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2010 Tax Return

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2010 Tax Return

2010 tax return 2. 2010 tax return   Filing Requirements and Required Disclosures Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Annual Information ReturnsSupporting Organization Annual Information Return Unrelated Business Income Tax ReturnEstimated tax. 2010 tax return Employment Tax ReturnsException. 2010 tax return FUTA tax exception. 2010 tax return FICA tax exemption election. 2010 tax return Revoking the election. 2010 tax return Definitions. 2010 tax return Effect on employees. 2010 tax return Political Organization Income Tax ReturnExempt function. 2010 tax return Political organization taxable income. 2010 tax return Separate fund. 2010 tax return Failure to file. 2010 tax return Failure to pay on time. 2010 tax return Reporting Requirements for a Political OrganizationForm 8871 Form 8872 Donee Information ReturnCharitable deduction property. 2010 tax return Publicly traded securities. 2010 tax return Exceptions. 2010 tax return Form 8283. 2010 tax return Information Provided to DonorsDisclosure of Quid Pro Quo Contributions Acknowledgment of Charitable Contributions of $250 or More Acknowledgment of Vehicle Contribution Qualified Intellectual Property Report of Cash Received Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting FormsAnnual Information Return Public Inspection of Exemption Application Political Organization Reporting Forms Required DisclosuresSolicitation of Nondeductible Contributions Sales of Information or Services Available Free From Government Dues Used for Lobbying or Political Activities Prohibited Tax Shelter Transactions Miscellaneous RulesOrganizational Changes and Exempt Status Introduction Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period. 2010 tax return Topics - This chapter discusses: Annual information returns Unrelated business income tax return Employment tax returns Political organization income tax return Reporting requirements for a political organization Donee information return Information provided to donors Report of cash received Public inspection of exemption applications, annual returns, and political organizations reporting forms Required disclosures Miscellaneous rules Useful Items - You may want to see: Publication 15 Circular E, Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 598 Tax on Unrelated Business Income of Exempt Organizations Form (and Instructions) 941 Employer's Quarterly Federal Tax Return 990 Return of Organization Exempt From Income Tax 990-EZ Short Form Return of Organization Exempt From Income Tax Schedule A (Form 990 or 990-EZ) Public Charity Status and Public Support Schedule B (Form 990, 990-EZ, or 990-PF) Schedule of Contributors Schedule C (Form 990 or 990-EZ) Political Campaign and Lobbying Activities Schedule D (Form 990) Supplemental Financial Statements Schedule E (Form 990 or 990-EZ) Schools Schedule F (Form 990) Statement of Activities Outside the United States Schedule G (Form 990 or 990-EZ) Supplemental Information Regarding Fundraising or Gaming Activities Schedule H (Form 990) Hospitals Schedule I (Form 990) Grants and Other Assistance to Organizations, Governments, and Individuals in the United States Schedule J (Form 990) Compensation Information Schedule K (Form 990) Supplemental Information on Tax-Exempt Bonds Schedule L (Form 990 or 990-EZ) Transactions With Interested Persons Schedule M (Form 990) Noncash Contributions Schedule N (Form 990 or 990-EZ) Liquidation, Termination, Dissolution, or Significant Disposition of Assets Schedule O (Form 990 or 990-EZ) Supplemental Information to Form 990 Schedule R (Form 990) Related Organizations and Unrelated Partnerships 990-PF Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation 990-BL Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons 990-T Exempt Organization Business Income Tax Return 990-W Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations 1120-POL U. 2010 tax return S. 2010 tax return Income Tax Return for Certain Political Organizations 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code 5768 Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation 6069 Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction 7004 Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes 8282 Donee Information Return 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business 8453-X Political Organization Declaration for Electronic Filing of Notice of Section 527 Status 8822-B Change of Address-Business 8868 Application for Extension of Time to File an Exempt Organization Return 8870 Information Return for Transfers Associated with Certain Personal Benefits Contracts 8871 Political Organization Notice of Section 527 Status 8872 Political Organization Report of Contributions and Expenditures 8886-T Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction 8899 Notice of Income from Donated Intellectual Property 8940 Request for Miscellaneous Determination See chapter 6 for information about getting these publications and forms. 