Financial Glossary
Form 8275 (Disclosure Statement)
Form 8275 is an IRS disclosure statement that taxpayers and preparers attach to a return to describe positions that are not clearly supported by regulations or that might otherwise draw scrutiny. By disclosing the item and the reasoning behind it, a filer can demonstrate good faith and reduce exposure to certain accuracy-related penalties. A related form, Form 8275-R, is used specifically to disclose positions that are contrary to existing Treasury regulations.
Problem & Application
Owner-operated businesses and real estate investors sometimes take defensible but aggressive positions, such as a particular depreciation treatment or an unusual expense allocation, where the law is ambiguous. Filing Form 8275 puts the position on the record and can blunt penalties if the IRS later disagrees. It is a judgment call, not a routine attachment, and the disclosure itself does not guarantee the position will be upheld.
In Short
Form 8275 is a protective disclosure that trades a small amount of transparency for meaningful penalty protection on uncertain tax positions. Used selectively, it signals good faith to the IRS.