IRS Form 13750 Guide: Announcement 2005-80 Settlement Rules

1. Introduction: What is Form 13750?

IRS Form 13750, officially titled the Election to Participate in Announcement 2005-80 Settlement Initiative, is a specialized compliance and election document issued by the Internal Revenue Service (IRS). The IRS is a bureau of the United States Department of the Treasury responsible for administering the internal revenue code and enforcing federal tax compliance.

Unlike routine annual tax returns, Form 13750 was designed for a targeted administrative purpose. It was published in connection with IRS Announcement 2005-80 to serve as the exclusive legal mechanism for taxpayers to enter into a comprehensive settlement initiative resolving disputed tax shelter transactions.

Through Form 13750, individual and business taxpayers formally notified the IRS of their election to concede improper tax deductions or artificial losses generated by aggressive tax schemes. In exchange, the IRS offered a structured path to settle tax debts with reduced penalties, deductions for out-of-pocket transaction costs, and protection from protracted federal litigation.

2. Purpose of the Form

During the late 1990s and early 2000s, boutique accounting firms, law practices, and financial promoters marketed complex, abusive tax avoidance schemes. These transactions used convoluted mechanisms—such as offsetting foreign currency options, lease strips, and artificial basis shifts—to generate massive paper losses that wiped out real taxable income.

As the IRS identified and designated these arrangements as “listed transactions” or abusive tax shelters, thousands of investors faced audits, severe 40% accuracy penalties, compounding interest, and public court exposure. To resolve these disputes efficiently without overwhelming the federal court system, the IRS issued Announcement 2005-80, establishing a global settlement initiative for 21 specific transactions.

Form 13750 exists to provide a standardized, legally binding intake procedure for this settlement initiative. By executing the form, taxpayers agreed to disallow the tax shelter benefits in full, while the IRS agreed to cap accuracy-related penalties (often lowering them to 5%, 10%, or 20%), allow ordinary loss deductions for promoter fees, and finalize the settlement through a binding closing agreement.

3. Who Needs to File This Form

Form 13750 was required for any taxpayer who wished to resolve their participation in one or more of the 21 abusive tax arrangements covered under Announcement 2005-80. Eligible parties included:

• Individual Taxpayers: High-net-worth individuals who used promoted tax shelters to offset significant capital gains or ordinary income on their Form 1040 returns.
• Corporate Entities: C corporations and S corporations that utilized management stock compensation schemes, contested liability shelters, or leasing transactions to reduce corporate tax liabilities.
• Partners & Trust Beneficiaries: Investors in pass-through entities or common trust funds where artificial tax losses flowed through to individual returns.
• Taxpayers at Any Examination Stage: Taxpayers eligible for the initiative included those currently under audit, those with cases pending before the IRS Independent Office of Appeals, and unexamined taxpayers coming forward voluntarily.

Submitting Form 13750 was the exclusive method to participate. Taxpayers could not request settlement terms through informal letters, phone calls, or standard audit conferences.

4. Who Is Exempt / Not Required to File

Because Form 13750 applied only to the specific settlement initiative launched under Announcement 2005-80, most taxpayers and entities were exempt or barred from filing it:

• Everyday Taxpayers: Individuals and businesses resolving routine audit adjustments or filing regular tax returns never use Form 13750.
• Promoters and Organizers: Anyone who organized, marketed, or sold an eligible tax shelter, or who received referral fees or commissions from a promoter, was legally barred from participating.
• Taxpayers with Prior Final Determinations: Individuals who had already resolved their transaction through a signed closing agreement (Form 906), a settlement on Form 870-AD, or a final court judgment could not reopen their cases.
• Excluded Transactions: Taxpayers participating in tax shelters that were not among the 21 covered transactions—or transactions addressed by earlier specific initiatives (such as Son of Boss under Announcement 2004-46)—were ineligible.
• Taxpayers in Ongoing Litigation: Taxpayers whose cases were actively docketed in the United States Tax Court or a federal district court were generally excluded unless approved by IRS Chief Counsel.

5. When to File

Form 13750 operated on a strict, time-limited window established by the IRS when the global settlement initiative was announced:

• One-Time Election Deadline: Eligible taxpayers were required to postmark and submit Form 13750 no later than January 23, 2006.
• Supporting Documentation Timeline: Within 30 to 60 days following the submission of Form 13750, taxpayers had to deliver complete transaction contracts, marketing prospectuses, and proof of promoter fees paid.
• Closing Agreement Execution: Following IRS verification of eligibility and calculations, taxpayers executed a formal closing agreement and arranged for full payment or an approved installment plan.

