Form 8886 Checklist – Tax Year 2022
Purpose of Form 8886
Form 8886 requires disclosure of reportable transactions, including listed transactions, confidential transactions, contractual protection transactions, loss transactions, and transactions of interest. For 2022, the minimum fee threshold for confidential transaction disclosure remains $250,000 for corporations (excluding S corporations) and $50,000 for all others.
Penalties under Section 6707A for non-disclosure are as follows: a minimum of $5,000 for individuals and a minimum of $10,000 for other entities. Listed transaction penalties are capped at $100,000 per year for individuals and $200,000 per year for different entities.
Step-by-Step Completion Guide
Step 1: Determine Reportable Transaction Status
Classify your transaction under one or more 2022 categories: listed transaction, confidential transaction, contractual protection transaction, loss transaction, or transaction of interest. Consult Notice 2009-59 (as updated through October 2022) and IRS.gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions for current guidance.
Loss Transaction Thresholds for 2022:
● Individuals: $2 million in a single year or $4 million over any combination of tax years
● Corporations (excluding S corporations): $10 million in a single year or $20 million over any combination of tax years
● All other partnerships and S corporations: $2 million in a single year or $4 million over any combination of tax years, whether or not losses flow through to partners or shareholders
● Trusts: $2 million in a single year or $4 million over any combination of tax years
Step 2: Complete Item A – Statement Sequencing
Suppose you file multiple Forms 8886 with your 2022 return; number each sequentially. For example, if submitting three forms, mark them as “statement 1 of 3,” “statement 2 of 3,” and “statement 3 of 3.” Each form must show its place in the sequence on the first page.
Step 3: Complete Item B – Tax Return Identification
Enter the exact form number and tax year for the 2022 return being filed. For calendar-year filers, enter “2022.” For fiscal-year filers, enter the fiscal year-end date in MM/DD/YYYY format (for example, 06/30/2023 for a fiscal year ending on June 30, 2023).
Step 4: Complete Item C – Initial Year Filer and Protective Disclosure Boxes
Check the “Initial year filer” box only if this is your first Form 8886 filing for this specific transaction in 2022 or any prior year. If filing on a protective basis under Regulations Section 1.6011-4(f), check the protective disclosure box. Both options are available for 2022 filers. The form must be completed with all required information; failure to disclose does not excuse incomplete disclosures.
Step 5: Complete Line 1a–c – Transaction Identification
Enter the transaction name on Line 1a. If no name exists, provide a short identifying description. On Line 1b, enter the first year of participation in YYYY format. On Line 1c, list all reportable transaction numbers issued to material advisors, including 9-digit and 11-digit numbers that may begin with “MA.” Attach a separate list if space is insufficient.
Step 6: Complete Line 2 – Category Checkboxes
Check all applicable boxes: listed transaction (2a), confidential transaction (2b), contractual protection (2c), loss transaction (2d), or transaction of interest (2e). If the transaction is a listed transaction or transaction of interest, you must check the listed transaction box or transaction of interest box in addition to any others that may apply. Note that the brief asset holding period category was eliminated for transactions entered into on or after August 3, 2007; this action does not relieve disclosure obligations for pre-August 3, 2007 transactions in that category.
Step 7: Complete Line 3 – Published Guidance Identification
Identify the notice, revenue ruling, regulation, announcement, or other published guidance that designated the transaction as a listed transaction or transaction of interest. For listed transactions in 2022, cite Notice 2009-59 or any subsequent guidance listed on IRS.gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions.
Step 8: Complete Lines 4–8 – Detailed Transaction Information
Provide complete information for Lines 4 through 8, including transaction description, pass-through entities, advisor fees, tax benefits, and parties to the transaction. Descriptions must be sufficiently detailed for the IRS to understand the tax structure and identify all involved parties. Do not enter statements such as “Information provided upon request” or “Details available upon request,” as such data subjects you to penalties under Sections 6707A and 6662A.
Step 9: File Initial Copy with OTSA (If Required)
If this is an initial year filer, prepare an exact duplicate copy of the completed Form 8886 and mail or fax it to the Office of Tax Shelter Analysis (OTSA) by the 2022 return due date, including extensions.
Mail Address:
Internal Revenue Service
OTSA
Mail Stop 4915
1973 Rulon White Blvd.
Ogden, UT 84201
Fax: 844-253-2553 (one copy per fax, maximum 100 pages)
Fax Cover Sheet Requirements: Include subject line “Form 8886,” sender details (name, title, phone, address), taxpayer name, date, and page count. Do not include SSN or EIN on the cover sheet.
