 7701(o).

Adequate disclosure. Generally, 

you can avoid the disregard of rules 

and substantial understatement 

portions of the accuracy-related 

penalty if the position is adequately 

disclosed and the position has at least 

a reasonable basis. To avoid the 

disregard of regulations portion of the 

accuracy-related penalty, the position 

taken must also represent a 

good-faith challenge to the validity of 

the regulation. See Regulations 

section 1.6662-3(c)(1).

Reasonable basis. Reasonable 

basis is a relatively high standard of 

tax reporting that is significantly higher 

than not frivolous or not patently 

improper. The reasonable basis 

standard is not satisfied by a return 

position that is merely arguable.

If the return position is reasonably 

based on one of the authorities set 

forth in Regulations section 

1.6662-4(d)(3)(iii) (taking into account 

the relevance and persuasiveness of 

the authorities, and subsequent 

developments), the return position will 

generally satisfy the reasonable basis 

standard even though it may not 

satisfy the substantial authority 

standard as defined in Regulations 

section 1.6662-4(d)(2). For details, 

see Regulations sections 1.6662-4(d); 

1.662-3(b)(3).

If you failed to keep proper books 

and records or failed to substantiate 

items properly, you cannot avoid the 

penalty by disclosure.

Substantial Understatement

An understatement is the excess of:

1. The amount of tax required to 

be shown on the return for the tax 

year, over

2. The amount of tax imposed 

which is shown on the return for the 

tax year, reduced by any rebates.

There is a substantial 

understatement of income tax if the 

amount of the understatement for any 

tax year exceeds the greater of:

1. 10% of the tax required to be 

shown on the return for the tax year, 

or

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2. $5,000.

An understatement of a corporation 

(other than an S corporation or a 

personal holding company, as defined 

in section 542) is substantial if it 

exceeds in any year the lesser of:

1. 10% of the tax required to be 

shown on the return for the tax year 

(or, if greater, $10,000), or

2. $10,000,000.

Reduction of understatement. The 

amount of the understatement will be 

reduced by the part that is attributable 

to the following items.

• An item (other than a tax shelter 

item) for which there was substantial 

authority for the treatment claimed at 

the time the return was filed or on the 

last day of the tax year to which the 

return relates.

• An item (other than a tax shelter 

item) that is adequately disclosed on 

this form if there is a reasonable basis 

for the tax treatment of the item. (In no 

event will a corporation be treated as 

having a reasonable basis for its tax 

treatment of an item attributable to a 

multi-party financing transaction 

entered into after August 5, 1997, if 

the treatment does not clearly reflect 

the income of the corporation.)

For corporate tax shelter 

transactions (and for tax shelter items 

of other taxpayers for tax years 

ending after October 22, 2004), the 

only exception to the substantial 

understatement portion of the 

accuracy-related penalty is the 

reasonable cause exception. For 

more details, see Reasonable cause 

exception, earlier; section 6662(d); 

and Regulations section 1.6664-4.

Tax shelter items. A tax shelter, 

for purposes of the substantial 

understatement portion of the 

accuracy-related penalty, is a 

partnership or other entity, plan, or 

arrangement, with a significant 

purpose to avoid or evade federal 

income tax. For transactions on or 

before August 5, 1997, a tax shelter is 

a partnership or other entity, plan, or 

arrangement, whose principal 

purpose is to avoid or evade federal 

income tax.

A tax shelter item is any item of 

income, gain, loss, deduction, or 

credit that is directly or indirectly 

attributable to the principal or 

-2- Instructions for Form 8275 (Rev. 1-2021)
significant purpose of the tax shelter 

to avoid or evade federal income tax.

Tax Return Preparer Penalties

A preparer who files a return or claim 

for refund is subject to a penalty in an 

amount equal to the greater of $1,000 

or 50% of the income derived (or to be 

derived) by the tax return preparer, 

with respect to the return or claim, for 

taking a position which the preparer 

knew or reasonably should have 

known would understate any part of 

the liability if:

• There is or was no substantial 

authority for the position;

• The position is a tax shelter (as 

defined in section 6662(d)(2)(C)(ii)) or 

a reportable transaction to which 

section 6662A applies and it was not 

reasonable to believe that the position 

would more likely than not be 

sustained on its merits; or

• The position disclosed as provided 

in section 6662(d)(2)(B)(ii) is not a tax 

shelter or a reportable transaction to 

which section 6662A applies, and 

there was no reasonable basis for the 

position.

The penalty will not apply if it can 

be shown that there was reasonable 

cause for the understatement and that 

the preparer acted in good faith.

In cases where any part of the 

understatement of the liability is due 

to a willful attempt by the return 

preparer to understate the liability, or 

if the understatement is due to 

reckless or intentional disregard of 

rules or regulations by the preparer, 

the preparer is subject to a penalty 

equal to the greater of $5,000 or 75% 

of the income derived (or to be 

derived) by the tax return preparer 

with respect to the return or claim. 

This penalty shall be reduced by the 

amount of the penalty paid by such 

person for taking an unreasonable 

position, or a position with no 

reasonable basis, as described 

immediately above.

