Instructions for

Form 8275-R

(Rev. January 2021)

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

Regulation 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-R 

and its instructions, such as 

legislation enacted after they were 

published, go to IRS.gov/Form8275R.

General Instructions

Purpose of Form

Form 8275-R is used by taxpayers 

and tax return preparers to disclose 

positions taken on a tax return that are 

contrary to Treasury regulations. The 

form is filed to avoid the portions of 

the accuracy-related penalty due to 

disregard of regulations 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 positions taken contrary to 

regulations.

The portion of the 

accuracy-related penalty 

attributable to the following 

types of misconduct cannot be 

avoided by disclosure on Form 

8275-R.

• Negligence.

• Disregard of rules.

• 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 

CAUTION

!

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.

Because of the importance to the 

self-assessment system of disclosing 

positions contrary to regulations, the 

requirements for making such 

disclosures are stringent.

• The disclosure is adequate only if it 

is made separately on a Form 

8275-R.

• The penalty for reckless or 

intentional disregard of a regulation 

can be avoided by disclosure only if 

the position represents a good-faith 

challenge to the validity of the 

regulation and has a reasonable 

basis.

Instead of Form 8275-R, use Form 

8275, Disclosure Statement, for the 

disclosure of items or positions which 

are not contrary to regulations but 

which are not otherwise adequately 

disclosed.

Who Should File

Form 8275-R is filed by individuals, 

corporations, pass-through entities, 

and tax return preparers.

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.

How To File

When a return position is contrary to 

regulations, you must file Form 

8275-R. File all Forms 8275-R with 

your original tax return. Keep a copy 

for your records. You may also be 

able to file Forms 8275-R 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-through 

entity, you must complete and file a 

separate Form 8275-R 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-R for each foreign entity.

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

disclosed in the tax year in which they 

originated. You do not have to file 

another Form 8275-R 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-R for those items 

for the tax years in which the 

carryback is taken into account.

However, if you disclose items that 

are of a recurring nature (such as 

depreciation expense), you must file 

Form 8275-R for each tax year in 

which the item occurs.

If you are disclosing a position that 

is contrary to a regulation, 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:

1. Negligence or disregard of rules 

or regulations;

Oct 06, 2020 Cat. No. 14317I
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; or

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.

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-R 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).

CAUTION

!

If you failed to keep proper books 

and records or failed to substantiate 

items properly, you cannot avoid the 

penalty by disclosure.

Adequate disclosure. Generally, 

you can avoid the disregard of 

regulations 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 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 

year exceeds the greater of:

1. 10% of the tax required to be 

shown on the return for the tax year, 

or

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 

significant purpose of the tax shelter 

to avoid or evade federal income tax.

-2-
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 of the information 

requested in Parts I and II and, if 

applicable, Part III. Your disclosure 

will be considered adequate if you file 

Form 8275-R 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-R to disclose a 

position related to a foreign entity for 

which an information return (such as 

Form 5471) is filed, enter on Form 

8275-R the same reference ID 

number for the foreign entity that is 

entered on the information return.

If you are filing Form 8275-R to 

report a position or positions related to 

multiple foreign entities, file a 

separate Form 8275-R for each 

foreign entity.

Part I

Column (a). Enter the full citation for 

each regulation for which you have 

taken a contrary position. The citation 

should specify the section number, 

including all designations of smaller 

units (lettered or numbered 

subsections, paragraphs, 

subparagraphs, and clauses) to which 

the contrary position relates. For 

example, enter “1.482-7(d)(1)(iii)” 

instead of “482 regs” or “1.482-7”.

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-R for each entity. Also, 

see How To File, earlier.

Column (c). Enter a complete 

description of the item(s) you are 

disclosing.

Example. If an entertainment 

expense was 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 must include the 

following.

1. 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.

2. A statement explaining why you 

believe this regulation to be invalid.

Unless provided otherwise in 

the General Instructions, 

earlier, your disclosure will not 

be considered adequate unless (1) 

and (2) above are provided using 

Form 8275-R. 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-R is not 

completed and attached to the return, 

the disclosure will not be considered 

valid even if the information in (1) and 

(2) 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.

CAUTION

!

-3-
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 

penalty due to a substantial 

understatement of income tax or 

disregard of regulations, 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 .... 53 min.

Preparing and sending 

the form to the IRS . 59 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-