2010 tax return Annual Information Returns Every organization exempt from federal income tax under section 501(a) must file an Annual Exempt Organization Return except: A church, an interchurch organization of local units of a church, a convention or association of churches, An integrated auxiliary of a church, A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs, A school below college level affiliated with a church or operated by a religious order, Church-affiliated mission societies if more than half of their activities are conducted in, or are directed at persons in, foreign countries, An exclusively religious activity of any religious order, A state institution, the income of which is excluded from gross income under section 115, A corporation described in section 501(c)(1) that is organized under an Act of Congress, an instrumentality of the United States, and is exempt from Federal income taxes, A stock bonus, pension, or profit-sharing trust that qualifies under section 401 (required to file Form 5500, Annual Return/Report of Employee Benefit Plan), A religious or apostolic organization described in section 501(d) (required to file Form 1065, U. 2010 tax return S. 2010 tax return Return of Partnership Income), A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C. 2010 tax return B. 2010 tax return 418, www. 2010 tax return irs. 2010 tax return gov/pub/irs-tege/rp1995-48. 2010 tax return pdf, A private foundation described in section 501(c)(3) and exempt under section 501(a) (required to file Form 990-PF, Return of Private Foundation), A political organization that is a state or local committee of a political party, a political committee of a state or local candidate, a caucus or association of state or local officials, or required to report under the Federal Election Campaign Act of 1971 as a political committee, An exempt organization (other than a private foundation) that normally has annual gross receipts of $50,000 or less, or A foreign organization, or an organization located in a U. 2010 tax return S. 2010 tax return possession, that normally has annual gross receipts from sources within the United States of $50,000 or less. 2010 tax return Supporting Organization Annual Information Return For tax years ending after August 17, 2006, all section 509(a)(3) supporting organizations are required to file Form 990 or 990-EZ with the IRS regardless of the organization's gross receipts, unless it qualifies as one of the following: An integrated auxiliary of a church; The exclusively religious activities of a religious order; or An organization, the gross receipts of which are normally not more than $5,000, that supports a section 509(a)(3) religious order. 2010 tax return If the organization is described in item (3) above, then it must submit Form 990-N (e-Postcard) unless it voluntarily files Form 990 or 990-EZ. 2010 tax return On its annual information return, at Part I, Schedule A (Form 990 or 990-EZ) a supporting organization must: List the section 509(a)(3) organizations to which it provides support, Indicate whether it is a Type I, Type II, or Type III supporting organization, and Certify that the organization is not controlled directly or indirectly by disqualified persons (other than by foundation managers and other than one or more publicly supported organizations). 2010 tax return Annual Electronic Filing Requirement for Small Tax-Exempt Organizations Small tax-exempt organizations with annual gross receipts normally $50,000 or less must submit Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, with the IRS each year, if they choose not to file a Form 990 or 990-EZ. 2010 tax return Form 990-N requires the following information: The organization's legal name, and mailing address; Any name under which it operates and does business; Its Internet website address (if any); Its taxpayer identification number; The name and address of a principal officer; Organization's annual tax period; Verification that the organization's annual gross receipts are normally $50,000 or less; and Notification if the organization has terminated. 2010 tax return Form 990-N is due by the 15th day of the fifth month after the close of the tax year. 2010 tax return For tax years beginning after December 31, 2006, any organization that fails to meet its annual reporting requirement for 3 consecutive years will automatically lose its tax-exempt status. 2010 tax return To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization. 2010 tax return Exceptions. 2010 tax return   This filing requirement does not apply to: Churches, their integrated auxiliaries, and conventions or associations of churches; Organizations that are included in a group return; Private foundations required to file Form 990-PF; and Section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ. 2010 tax return Forms 990 and 990-EZ Exempt organizations, other than private foundations, must file their annual information returns on Form 990 or 990-EZ, unless excepted from filing or allowed to submit Form 990-N, described earlier. 2010 tax return Generally, political organizations with gross receipts of $25,000 ($100,000 for a qualified state or local political organization (QSLPO)) or more for the tax year are required to file Form 990 or 990-EZ unless specifically excepted from filing the annual return. 2010 tax return The following political organizations are not required to file Form 990 or Form 990-EZ. 2010 tax return A state or local committee of a political party. 2010 tax return A political committee of a state or local candidate. 2010 tax return A caucus or association of state or local officials. 2010 tax return A political organization that is required to report as a political committee under the Federal Election Campaign Act. 2010 tax return A 501(c) organization that has expenditures for influencing or attempting to influence the selection, nomination, election, or appointment of any individual for a federal, state, or local public office. 2010 tax return Form 990-EZ. 2010 tax return   This is a shortened version of Form 990. 2010 tax return It is designed for use by small exempt organizations and nonexempt charitable trusts. 2010 tax return   Beginning in tax year 2010, an organization can file either Form 990 or 990-EZ if it meets the following: Its gross receipts during the year are less than $200,000. 2010 tax return Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year are less than $500,000. 