How to File Form 8918-Material Advisor Disclosure Statement

Purpose of Form 8918 – Material advisors to any reportable transaction must disclose certain information about the reportable transaction by filing a Form 8918 with the IRS. Form 8918 replaces Form 8264, which was previously used by material advisors for disclosure. Material advisors who file a Form 8918 will receive a reportable transaction number from the IRS. Material advisors must provide the reportable transaction number to all taxpayers and material advisors for whom the material advisor acts as a material advisor. Every taxpayer who has participated in a reportable transaction must also disclose the transaction on a Reportable Transaction Disclosure Statement called Form 8886.

Who Must File? Generally, every material advisor to a reportable transaction is required to file Form 8918. A material advisor can be an individual, trust, estate, partnership, or corporation. You are not required to file Form 8918 unless a taxpayer to whom or for whose benefit you provided the tax statement (defined below) entered into the reportable transaction. If you provide a tax statement to another material advisor, you are not required to file Form 8918 unless the reportable transaction is entered into by a taxpayer to whom or for whose benefit that material advisor provided the tax statement.

Who is a Material Advisor? You are a material advisor to a transaction if you:

1. ​Provide any material aid, assistance, or advice with respect to the organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction, and You directly or indirectly receive or expect to receive gross income in excess of the threshold amount for the material aid, assistance, or advice.
2. ​You provide material aid, assistance, or advice with respect to the organizing, managing, promoting, selling, implementing, insuring, or carrying out any transaction if you make or provide a tax statement to or for the benefit of.
3. ​A taxpayer who either is required to disclose the transaction under section 6011 because the transaction is a listed transaction or a transaction of interest, or would have been required to disclose the transaction under section 6011 if the transaction had become a listed transaction or a transaction of interest within the period of limitations.
4. A taxpayer who you know is or reasonably expect to be required to disclose the transaction under Regulations section 1.6011-4 because the transaction is or is reasonably expected to become a reportable transaction other than a listed transaction or transaction of interest;
5. ​A material advisor who is required to disclose the transaction under section 6111 because the transaction is a listed transaction or a transaction of interest.
6. A material advisor who you know is or reasonably expect to be required to disclose the transaction under section 6111 because the transaction is or is reasonably expected to become a reportable transaction other than a listed transaction or transaction of interest.

What is a Tax statement? Generally, a tax statement is any statement (including another person’s statement), oral or written, that relates to a tax aspect of a transaction that causes the transaction to be a reportable transaction. A tax statement includes tax result protection that insures some or all of the tax benefits of a reportable transaction. Tax result protection includes insurance company and other third party products commonly described as tax result insurance. For more information, see Regulations section 301.6111-3(b)(2)(ii).

What is the Threshold amount? The threshold amount of gross income is $50,000 for a reportable transaction that provides substantially all of the tax benefits to individuals (looking through any partnerships, S corporations, or trusts). The determination of whether substantially all of the tax benefits from a reportable transaction are provided to individuals is based on all the facts and circumstances. Generally, if 70% or more of the tax benefits (defined later) from a reportable transaction are provided to individuals (looking through any partnerships, S corporations, or trusts) then substantially all of the tax benefits will be considered to be provided to individuals.

​For all other transactions, the threshold amount is $250,000. For listed transactions, the threshold amounts are reduced from $50,000 to $10,000 and from $250,000 to $25,000. For transactions of interest, the threshold amounts may be reduced as identified in the published guidance describing the transaction. Determine the threshold amount separately for each reportable transaction. The threshold amount must be met independently for each transaction that is a reportable transaction and aggregation of fees among reportable transactions is not required.

In figuring the amount of gross income you receive directly, or indirectly, for material aid, assistance, or advice, include all the following:

1. Fees for a tax strategy
2. Fees for advice (whether or not tax advice)
3. Fees for implementing the reportable transaction

What Kind of Fees are Considered? Fees include consideration in whatever form paid, whether in cash or other kind, for:

• ​Services to analyze the transaction (whether or not related to the tax consequences of the transaction)
• Services to implement the transaction,
• Services to document the transaction,
• Services to prepare tax returns to the extent return preparation fees are unreasonable

A fee does not include amounts paid to a person, including an advisor, in that person’s capacity as a party to the transaction. For example, a fee does not include reasonable charges for the use of capital or the sale or use of property. ​The IRS will scrutinize carefully all of the facts and circumstances to determine if consideration received or expected to be received in connection with a reportable transaction is gross income received directly, or indirectly, for aid, assistance, or advice.

How Does an ​Employee Exception Work? 

Generally, you are not considered to be a material advisor if you make a tax statement solely in your capacity as an employee, shareholder, partner, or agent of another person. In this case, any tax statement you make will be considered to be made by your employer, corporation, partnership, or principal.
However, you will be treated as a material advisor if you form or use an entity to avoid the rules of section 6111 or 6112 or the penalties under section 6707 or 6708.

You are a material advisor when all of the following have occurred (in no particular order):

• ​If a transaction that was not a reportable transaction is identified as a listed transaction or a transaction of interest in published guidance after the occurrence of the 3 events described above, you will be treated as becoming a material advisor on the date the transaction is identified as a listed transaction or a transaction of interest.
• You make a tax statement.
• You receive or expect to receive gross income in excess of the threshold amount.
• The transaction is entered into by the taxpayer to whom or for whose benefit you provided the tax statement, or in the case of a tax statement provided to another material advisor, when the transaction is entered into by a taxpayer to whom or for whose benefit that material advisor provided a tax statement.

You must make reasonable and good faith efforts to determine when the taxpayer entered into the transaction, even if you stop providing services before the taxpayer enters into the transaction.

​Post-filing advice: 

You are not considered to be a material advisor concerning a transaction if you do not make or provide a tax statement about the transaction until after the first tax return reflecting tax benefit(s) of the transaction is filed with the IRS. This exception does not apply to you if it is expected the taxpayer will file a supplemental or amended return reflecting additional tax benefits from the transaction.