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Department of the Treasury
Internal Revenue Service
Instructions for Form 8275

(Rev. January 2021)

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

Section references are to the Internal requirements of any similar rule of with an amended return. See
Revenue Code unless otherwise noted. law. Regulations sections 1.6662-4(f)(1)
• Any otherwise undisclosed foreign and 1.6664-2(c)(3) for more
Future Developments financial asset understatement. information.
For the latest information about • Any inconsistent estate basis.
developments related to Form 8275 To make adequate disclosure for
items reported by a pass-though
and its instructions, such as Who Should File
entity, you must complete and file a
legislation enacted after they were Form 8275 is filed by individuals, separate Form 8275 for items
published, go to IRS.gov/Form8275. corporations, pass-through entities, reported by each entity.
and tax return preparers. If you are
General Instructions disclosing a position taken contrary to To make adequate disclosure for a
a regulation, use Form 8275-R, position or positions related to more
Purpose of Form Regulation Disclosure Statement, than one foreign entity, you must
Form 8275 is used by taxpayers and instead of Form 8275. complete and file a separate Form
tax return preparers to disclose items 8275 for each foreign entity.
For items attributable to a
or positions, except those taken Carryovers, carrybacks, and recur-
pass-through entity, disclosure should
contrary to a regulation, that are not ring items. Carryover items must be
be made on the tax return of the
otherwise adequately disclosed on a disclosed for the tax year in which
entity. If the entity does not make the
tax return to avoid certain penalties. they originated. You do not have to file
disclosure, the partner (or
The form is filed to avoid the portions another Form 8275 for those items for
shareholder, etc.) can make adequate
of the accuracy-related penalty due to the tax years in which the carryover is
disclosure of these items.
disregard of rules or to a substantial taken into account.
understatement of income tax for Exception to filing Form 8275.
non-tax shelter items if the return Guidance is published annually in a Carryback items must be disclosed
position has a reasonable basis. It can revenue procedure in the Internal for the tax year in which they
also be used for disclosures relating Revenue Bulletin that identifies originated. You do not have to file
to the economic substance penalty circumstances when an item reported another Form 8275 for those items for
and the preparer penalties for tax on a return is considered adequate the tax years in which the carryback is
understatements due to unreasonable disclosure for purposes of the taken into account.
positions or disregard of rules. substantial understatement aspect of However, if you disclose items of a
the accuracy-related penalty and for recurring nature (such as depreciation
The portion of the expense), you must file Form 8275 for
avoiding the preparer's penalty
! accuracy-related penalty relating to understatements due to each tax year in which the item
CAUTION attributable to the following
unreasonable positions. See the occurs.
types of misconduct cannot be
Example below. You do not have to
avoided by disclosure on Form 8275. If you are disclosing a position that
file Form 8275 for items that meet the is contrary to a rule, and the position
requirements listed in this revenue relates to a reportable transaction as
• Negligence. procedure. This revenue procedure defined in Regulations section
• Disregard of regulations. can be found on the internet at 1.6011-4(b), you must also make the
• Any substantial understatement of IRS.gov. disclosure as indicated in Regulations
income tax on a tax shelter item. Example. Generally, you will have section 1.6011-4(d). See Form 8886,
• Any substantial or gross valuation met the requirements for adequate Reportable Transaction Disclosure
misstatement (including disclosure of a charitable contribution Statement, and its instructions; Notice
misstatements attributable to deduction if you complete the 2006-6, 2006-5 I.R.B. 385, available
non-arm's length prices) under contributions section of Schedule A at IRS.gov/irb/2006-05_IRB/
chapter 1. (Form 1040), supply all required ar10.html; and Notice 2010-62,
• Any substantial overstatement of information, and attach all related 2010-40 I.R.B. 411, available at
pension liabilities. forms required pursuant to statute or IRS.gov/irb/2010-40_IRB/ar09.html.
• Any substantial estate or gift tax regulation.
valuation understatements. Accuracy-Related Penalty
• Any claim of tax benefits from a How To File Generally, the accuracy-related
transaction lacking economic File Form 8275 with your original tax penalty is 20% of any portion of a tax
substance (within the meaning of return. Keep a copy for your records. underpayment attributable to:
section 7701(o)) or failing to meet the You may be able to file Form 8275

