Form 8886 – 2018 Tax Year Checklist
What This Form Requires
The Internal Revenue Service requires taxpayers to file Form 8886 when they participate in specific categories of reportable transactions. You must file if you engaged in a listed transaction, confidential transaction, transaction with contractual protection, loss transaction, or transaction of interest during the 2018 tax year. The Tax Cuts and Jobs Act took effect January 1, 2018, and established new loss threshold calculations and revised basis adjustment rules that apply to reportable transactions.
Complete and accurate information must appear on every Form 8886 you submit to the IRS. Any form that includes phrases such as "upon request" or "details available upon request" fails to meet disclosure requirements and triggers penalties under section 6707A.
Filing Steps
1. Determine Transaction Reportability Under 2018 TCJA Rules
You must assess whether your transaction qualifies as listed, confidential, contractually protected, loss-based, or interest-based under post-TCJA law. For transactions entered into during 2018 or later, loss thresholds apply to section 165 losses without netting at the entity level. TCJA changes to passthrough entity rules may affect partnership and S corporation loss allocations reported to you on Schedule K-1.
2. Confirm Loss Threshold Applicability for 2018
● Individuals must report a minimum $2 million single-year loss or $4 million aggregate loss over the applicable period.
● Corporations excluding S corporations must report a minimum $10 million single-year loss or $20 million aggregate loss.
● All other partnerships and S corporations must report a minimum $2 million single-year loss or $4 million aggregate loss.
● Section 988 foreign currency losses apply a $50,000 threshold separately, regardless of entity type.
3. Obtain Reportable Transaction Numbers from Material Advisors
You must request the 9-digit or 11-digit registration number from any advisor who promoted, solicited, or recommended the transaction. Material advisors file registration statements under section 6111. Your failure to obtain the number does not relieve your disclosure obligation under section 6011.
4. Identify All Fee Payments and Advisors
For 2018 confidentiality testing, the minimum fee is $250,000 for corporations, excluding S corporations or partnerships and trusts with only corporate partners or beneficiaries. For all other taxpayers, the minimum fee is $50,000. Fees include cash payments, in-kind consideration, referral fees, and indirect payments for transaction analysis, implementation, documentation, and unreasonable return preparation services.
5. Document Tax Benefit Calculations and Basis Adjustments
Line 7b requires the total anticipated tax benefit over the transaction's entire life. You must report the number of years required to realize all benefits on line 7c. Line 7d must show the total investment or basis in the transaction.
Under 2018 TCJA rules, you must fully explain basis adjustments under section 1016 and passthrough entity provisions. Detailed step-by-step documentation on attached sheets is required for all basis reduction rules affecting loss calculations.
6. Prepare Complete Line 7e Narrative
Each transaction step, all parties involved, liabilities assumed or satisfied, and property transfers must appear in your line 7e description. You must identify entity formations and dissolutions and explain any tax result protection, such as insurance or contractual guarantees.
The economic purpose and business reasons for the transaction structure require a clear explanation in your narrative. If the transaction involves a 2018 TCJA provision, such as section 199A deduction structuring or corporate rate reduction timing, you must describe how TCJA rules made the transaction reportable or affected its tax consequences.
7. List All Parties and Verify Related-Party Relationships
Line 8 requires identification of all individuals, tax-exempt entities, foreign entities, and related parties involved in the transaction. Related-party definitions under section 267(b) and 707(b) determine whether passthrough entity disclosure limitations apply to individual partners or shareholders.
You must provide the country of incorporation for all foreign entities. All relationships between parties require a description with sufficient detail for the IRS to understand the transaction structure.
8. Assemble Form 8886 With Required Attachments and Prepare OTSA Mailing
Form 8886 must be completed in its entirety with all required information attached. If you are filing Form 8886 for the first time for this transaction, you must prepare an exact copy for mailing to the Office of Tax Shelter Analysis.
Mail the exact copy to Internal Revenue Service, OTSA Mail Stop 4915, 1973 Rulon White Blvd., Ogden, UT 84201. The original Form 8886 must be attached to your 2018 income tax return or amended return filed with the IRS.
2018 Year-Specific Updates
TCJA Effective Date Compliance
For transactions entered into or restructured on or after January 1, 2018, you must apply TCJA rules to loss calculations, basis determinations, and passthrough allocations. You must describe in line 7e how TCJA provisions affected the transaction’s tax reporting and whether TCJA changes triggered reportability requirements.
Passthrough Entity Allocation Reporting
The 2018 TCJA modified partnership and S corporation allocation rules for many taxpayers. If you receive a Schedule K-1 from a partner or shareholder less than 10 calendar days before your return due date and you identify a reportable transaction, the 60-day OTSA extension applies to your filing obligation. Your Form 8886 is not considered late if you file it with OTSA within 60 days after your return due date, including extensions.
Section 6707A Penalty Amounts for 2018
● The failure-to-disclose penalty equals 75 percent of the tax reduction shown on your return with statutory minimums applied.
● The minimum penalty amount is $5,000 for individuals and $10,000 for all other taxpayers, regardless of transaction type.
● The annual maximum penalty for non-listed transactions cannot exceed $10,000 for individuals or $50,000 for all other taxpayers.
● The annual maximum penalty for listed transactions cannot exceed $100,000 for individuals or $200,000 for all other taxpayers.
● The penalty applies separately to each distinct failure to disclose a reportable transaction during the tax year.
Incomplete Disclosure Rejection
Any Form 8886 containing the phrase “information provided upon request” or similar language is incomplete. The Internal Revenue Service will reject incomplete forms and assess penalties under section 6707A and section 6662A. You must provide all required information directly on the form or on attached sheets that include your name and identifying number.
Loss Transaction Aggregation Period
For 2018 loss transactions, only losses claimed in 2018 and the five succeeding tax years (2018 through 2023) are combined to determine whether you meet the threshold. Losses from 2017 or earlier years are not included when calculating your 2018 threshold. You must file Form 8886 in the first year the threshold is reached and in each subsequent year that reflects any section 165 loss from the transaction.
Regulations Section 1.6011-4 Authority
You must follow Regulations section 1.6011-4 as amended for all 2018 filings. Protective disclosure is permitted under section 1.6011-4(f) if you check the protective disclosure box and provide complete information. Checking the protective disclosure box does not excuse incomplete forms or missing required information.
Need Help With Your Tax Filing?
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
We offer:
- Full IRS transcript retrieval (Wage & Income + Account)
- Professional tax form review
- Preparation & filing support
- Tax relief options if you owe the IRS
Call now before filing: (888) 260-9441
Fast transcript pull available
This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