A preparer is not considered to 

have recklessly or intentionally 

disregarded a rule if a position is 

adequately disclosed and has a 

reasonable basis.

Note. For more information about the 

accuracy-related penalty and preparer 

penalties, and the means of avoiding 

these penalties, see the regulations 

under sections 6662, 6664, and 6694.

Specific Instructions

Be sure to supply all the information 

for Parts I, II, and, if applicable, Part 

III. Your disclosure will be considered 

adequate if you file Form 8275 and 

supply the information requested in 

detail.

Use Part IV on page 2 if you need 

more space for Part I or II. Indicate the 

corresponding part and line number 

from page 1. You can use a 

continuation sheet(s) if you need 

additional space. Be sure to put your 

name and identifying number on each 

sheet.

Reference ID number. If you are 

filing Form 8275 to disclose a position 

related to a foreign entity for which an 

information return (such as Form 

5471) is filed, enter on Form 8275 the 

same reference ID number for the 

foreign entity that is entered on the 

information return.

If you are filing Form 8275 to report 

a position or positions related to 

multiple foreign entities, file a 

separate Form 8275 for each foreign 

entity.

Part I

Column (a). If you are disclosing a 

position contrary to a rule (such as a 

statutory provision or IRS revenue 

ruling), you must identify the rule in 

column (a).

Column (b). Identify the item by 

name.

If any item you disclose is from a 

pass-through entity, you must identify 

the item as such. If you disclose items 

from more than one pass-through 

entity, you must complete a separate 

Form 8275 for each entity. Also, see 

How To File, earlier.

Column (c). Enter a complete 

description of the item(s) you are 

disclosing.

Example. If entertainment 

expenses were reported in column 

(b), then list in column (c) “theater 

tickets, catering expenses, and 

banquet hall rentals.”

If you claim the same tax treatment 

for a group of similar items in the 

same tax year, enter a description 

identifying the group of items you are 

disclosing rather than a separate 

description of each item within the 

group.

Columns (d) through (f). Enter the 

location of the item(s) by identifying 

the form number or schedule and the 

line number in columns (d) and (e) 

and the amount of the item(s) in 

column (f).

Part II

Your disclosure statement must 

include a description of the relevant 

facts affecting the tax treatment of the 

item. To satisfy this requirement, you 

must include information that can 

reasonably be expected to apprise the 

IRS of the identity of the item, its 

amount, and the nature of the 

controversy or potential controversy. 

Information concerning the nature of 

the controversy can include a 

description of the legal issues 

presented by the facts.

Unless provided otherwise in 

the General Instructions, 

earlier, your disclosure will not 

be considered accurate unless the 

information described above is 

provided using Form 8275. For 

example, your disclosure will not be 

considered adequate if you attach a 

copy of an acquisition agreement to 

your tax return to disclose the issues 

involved in determining the basis of 

certain acquired assets. If Form 8275 

is not completed and attached to the 

return, the disclosure will not be 

considered valid even if the 

information described above is 

provided using another method, such 

as a different form or an attached 

letter.

Part III

Line 4. Contact your pass-through 

entity if you do not know where its 

return was filed. However, for partners 

and S corporation shareholders, 

information for line 4 can be found on 

the Schedule K-1 that you received 

from the partnership or S corporation.

If the pass-through entity filed its 

return electronically using e-file, enter 

“e-file” on line 4.

Paperwork Reduction Act Notice. 

We ask for the information on this 

form to carry out the Internal Revenue 

laws of the United States. You are 

required to give us the information if 

you wish to use this form to make 

adequate disclosure to avoid the 

portion of the accuracy-related 

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Instructions for Form 8275 (Rev. 1-2021) -3-
penalty due to a substantial 

understatement of income tax or 

disregard of rules, or to avoid certain 

preparer penalties. We need it to 

ensure that you are complying with 

these laws and to allow us to figure 

and collect the right amount of tax.

You are not required to provide the 

information requested on a form that 

is subject to the Paperwork Reduction 

Act unless the form displays a valid 

OMB control number. Books or 

records relating to a form or its 

instructions must be retained as long 

as their contents may become 

material in the administration of any 

Internal Revenue law. Generally, tax 

returns and return information are 

confidential, as required by section 

6103.

The time needed to complete and 

file this form will vary depending on 

individual circumstances. The 

estimated burden for individual 

taxpayers filing this form is approved 

under OMB control number 

1545-0074 and is included in the 

estimates shown in the instructions for 

their individual income tax return. The 

estimated burden for all other 

taxpayers who file this form is shown 

below.

Recordkeeping....... 3 hr., 35 

min.

Learning about the law

or the form ........ 1 hr.

Preparing and sending

the form to the IRS . . 1 hr., 6 min.

If you have comments concerning 

the accuracy of these time estimates 

or suggestions for making this form 

simpler, we would be happy to hear 

from you. See the instructions for the 

tax return with which this form is filed.

-4- Instructions for Form 8275 (Rev. 1-2021)