Form 8275 Disclosure Statements and Form 8886 Reportable Transactions: Divulging Transactions to the IRS

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, May 27, 2021

Recorded event now available

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Program Materials

This webinar will explain when tax practitioners must or should file disclosure statements with a tax return. Our filing experts will provide examples of reportable transactions requiring disclosure and tax positions warranting disclosure statements for positions taken that could be considered contrary to existing rules or regulations.

Description

Tax practitioners continue to struggle with the need to disclose sticky transactions and the preparation of related Forms 8275, 8275-R, and 8886. Under Section 6662, a 20 percent underpayment penalty or 40 percent (for certain gross valuation misstatements) can be assessed when a taxpayer takes a position contrary to a rule or regulation.

There are two ways to avoid this substantial underpayment penalty. One is if the item's tax treatment is supported by "substantial authority." The second is if the transaction is adequately disclosed on Form 8275 or 8275-R, and there is “reasonable authority” for the position taken. Updated annually, Revenue Procedure 2020-54 identifies circumstances where disclosure on a taxpayer's return is considered adequate.

More recognizable, reportable transactions must be disclosed, and include listed transactions, transactions of interest (TOIs), confidential transactions, and certain loss transactions. The IRS specifically identifies listed transactions. Syndicated conservation easements, micro-captive transactions, and inflated partnership transactions (Son of Boss) are among those named. Taxpayers with these transactions are required to file Form 8886.

The IRS can impose a minimum penalty of $5,000 for individual taxpayers or a 75 percent penalty, based on the tax savings, under Section 6707A for failure to disclose reportable transactions properly. These penalties are cumulative and continue to run as long as the taxpayer participates in the transaction.

Listen as our panel of tax experts explains when these forms should be added to a taxpayer's return, the differences in the levels of authority, the IRS' response to receipt of these disclosure statements, and avoiding preparer penalties for unreasonable positions.

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Outline

  1. Disclosing transactions to the IRS
  2. Forms 8275 and 8275-R, Disclosure Statement
  3. Form 8886, Reportable Transaction Disclosure Statement
  4. Levels of authority
  5. Penalties
    1. Taxpayer
    2. Preparer
  6. Amending returns for disclosures
  7. Best practices

Benefits

The panel will review these and other critical issues:

  • Preparing Forms 8275-R and 8275 to meet the adequate disclosure threshold and avoid penalties
  • Identifying specific transactions that are reportable on Form 8666, Reportable Transaction Disclosure Statement
  • Does filing Forms 8275-R and 8275 increase a taxpayer's chance of audit?
  • When and how should returns be amended to include disclosure statements?

Faculty

Freeman, Jason
Jason B. Freeman, J.D., CPA

Founder and Managing Member
Freeman Law

Mr. Freeman is a dual-credentialed attorney-CPA, author, law professor, and trial attorney. He represents clients in...  |  Read More

Dean, Ryan
Ryan Dean, J.D., Tax LL.M.
Attorney
Meadows Collier Reed Cousins

Mr. Dean's practice focuses mainly on tax controversy, white-collar criminal defense, international tax...  |  Read More

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