Step 10: Attach Form 8886 to Your 2022 Tax Return
Attach the original Form 8886 to your 2022 income tax return. If filing electronically, the form submitted to OTSA must show the same information, word for word, as provided with the electronically filed return.
Important 2022 Regulatory Information
Section 6707A Penalty Structure
The penalty for failing to include information about a reportable transaction is 75 percent of the decrease in tax shown on the return due to participation in that transaction, or the decrease that would occur if the transaction were recognized for federal tax purposes. Minimum penalties apply: $5,000 for individuals and $10,000 for other entities.
Maximum annual penalties are $10,000 for individuals or $50,000 for other entities for non-listed reportable transactions, and $100,000 for individuals or $200,000 for other entities for listed transactions. Penalties apply for each failure to attach Form 8886 to the original or amended return or application for tentative refund, failure to file with OTSA when required, or filing an incomplete or incorrect form.
Confidential Transaction Minimum Fees
For corporations (excluding S corporations), partnerships, or trusts in which all owners or beneficiaries are corporations (excluding S corporations), the minimum fee is $250,000. For all other taxpayers, the minimum fee is $50,000.
Fees include all payments for tax strategy advice, implementation, documentation, and tax return preparation (if unreasonable), whether in cash or in kind, including referral fees or fee-sharing arrangements. Related parties are treated as one entity for fee aggregation purposes.
60-Day OTSA Extension Rule
If you are a partner, shareholder, or beneficiary receiving a timely Schedule K-1 less than 10 calendar days before your 2022 return due date (including extensions) and determine participation in a reportable transaction based on that K-1, Form 8886 will not be considered late if you file it with OTSA within 60 days after your return due date, including extensions.
Subsequent Loss Transactions
If a transaction becomes a loss transaction because losses equal or exceed the threshold amounts, Form 8886 must be filed as an attachment to your income tax return for the first tax year in which the threshold amount is reached and to any subsequent return that reflects any amount of Section 165 loss from the transaction.
Transactions Designated as Listed or Transactions of Interest After Filing
If a transaction becomes a listed transaction or transaction of interest after you file your tax return and before the statute of limitations expires, you must file Form 8886 according to specific timing rules. For listed transactions entered into before August 3, 2007, attach Form 8886 to the first tax return filed after the transaction became listed and file with OTSA. For listed transactions entered into after August 2, 2007, file Form 8886 with the OTSA within 90 days after the transaction became listed. For transactions of interest that occur after November 1, 2006, you must file Form 8886 with the OTSA within 90 days after the transaction is classified as a transaction of interest.
Special Considerations
Accuracy-Related Penalty Under Section 6662A
If you have a reportable transaction understatement, an accuracy-related penalty may be imposed under Section 6662A. This penalty applies to the amount of the understatement attributable to any listed transaction and any reportable transaction (apart from a listed transaction) with a significant tax avoidance purpose. The penalty increases for transactions not disclosed on Form 8886, as instructed. If the transaction is not disclosed and a reportable transaction understatement exists, you likely lack a reasonable cause and good faith defense under Section 6664(d) regarding the accuracy-related penalty under Section 6662A.
Recordkeeping Requirements
You must keep a copy of all documents and other records related to a reportable transaction as required by Regulations Section 1.6011-4(g). These records must be retained as long as their contents may become material in the administration of any Internal Revenue law.
Electronic Filing
If you file your income tax return electronically, any copy sent to OTSA must show the same information provided with the electronically filed return and must be on the official IRS Form 8886 or an exact copy of the form. Computer-generated or substitute forms must be exact copies of the official IRS form.
Previously Undisclosed Listed Transactions
If you are required to disclose a listed transaction and fail to do so within the time and manner prescribed, the period to assess any tax with respect to the listed transaction will be extended under Section 6501 until one year after you properly disclose the transaction by filing Form 8886 in the manner prescribed in Revenue Procedure 2005-26.
Securities and Exchange Commission Reporting
If you are required to file periodic reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 and are required to pay a penalty under Section 6707A, the requirement to pay such penalty must be disclosed in those reports for the periods specified by the Secretary. Failure to make this disclosure is considered a separate failure, subject to additional penalties.
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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.
