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Department of the Treasury

Instructions for Form 8275

Internal Revenue Service

(Rev. January 2005)

(Use with the May 2001 revision of Form 8275.)

Disclosure Statement

understatements due to unrealistic

2. Substantial understatement of income

General Instructions

positions. See the Example below. You do

tax.

not have to file Form 8275 for items that

3. Any substantial valuation

Section references are to the Internal

Revenue Code unless otherwise noted.

meet the requirements listed in this revenue

misstatement under chapter 1.

procedure.

4. Any substantial overstatement of

Purpose of Form

pension liabilities.

Example. Generally, you will have met

5. Any substantial estate or gift tax

Form 8275 is used by taxpayers and income

the requirements for adequate disclosure of

valuation understatement.

tax return preparers to disclose items or

a charitable contribution deduction, if you

positions, except those taken contrary to a

complete the contributions section of

However, the penalty is 40% of any

Schedule A (Form 1040) and supply all the

regulation, that are not otherwise adequately

portion of a tax underpayment attributable to

disclosed on a tax return to avoid certain

required information. If you make a

one or more gross valuation misstatements

penalties. The form is filed to avoid the

contribution of property other than cash that

in (3), (4), or (5) above if the applicable

is over $500, the form required by the

portions of the accuracy-related penalty due

dollar limitation under section 6662(h)(2) is

to disregard of rules or to a substantial

Schedule A instructions must be attached to

met.

understatement of income tax for non-tax

your return.

Reasonable basis. Generally, you can

shelter items if the return position has a

avoid the disregard of rules and substantial

reasonable basis. It can also be used for

How To File

understatement portions of the

disclosures relating to preparer penalties for

File Form 8275 with your original tax return.

accuracy-related penalty if the position is

understatements due to unrealistic positions

Keep a copy for your records. You may be

adequately disclosed and the position has at

or disregard of rules.

able to file Form 8275 with an amended

least a reasonable basis. Reasonable basis

return. See Regulations sections 1.6662-4(f)

The portion of the accuracy-related

is a relatively high standard of tax reporting

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

that is significantly higher than not frivolous

penalty attributable to the following

or not patently improper. The reasonable

types of misconduct cannot be

CAUTION

To make adequate disclosure for items

avoided by disclosure on Form 8275:

basis standard is not satisfied by a return

reported by a pass-through entity, you must

position that is merely arguable.

•

complete and file a separate Form 8275 for

Negligence.

•

The penalty will not be imposed on any

items reported by each entity.

Disregard of regulations.

•

part of an underpayment if there was

Substantial understatement of tax on a

Carrybacks, carryovers, and recurring

reasonable cause for your position and you

tax shelter item.

items. Carryover items must be disclosed

•

acted in good faith in taking that position.

Substantial valuation misstatement under

for the tax year in which they originated. You

chapter 1.

If you failed to keep proper books and

do not have to file another Form 8275 for

•

Substantial overstatement of pension

records or failed to substantiate items

those items for the tax years in which the

liabilities.

properly, you cannot avoid the penalty by

carryover is taken into account.

•

Substantial estate or gift tax valuation

disclosure.

Carryback items must be disclosed for

understatements.

Substantial Understatement

the tax year in which they originated. You do

not have to file another Form 8275 for those

Who Should File

An understatement is the excess of:

items for the tax years in which the

1. The amount of tax required to be

Form 8275 is filed by individuals,

carryback is taken into account.

shown on the return for the tax year, over

corporations, pass-through entities, and

However, if you disclose items of a

2. The amount of tax shown on the

income tax return preparers. If you are

recurring nature (such as depreciation

return for the tax year, reduced by any

disclosing a position taken contrary to a

expense), you must file Form 8275 for each

rebates.

regulation, use Form 8275-R, Regulation

tax year in which the item occurs.

Disclosure Statement, instead of Form

There is a substantial understatement of

If you are disclosing a position that is

8275.

income tax if the amount of the

contrary to a rule, and the position relates to

For items attributable to a pass-through

understatement for any tax year exceeds

a reportable transaction as defined in

entity, disclosure should be made on the tax

the greater of:

Regulations section 1.6011-4(b), you must

return of the entity. If the entity does not

1. 10% of the tax required to be shown

also make the disclosure required by

make the disclosure, the partner (or

on the return for the tax year, or

Regulations section 1.6011-4(b). See Form

shareholder, etc.) may make adequate

2. $5,000 ($10,000 for a corporation

8886, Reportable Transaction Disclosure

disclosure of these items.

other than an S corporation or a personal

Statement, its instructions, and Rev. Proc.

Exception to filing Form 8275. Guidance

holding company as defined in section 542).

2004-45, which is on page 140 of Internal

is published annually in a revenue

Revenue Bulletin 2004-31 at http://

For tax years beginning after October 22,

procedure in the Internal Revenue Bulletin.

2004, an understatement of a corporation

This can be found on the Internet at

(other than an S corporation or a personal

The revenue procedure

Accuracy-Related Penalty

holding company) is substantial if it exceeds

identifies circumstances when an item

Generally, the accuracy-related penalty is

the lesser of:

reported on a return is considered adequate

20% of any portion of a tax underpayment

disclosure for purposes of the substantial

1. 10% of the tax required to be shown

attributable to:

understatement aspect of the

on the return for the tax year (or, if greater,

accuracy-related penalty and for avoiding

1. Negligence or disregard of rules or

$10,000), or

the preparer’s penalty relating to

regulations.

2. $10,000,000.

Cat. No. 62063F

Instructions For Form 8275 - Disclosure Statement - Department Of The Treasury - 2005

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