IRS lets tax pros fax Form 8918 for material advisor disclosures

The Internal Revenue Service is now allowing tax advisors and taxpayers to fax the Form 8918, Material Advisor Disclosure Statement, as part of its response to the novel coronavirus pandemic.

Since the outbreak of COVID-19, the IRS has been easing its requirements for mailing various types of tax documents by providing secure fax capability. The IRS is still catching up with millions of pieces of correspondence that began building up in trailers outside its offices early in the pandemic while the majority of IRS employees worked from home. Even though IRS employees started returning to the offices during tax season, many tax professionals are still working remotely, and the secure fax lines offer an alternative, more time-saving way to send in the documents than the mail.

The IRS will accept taxpayers' completed Forms 8918 faxed to (844) 253-5607. This temporary procedure will be in effect until further notice.

Generally, every “material advisor” to a reportable transaction is required to file Form 8918. That can be an individual, trust, estate, partnership or corporation. Reportable transactions can include tax shelters, “listed transactions” that the IRS deems to be for the purpose of tax avoidance, loss transactions, confidential transactions in which the transactions are offered to the taxpayer under condition of confidentiality, and so-called “transactions of interest” that have the potential for tax evasion or avoidance, and contractual protection transactions in which they’re offered to clients with the right to a full or partial refund if the IRS disallows them.

Material advisors are those who offer their clients any of these “reportable transactions” in return for income, and are required to file Form 8918 to disclose information about the transactions, such as fees and tax result protections offered such as insurance. They provide aid, assistance or advice in organizing, managing, promoting, selling, implementing, insuring or carrying out any reportable transaction, and directly or indirectly receive or expect to receive gross income in excess of a certain threshold amount of $50,000 or $250,000, depending on the type of transaction, for the aid, assistance or advice they provide.

Material advisors will need to sign Form 8918 before faxing it to the IRS. The IRS won’t provide a fax confirmation that it has received the form, so the IRS advises taxpayers and advisors to check their fax transmission log to verify that all the Form 8918 pages have been sent. The IRS will send a Letter 4373, which provides a Reportable Transaction Number and other information, to the material advisor.

On the fax cover sheet, advisors should include the following information:

Subject: Form 8918
Sender's name, title, phone number, address
Material Advisor’s name
Date
Number of pages faxed (including cover sheet)

However, they should not include sensitive information on the cover sheet, such as Employer Identification Number or Social Security Number.

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