The January 23, 2006 deadline was strictly enforced. Taxpayers who failed to elect participation by this cutoff date forfeited their eligibility for reduced penalties and statutory interest benefits.

6. Where and How to File

Form 13750 was an administrative legal document that could not be submitted through commercial consumer tax software. It required physical submission directly to dedicated IRS compliance units.

Taxpayers were required to mail their signed Form 13750 and required attachments to the specific IRS address as per instructions outlined in Announcement 2005-80. In addition, if a taxpayer was actively under examination or had a case pending before the IRS Independent Office of Appeals, an identical duplicate copy was sent directly to the assigned revenue agent or appeals officer.

Because the January 23, 2006 deadline was rigid, submissions were typically delivered using certified mail with a return receipt requested or through approved private delivery services to establish legal proof of timely postmarking. Taxpayers were advised to maintain a complete copy of the signed form, transaction contracts, and postal receipts in their permanent tax archives.

7. Step-by-Step Instructions to Fill the Form

Form 13750 was organized into structured sections designed to capture taxpayer identity, transaction categories, and fee substantiation. Review the table below for a section-by-section breakdown.

Section	Required Information	Instructions for Taxpayers
Part 1	Taxpayer Identification	Enter legal name, Social Security Number (SSN) or Employer Identification Number (EIN), address, and daytime phone number.
Part 2	Eligible Transactions	Select the specific transaction(s) entered into from the 21 designated categories outlined in Announcement 2005-80.
Part 3	Affected Tax Years	List every tax year (e.g., 2000, 2001, 2002) in which deductions, losses, or basis adjustments were claimed from the scheme.
Part 4	Transaction Costs & Fees	Itemize net out-of-pocket fees paid to promoters, law firms, and accountants, subtracting any refunds or damages recovered.
Part 5	Partnership Information	If the transaction involved a pass-through entity, provide the partnership legal name, EIN, and attach Form 13751.
Part 6	Perjury Declaration	Sign and date the form under penalties of perjury, certifying that the taxpayer was an investor and not a promoter or seller.

Understanding the 21 Covered Transactions

Part 2 of Form 13750 required taxpayers to identify their specific transaction. The initiative covered three distinct tiers of promoted schemes:

• Category 1 Listed Transactions: Well-known abusive shelters including Offsetting Foreign Currency Contracts (Notice 2003-81), Lease Strips (Notice 2003-55), Contested Liabilities (Notice 2003-77), and S Corporation ESOP arrangements (Rev. Rul. 2003-6).
• Category 2 Listed Transactions: Abusive employee benefit plans, including Section 412(i) retirement plans that accumulated excessive life insurance contracts (Rev. Rul. 2004-20) and Welfare Benefit Funds (Notice 2003-24).
• Category 3 Scrutinized Transactions: Five non-listed arrangements that raised severe compliance concerns, such as parking expense reimbursements (Rev. Rul. 2004-98) and distressed asset trust transactions.

8. Required Documents/Information Needed Before Filling

To successfully elect into the settlement initiative, taxpayers and their legal advisors had to compile extensive historical documentation:

• Filed Federal Tax Returns: Copies of Forms 1040, 1120, or 1065 for every year in which the tax shelter produced a tax benefit.
• Transaction Agreements: Complete transactional paperwork, including partnership agreements, loan contracts, promissory notes, and brokerage confirmations.
• Promoter Fee Records: Invoices, bank wire confirmations, and canceled checks showing the exact fees paid to promoters, attorneys, and accountants.
• Written Tax Opinions: Copies of formal legal opinion letters, offering memoranda, and promotional brochures supplied by the shelter promoter.
• Form 13751 (Partnership Waiver): A signed waiver of consistent agreement rights if the transaction was conducted through a TEFRA partnership entity.
• Form 2848 (Power of Attorney): A valid authorization form if legal counsel or a CPA represented the taxpayer.

9. Common Mistakes to Avoid

Submitting Form 13750 required precise execution. Common errors that derailed participation included:

• Missing the Election Deadline: Submitting or postmarking Form 13750 after January 23, 2006 resulted in automatic exclusion from the settlement initiative.
• Promoter Ineligibility: Filing Form 13750 when the applicant had participated in selling, marketing, or collecting referral fees for the shelter led to immediate rejection.
• Failing to Provide Fee Proof: Claiming an ordinary loss deduction for transaction costs without attaching canceled checks or invoices led the IRS to disallow fee deductions.
• Omitting Form 13751: In partnership-level transactions, failing to include Form 13751 alongside Form 13750 breached initiative requirements for pass-through entities.
• Assuming Immunity from Criminal Review: Form 13750 resolved civil tax liabilities only; it did not provide immunity from criminal prosecution for taxpayers who engaged in willful tax fraud.

