STAYING ALIVE WITH 8275
THE DISCLOSURE STATEMENT
Referred to as the "Disclosure Statement", form 8275 is used to put the IRS on notice of a potential controver
sy. Although an inclusion of this form with your tax return does not, in and of itself, trigger an audit, it does indicate you have taken a position contrary to the rules and regulations. Lets just say it would be like raising your hand in class and not getting called on.
With the amendment of Sec. 6694 to the Internal Revenue Code in 2007, exposure to both taxpayer and preparer penalties were increased resulting in exploring ways to minimize risk. Keep in mind that the penalty will not apply if (1) the preparer has a reasonable belief that the position would "more likely than not" be sustained on its own merits or (2) there is a reasonable basis for the position and the position is adequately disclosed.
Here is my take on this issue; as tax professionals we have an obligation to provide the best service possible at a reasonable fee. To me, this means being an advocate for my client; the taxpayer. However, in recent years, it seems we have been given the responsibility of administering tax law for the benefit of various taxing authorities.
I believe that ethics and morals are not taught in our schools, but are a result of our upbringing. The use of taxpayer and preparer penalties will not induce ethic and moral values, but only encourage other ways to achieve the same goals. Hence, reward those with high standards, and implement education and training for those willing to learn.
I believe form 8275 will stay alive and find its way in more tax returns in the coming years as more taxpayers and preparers look for ways to protect themselves against scrutiny and penalties. Although this form requires adequate disclosure for validity, our tax law has become so complex that its completion may be the only safe haven we have when dealing with specific taxpayer issues.
So next time you "raise your hand", be prepared; you might get called on.
