Ready for Financial Confidence?
If you’ve ever skipped a legitimate deduction or avoided a gray-area tax strategy just to stay under the IRS radar, you’re not alone. But that’s exactly where Form 8275 can help. This underused disclosure form lets real estate investors, contractors, and business owners take smart, defensible tax positions without risking penalties. It’s not a loophole. It’s a tool. And it’s one more way to make the tax code work for you.
What is Form 8275?
Form 8275, officially titled Disclosure Statement, is used to disclose a tax position that’s not clearly covered by IRS rules or that could be challenged.
It doesn’t mean you did anything wrong. It means you’re being transparent about a reasonable, good-faith interpretation of the law.
This form helps you:
- Avoid accuracy-related penalties
- Stand behind legitimate gray-area deductions
- Show the IRS you’re not hiding anything
This is especially helpful for real estate pros and business owners dealing with complex transactions or nuanced tax rules.
Why Most Tax Software Won’t Tell You About It
DIY platforms like TurboTax often play it extremely safe. If a deduction isn’t clearly outlined in the IRS instructions, the software might throw up a warning or shut it down altogether.
Basic tax preparers sometimes do the same. They’d rather avoid any question marks, even if it means missing a valid opportunity.
That’s not how we work.
At Attracct, we help clients make bold moves backed by IRS regulations and references to tax case law. If a deduction is up for interpretation, we’ll take a position with the necessary support and help you file the form properly and sleep better at night.
When to File Form 8275?
You might want to file this form if:
- You’re taking a position that isn’t directly addressed in the tax code
- You’re relying on a court case or other authority rather than IRS instructions
- You’ve received conflicting advice from professionals or prior CPAs
- You want to proactively protect against penalties if the IRS disagrees
Example:
Let’s say you’re deducting 100% of a truck used in your real estate rehab business. The IRS might challenge whether it’s “ordinary and necessary.” If you have strong documentation and a reasonable basis, Form 8275 can disclose your position and reduce penalty risk.
Form 8275 vs. 8275-R: What’s the Difference?
These forms are often confused, but they’re not interchangeable.
- Form 8275 is used when your position isn’t directly addressed by IRS regs or guidance
- Form 8275-R is used when you’re taking a position that directly contradicts an existing IRS regulation
Most taxpayers will use the regular form, not the -R version.
Pro tip: Filing Form 8275-R can trigger more scrutiny. If you’re going that route, it should be part of a deliberate strategy, not a casual choice.
What’s a Reasonable Basis for Filing Form 8275?
The IRS recognizes several levels of confidence behind a tax position. “Reasonable basis” is one of the lower thresholds, but it still requires solid support.
To file Form 8275 with a reasonable basis, you should:
- Have a logical argument supported by facts
- Reference credible sources like court decisions, IRS publications, or other guidance
- Avoid relying solely on hearsay or personal opinion
You’re not expected to be bulletproof. You’re expected to be informed and transparent.
What Is Form 8825?
We get this question a lot: What is reported on Form 8825, and how does it relate to Form 8275?
Form 8825 is used by partnerships and S corporations to report income and expenses from rental real estate activities. If you’re aggressively interpreting depreciation rules, passive activity grouping, or active participation thresholds, and it’s reported on 8825, that’s where Form 8275 may come in as a protective disclosure.
In short: Form 8275 supports your position. Form 8825 reports your results.
How We Use Form 8275 With Our Clients
We don’t file this form for every client, but we do use it strategically when the situation calls for it. Our process includes:
- Reviewing your position for reasonable basis
- Citing supporting tax law or cases
- Preparing a clear, professional disclosure statement
- Filing it with your return so you’re covered
This isn’t about being reckless. It’s about being informed, assertive, and protected.
Want a second opinion on a deduction your software flagged?
Let’s take a look. At Attracct, we help real estate investors and business owners file with confidence, not guesswork.
Book a call with our team and let’s figure out the best way to move forward.
FAQ
What are the official Form 8275 instructions?
You can find the IRS instructions here, but in short: the form includes your position, the relevant facts, and the authorities you’re relying on. It must be attached to your tax return.
What is Form 8275-R used for?
Form 8275-R is filed when you’re knowingly taking a position that contradicts an IRS regulation. It’s a more aggressive disclosure and should only be used with strong legal or tax opinion backing.
Is filing Form 8275 a red flag?
Not necessarily. In fact, the IRS has said it may reduce audit risk by showing good-faith transparency. You’re telling them, “Here’s what we did and why”, which can go a long way.
Can I file Form 8275 myself?
Technically, yes, but we wouldn’t recommend it unless you have a solid grasp of tax authority and can defend your reasoning. This is where having the right advisor matters.
Do I always need to file it when taking a gray-area deduction?
Not always. If your position is widely accepted and backed by substantial authority, disclosure may not be necessary. But when in doubt, we help clients weigh the risks and decide.