Oct 20, 2020 Cat. No. 62063F

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1. Negligence or disregard of rules               The reasonable cause and             2. $5,000.
or regulations;                             !     good faith exception does not        An understatement of a corporation 
2. Any substantial understatement         CAUTION apply to any portion of an 
                                                                                     (other than an S corporation or a 
of income tax;                            underpayment attributable to a 
                                                                                     personal holding company, as defined 
                                          transaction that lacks economic 
3. Any substantial valuation                                                         in section 542) is substantial if it 
                                          substance under section 7701(o).
misstatement under chapter 1 of the                                                  exceeds in any year the lesser of:
Internal Revenue Code;                    Adequate disclosure.    Generally,           1. 10% of the tax required to be 
4. Any substantial overstatement          you can avoid the disregard of rules       shown on the return for the tax year 
of pension liabilities;                   and substantial understatement             (or, if greater, $10,000), or
5. Any substantial estate or gift tax     portions of the accuracy-related             2. $10,000,000.
valuation understatement;                 penalty if the position is adequately 
                                          disclosed and the position has at least    Reduction of understatement.          The 
6. Any claim of tax benefits from a 
                                          a reasonable basis. To avoid the           amount of the understatement will be 
transaction lacking economic 
                                          disregard of regulations portion of the    reduced by the part that is attributable 
substance, as defined by section 
                                          accuracy-related penalty, the position     to the following items.
7701(o), or failing to meet the 
requirements of any similar rule of       taken must also represent a                • An item (other than a tax shelter 
law;                                      good-faith challenge to the validity of    item) for which there was substantial 
                                          the regulation. See Regulations            authority for the treatment claimed at 
7. Any undisclosed foreign                section 1.6662-3(c)(1).                    the time the return was filed or on the 
financial asset understatement; or                                                   last day of the tax year to which the 
                                            Reasonable basis.     Reasonable 
8. Any inconsistent estate basis.                                                    return relates.
                                          basis is a relatively high standard of       An item (other than a tax shelter 
                                                                                     •
The penalty is 40% of any portion         tax reporting that is significantly higher 
                                                                                     item) that is adequately disclosed on 
of a tax underpayment attributable to     than not frivolous or not patently 
                                                                                     this form if there is a reasonable basis 
one or more gross valuation               improper. The reasonable basis 
                                                                                     for the tax treatment of the item. (In no 
misstatements in (3), (4), or (5) above   standard is not satisfied by a return 
                                                                                     event will a corporation be treated as 
if the applicable dollar limitation under position that is merely arguable.
                                                                                     having a reasonable basis for its tax 
section 6662(h)(2) is met. The penalty      If the return position is reasonably     treatment of an item attributable to a 
also increases to 40% for failing to      based on one of the authorities set        multi-party financing transaction 
adequately disclose a transaction that    forth in Regulations section               entered into after August 5, 1997, if 
lacks economic substance in (6)           1.6662-4(d)(3)(iii) (taking into account   the treatment does not clearly reflect 
above. See Economic substance             the relevance and persuasiveness of        the income of the corporation.)
below. The penalty is 40% of any          the authorities, and subsequent 
                                                                                       For corporate tax shelter 
portion of an underpayment that is        developments), the return position will 
                                                                                     transactions (and for tax shelter items 
attributable to any undisclosed foreign   generally satisfy the reasonable basis 
                                                                                     of other taxpayers for tax years 
financial asset understatement.           standard even though it may not 
                                                                                     ending after October 22, 2004), the 
Economic substance.     To satisfy the    satisfy the substantial authority 
                                                                                     only exception to the substantial 
disclosure requirements under section  standard as defined in Regulations            understatement portion of the 
6662(i), you may adequately disclose      section 1.6662-4(d)(2). For details, 
                                                                                     accuracy-related penalty is the 
with a timely filed original return       see Regulations sections 1.6662-4(d); 
                                                                                     reasonable cause exception. For 
(determined with regard to                1.662-3(b)(3).
                                                                                     more details, see Reasonable cause 
extensions) or a qualified amended          If you failed to keep proper books       exception, earlier; section 6662(d); 
return (as defined under Regulations      and records or failed to substantiate      and Regulations section 1.6664-4.
section 1.6664-2(c)(3)) the relevant      items properly, you cannot avoid the 
facts affecting the tax treatment of the  penalty by disclosure.                       Tax shelter items.   A tax shelter, 
transaction.                                                                         for purposes of the substantial 
                                          Substantial Understatement                 understatement portion of the 
Note. If you filed a Schedule UTP         An understatement is the excess of:        accuracy-related penalty, is a 
(Form 1120), you may not need to file       1. The amount of tax required to         partnership or other entity, plan, or 
Form 8275 to satisfy the disclosure       be shown on the return for the tax         arrangement, with a significant 
requirements of section 6662(i). See      year, over                                 purpose to avoid or evade federal 
the Instructions for Schedule UTP                                                    income tax. For transactions on or 
(Form 1120).                                2. The amount of tax imposed             before August 5, 1997, a tax shelter is 
                                          which is shown on the return for the       a partnership or other entity, plan, or 
Reasonable cause exception.               tax year, reduced by any rebates.          arrangement, whose principal 
Generally, no accuracy-related 
penalty will be imposed on any portion      There is a substantial                   purpose is to avoid or evade federal 
of an underpayment if you show that       understatement of income tax if the        income tax.
there was reasonable cause for that       amount of the understatement for any         A tax shelter item is any item of 
portion and that you acted in good        tax year exceeds the greater of:           income, gain, loss, deduction, or 
faith with respect to that portion.         1. 10% of the tax required to be         credit that is directly or indirectly 
                                          shown on the return for the tax year,      attributable to the principal or 
                                          or