10. Penalties for Non-Filing or Errors

Form 13750 was a voluntary settlement election, meaning there was no direct fine simply for choosing not to submit it. However, bypassing the settlement initiative exposed taxpayers to substantial enforcement consequences:

• Full Statutory Penalties: Taxpayers who chose not to settle faced the maximum statutory penalties, including a 40% penalty for gross valuation misstatements or reportable transaction understatements under Section 6662A, rather than the reduced 5% to 20% rates.
• Continuous Interest Charges: Under Section 303 of the Gulf Opportunity Zone (GO Zone) Act of 2005, Congress modified interest suspension rules under Section 6404(g). Taxpayers who settled under Announcement 2005-80 preserved interest suspension relief, while those who bypassed the settlement faced continuous interest compounding.
• Disallowance of Transaction Costs: Taxpayers who litigated their cases in court routinely had both their tax losses and their promoter fee deductions denied entirely.
• Public Court Litigation: Taxpayers who challenged the IRS in federal court lost the confidentiality of the settlement process, resulting in public court dockets detailing their tax shelter investments.
• Perjury Sanctions: Form 13750 was signed under penalties of perjury. Intentionally misrepresenting transaction costs or concealing promoter roles carried criminal liability under 18 U.S.C. Section 1001.

11. Related Forms or Schedules

Form 13750 operated within a specialized framework of IRS tax shelter enforcement documents:

• Form 13751: Waiver of Right to Consistent Agreement of Partnership Items and Partnership-Level Determinations
• Form 906: Closing Agreement on Final Determination Covering Specific Matters
• Form 8886: Reportable Transaction Disclosure Statement
• Form 870-AD: Offer to Waive Restrictions on Acceptance of Overassessment
• Form 1040-X: Amended U.S. Individual Income Tax Return
• Form 1120-X: Amended U.S. Corporation Income Tax Return
• Form 2848: Power of Attorney and Declaration of Representative

12. Frequently Asked Questions

What was the Announcement 2005-80 Settlement Initiative?

The Announcement 2005-80 Settlement Initiative was an IRS global settlement initiative that offered a one-time opportunity for taxpayers to voluntarily resolve tax liabilities tied to 21 specific abusive tax shelters with reduced penalties and deductions for out-of-pocket transaction costs.

How did Form 13750 reduce accuracy-related penalties?

Under federal statute, participants in abusive shelters faced accuracy-related penalties of up to 40%. By filing Form 13750 and conceding the improper benefits, the IRS reduced these penalties to standardized rates between 5% and 20%, depending on the category of the transaction.

Could tax shelter promoters or organizers use Form 13750?

No. Announcement 2005-80 explicitly barred promoters, organizers, material advisors, and individuals who received referral fees from participating in the settlement initiative. The program was designed strictly for investor-level taxpayers.

What is the difference between Form 13750 and Form 13751?

Form 13750 was the primary election form used to opt into the settlement initiative. Form 13751 was a specialized companion waiver required for partnership transactions governed by TEFRA rules, where the partner waived the right to consistent settlement terms with other non-settling partners.

How were out-of-pocket transaction costs handled under Form 13750?

Taxpayers who elected to participate were permitted to claim an ordinary loss deduction for the net transaction costs paid to promoters, attorneys, or accounting firms, provided those fees had not been refunded or recovered through civil lawsuits.

How was the settlement finalized after submitting Form 13750?

Once the IRS verified the taxpayer’s eligibility, transaction figures, and fee documentation, both the taxpayer and the IRS executed a formal, legally binding Closing Agreement on Form 906, permanently resolving all civil tax liabilities for the transaction.

13. Conclusion: Key Takeaways Summarized

IRS Form 13750 represented a historic off-ramp for taxpayers caught in the federal crackdown on aggressive tax shelters. Keep these primary points in mind:

• Exclusive Settlement Gateway: Form 13750 served as the sole legal mechanism to participate in the Announcement 2005-80 Global Settlement Initiative.
• Covered 21 Specific Schemes: The initiative applied strictly to 21 designated listed and scrutinized tax transactions promoted in the late 1990s and early 2000s.
• Substantial Penalty Relief: Taxpayers who conceded their improper deductions received reduced accuracy penalties, interest relief, and deductions for promoter fees.
• Promoters Were Excluded: The settlement was restricted to investor taxpayers; promoters and brokers who collected fees were legally barred.
• Binding Final Resolution: Approved elections culminated in a formal Form 906 closing agreement, providing taxpayers with a complete and permanent civil resolution.