What is substantial authority for a tax position?

Substantial authority is a standard under IRC Section 6662 that's met when the weight of authorities supporting your position is substantial relative to those against it. It's a lower bar than more-likely-than-not but higher than reasonable basis — generally understood as roughly a 40% likelihood of being sustained. A position with substantial authority avoids the substantial-understatement penalty even without disclosure.

What is the difference between reasonable basis and substantial authority?

Reasonable basis is the lower standard — a position that is reasonable based on authorities, significantly higher than 'not frivolous,' roughly a 20% or better chance of success. Substantial authority is stronger. Reasonable basis can protect a disclosed position from the negligence penalty, but you generally need substantial authority to avoid the substantial-understatement penalty on an undisclosed position.

When should I file Form 8275?

File Form 8275 (or 8275-R for a position contrary to a regulation) to adequately disclose a return position that has at least reasonable basis but may not rise to substantial authority. Disclosure can protect you from the substantial-understatement and negligence portions of the Section 6662 accuracy-related penalty — but it does not shield a position that lacks even a reasonable basis.

What is the substantial-understatement penalty?

It's part of the IRC Section 6662 accuracy-related penalty: a 20% penalty applies when you understate income tax by the greater of 10% of the tax required to be shown or $5,000 (for individuals). You can avoid it by having substantial authority for the position, or by having reasonable basis and adequately disclosing the position on Form 8275.

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Tax Return Position Standards: Reasonable Basis, Substantial Authority, and When to Disclose

Every position on your return carries a confidence level the IRS recognizes by name. Knowing where a position lands — reasonable basis, substantial authority, or more-likely-than-not — decides whether you need to disclose it and whether a penalty can stick.

SMAART Tax Team

February 24, 2026

6 min read

|Reviewed by Ray Dominguez, EA, USTCP

Tax Return Position Standards: Reasonable Basis, Substantial Authority, and When to Disclose

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Tax Return Position Standards: Reasonable Basis, Substantial Authority, and When to Disclose

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