                                                        -2-                          Instructions for Form 8275 (Rev. 1-2021)

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significant purpose of the tax shelter                                              Columns (d) through (f).    Enter the 
to avoid or evade federal income tax.     Specific Instructions                     location of the item(s) by identifying 
Tax Return Preparer Penalties             Be sure to supply all the information     the form number or schedule and the 
A preparer who files a return or claim    for Parts I, II, and, if applicable, Part line number in columns (d) and (e) 
for refund is subject to a penalty in an  III. Your disclosure will be considered   and the amount of the item(s) in 
amount equal to the greater of $1,000     adequate if you file Form 8275 and        column (f).
or 50% of the income derived (or to be    supply the information requested in 
derived) by the tax return preparer,      detail.                                   Part II
with respect to the return or claim, for  Use Part IV on page 2 if you need         Your disclosure statement must 
taking a position which the preparer      more space for Part I or II. Indicate the include a description of the relevant 
knew or reasonably should have            corresponding part and line number        facts affecting the tax treatment of the 
known would understate any part of        from page 1. You can use a                item. To satisfy this requirement, you 
the liability if:                         continuation sheet(s) if you need         must include information that can 
• There is or was no substantial          additional space. Be sure to put your     reasonably be expected to apprise the 
authority for the position;               name and identifying number on each       IRS of the identity of the item, its 
• The position is a tax shelter (as       sheet.                                    amount, and the nature of the 
defined in section 6662(d)(2)(C)(ii)) or                                            controversy or potential controversy. 
                                          Reference ID number.  If you are 
a reportable transaction to which                                                   Information concerning the nature of 
                                          filing Form 8275 to disclose a position 
section 6662A applies and it was not                                                the controversy can include a 
                                          related to a foreign entity for which an 
reasonable to believe that the position                                             description of the legal issues 
                                          information return (such as Form 
would more likely than not be                                                       presented by the facts.
                                          5471) is filed, enter on Form 8275 the 
sustained on its merits; or                                                                 Unless provided otherwise in 
                                          same reference ID number for the 
• The position disclosed as provided                                                !       the General Instructions, 
                                          foreign entity that is entered on the 
in section 6662(d)(2)(B)(ii) is not a tax                                           CAUTION earlier, your disclosure will not 
                                          information return.
shelter or a reportable transaction to                                              be considered accurate unless the 
which section 6662A applies, and          If you are filing Form 8275 to report     information described above is 
there was no reasonable basis for the     a position or positions related to        provided using Form 8275. For 
position.                                 multiple foreign entities, file a         example, your disclosure will not be 
                                          separate Form 8275 for each foreign       considered adequate if you attach a 
  The penalty will not apply if it can    entity.                                   copy of an acquisition agreement to 
be shown that there was reasonable                                                  your tax return to disclose the issues 
cause for the understatement and that     Part I                                    involved in determining the basis of 
the preparer acted in good faith.                                                   certain acquired assets. If Form 8275 
                                          Column (a). If you are disclosing a 
  In cases where any part of the          position contrary to a rule (such as a    is not completed and attached to the 
understatement of the liability is due    statutory provision or IRS revenue        return, the disclosure will not be 
to a willful attempt by the return        ruling), you must identify the rule in    considered valid even if the 
preparer to understate the liability, or  column (a).                               information described above is 
