By Jack Surgent, CPA
According to the IRS, taxpayers and tax return preparers use form 8275 to disclose items or positions that are not otherwise adequately disclosed on a tax return to avoid certain penalties. In other words, so much of what we do in tax return preparation is not black-and-white, and it is not possible to get 100 percent assurance that the position we have taken is the correct one.
Essentially, form 8275 was created by the IRS to enable preparers to disclose their position and offer valuable protection for both the tax preparer and taxpayer.
In spite of the obvious benefits of Form 8275, a low percentage of CPAs are actually filing this form. Although the IRS has said that using Form 8275 does not increase the risk of an audit, many practitioners simply don’t believe it.
So, I decided to conduct a very informal survey on this topic. As a CPE instructor, I get to interact with thousands of practitioners across the country every year. I have asked my audiences who file Form 8275 how many times they have been audited on these returns, and my unscientific result is less than 5 percent.
My advice? Don’t be afraid to file Form 8275 in the upcoming filing season. It is a very useful tool in protecting yourself from preparer penalties, and the risks are very low compared to the potential upside.