IRS Updates Adequate Disclosure Rules for Tax Positions

The Internal Revenue Service has released its annual update identifying the circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or a position is adequate for the purposes of reducing the understatement of income tax and avoiding the tax return preparer penalty.

The IRS noted Monday that Rev. Proc. 2012-51 does not apply with respect to any other penalty provisions (including the disregard provisions of the Section 6662(b)(1) accuracy-related penalty, the Section 6662(i) increased accuracy-related penalty in the case of nondisclosed noneconomic substance transactions, and the Section 6662(j) increased accuracy-related penalty in the case of undisclosed foreign financial asset understatements).

The IRS noted that if the revenue procedure does not include an item, disclosure is adequate with respect to that item only if made on a properly completed Form 8275 or 8275–R, as appropriate, attached to the return for the year or to a qualified amended return.

The revenue procedure applies to any income tax return filed on 2012 tax forms for a taxable year beginning in 2012, and to any income tax return filed on 2012 tax forms in 2013 for short taxable years beginning in 2013.

The IRS noted that editorial changes have been made throughout the revenue procedure, but no substantive changes have been made.

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Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.