                                                                                    provided using another method, such 
if the understatement is due to           Column (b). Identify the item by          as a different form or an attached 
reckless or intentional disregard of      name.                                     letter.
rules or regulations by the preparer, 
                                          If any item you disclose is from a 
the preparer is subject to a penalty 
                                          pass-through entity, you must identify 
equal to the greater of $5,000 or 75%                                               Part III
                                          the item as such. If you disclose items 
of the income derived (or to be 
                                          from more than one pass-through           Line 4. Contact your pass-through 
derived) by the tax return preparer 
                                          entity, you must complete a separate      entity if you do not know where its 
with respect to the return or claim. 
                                          Form 8275 for each entity. Also, see      return was filed. However, for partners 
This penalty shall be reduced by the 
                                          How To File, earlier.                     and S corporation shareholders, 
amount of the penalty paid by such 
person for taking an unreasonable         Column (c). Enter a complete              information for line 4 can be found on 
position, or a position with no           description of the item(s) you are        the Schedule K-1 that you received 
reasonable basis, as described            disclosing.                               from the partnership or S corporation.
                                                                                    If the pass-through entity filed its 
immediately above.                        Example.    If entertainment 
                                                                                    return electronically using e-file, enter 
                                          expenses were reported in column 
  A preparer is not considered to                                                   “e-file” on line 4.
                                          (b), then list in column (c) “theater 
have recklessly or intentionally 
                                          tickets, catering expenses, and 
disregarded a rule if a position is                                                 Paperwork Reduction Act Notice. 
                                          banquet hall rentals.”
adequately disclosed and has a                                                      We ask for the information on this 
reasonable basis.                         If you claim the same tax treatment       form to carry out the Internal Revenue 
                                          for a group of similar items in the       laws of the United States. You are 
Note. For more information about the      same tax year, enter a description        required to give us the information if 
accuracy-related penalty and preparer  identifying the group of items you are       you wish to use this form to make 
penalties, and the means of avoiding      disclosing rather than a separate         adequate disclosure to avoid the 
these penalties, see the regulations      description of each item within the       portion of the accuracy-related 
under sections 6662, 6664, and 6694.      group.

Instructions for Form 8275 (Rev. 1-2021)              -3-

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penalty due to a substantial returns and return information are Recordkeeping 3 hr., 35
understatement of income tax or confidential, as required by section min.
disregard of rules, or to avoid certain 6103. Learning about the law
preparer penalties. We need it to or the form 1 hr.
The time needed to complete and
ensure that you are complying with
file this form will vary depending on
these laws and to allow us to figure Preparing and sending
individual circumstances. The
and collect the right amount of tax. the form to the IRS 1 hr., 6 min.
estimated burden for individual
You are not required to provide the taxpayers filing this form is approved
information requested on a form that under OMB control number If you have comments concerning
is subject to the Paperwork Reduction 1545-0074 and is included in the the accuracy of these time estimates
Act unless the form displays a valid estimates shown in the instructions for or suggestions for making this form
OMB control number. Books or their individual income tax return. The simpler, we would be happy to hear
records relating to a form or its estimated burden for all other from you. See the instructions for the
instructions must be retained as long taxpayers who file this form is shown tax return with which this form is filed.
as their contents may become below.
material in the administration of any
Internal Revenue law. Generally, tax

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

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