2010 tax return If your organization does not meet either of these conditions, you cannot file Form 990-EZ. 2010 tax return Instead you must file Form 990. 2010 tax return Group return. 2010 tax return   A group return on Form 990 may be filed by a central, parent, or like organization for two or more local organizations, none of which is a private foundation. 2010 tax return This return is in addition to the central organization's separate annual return if it must file a return. 2010 tax return It cannot be included in the group return. 2010 tax return See the instructions for Form 990 for the conditions under which this procedure may be used. 2010 tax return    In any year that an organization is properly included as a subordinate organization on a group return, it should not file its own Form 990. 2010 tax return Schedule A (Form 990 or 990-EZ). 2010 tax return   Organizations, other than private foundations, that are described in section 501(c)(3) and that are otherwise required to file Form 990 or 990-EZ must also complete Schedule A of that form. 2010 tax return Schedule B (Form 990, Form 990-EZ, or 990-PF). 2010 tax return   Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors. 2010 tax return Schedule O (Form 990). 2010 tax return   Organizations that file Form 990 must use this schedule to provide required additional information or if additional space is needed. 2010 tax return   Other schedules may be required to be filed with Form 990 or 990-EZ. 2010 tax return See the instructions for Form 990 or the instructions for Form 990-EZ for more information. 2010 tax return Report significant new or changed program services and changes to organizational documents. 2010 tax return    An organization should report new significant program services or significant changes in how it conducts program services, and significant changes to its organizational documents, on its Form 990 rather than in a letter to EO Determinations. 2010 tax return EO Determinations no longer issues letters confirming the tax-exempt status of organizations that report new services or significant changes, or changes to organizational documents. 2010 tax return See Miscellaneous Rules, Organization Changes and Exempt Status, later. 2010 tax return Form 990-PF All private foundations exempt under section 501(c)(3) must file Form 990-PF. 2010 tax return These organizations are discussed in chapter 3. 2010 tax return Electronic Filing You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically. 2010 tax return If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. 2010 tax return See Regulations section 301. 2010 tax return 6033-4 for more information. 2010 tax return The IRS may waive the requirement to file electronically in cases of undue hardship. 2010 tax return For information on filing a waiver, see Notice 2010-13, 2010-4 I. 2010 tax return R. 2010 tax return B. 2010 tax return 327, available at www. 2010 tax return irs. 2010 tax return gov/ir/2010-04_IRSB/ar14. 2010 tax return html. 2010 tax return Form 990. 2010 tax return   An organization is required to file Form 990 electronically if it files at least 250 returns during the calendar year and has total assets of $10 million or more at the end of the tax year. 2010 tax return Form 990-PF. 2010 tax return   An organization is required to file Form 990-PF electronically if it files at least 250 returns during the calendar year. 2010 tax return Due Date Forms 990, 990-EZ, or 990-PF must be filed by the 15th day of the fifth month after the end of your organization's accounting period. 2010 tax return Thus, for a calendar year taxpayer, Forms 990, 990-EZ, or 990-PF is due May 15 of the following year. 2010 tax return Extension of time to file. 2010 tax return   Use Form 8868 to request an automatic 3-month extension of time to file Forms 990, 990-EZ, or 990-PF and also to apply for an additional (not automatic) 3-month extension if needed. 2010 tax return   Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. 2010 tax return For more information, see Form 8868 and its instructions. 2010 tax return   When filing Form 8868 for an automatic 3-month extension, neither a signature, nor an explanation is required. 2010 tax return However, when filing Form 8868 for an additional 3-month extension, both a signature and an explanation are required. 2010 tax return Application for exemption pending. 2010 tax return   An organization that claims to be exempt under section 501(a) but has not established its exempt status by the due date for filing an information return must complete and file Form 990, 990-EZ, 990–N or 990-PF (if it considers itself a private foundation), unless the organization is exempt from Form 990-series filing requirements. 2010 tax return If the organization's application is pending with the IRS, it must so indicate on Forms 990, 990-EZ, or 990-PF (whichever applies) by checking the application pending block at the top of page 1 of the return. 2010 tax return For more information on the filing requirements, see the Instructions for Forms 990, 990-EZ, and 990-PF. 2010 tax return State reporting requirements. 2010 tax return   Copies of Forms 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. 2010 tax return See the instructions for those forms. 2010 tax return Form 8870. 2010 tax return   Organizations that filed a Form 990, 990-EZ, or 990-PF, and paid premiums or received transfers on certain life insurance, annuity, and endowment contracts (personal benefit contracts), must file Form 8870. 2010 tax return For more information, see Form 8870 and the instructions for that form. 2010 tax return Automatic Revocation If the organization fails to file a Form 990, 990-EZ, or 990-PF, or fails to submit a Form 990-N, as required, for 3 consecutive years, it will automatically lose its tax-exempt status by operation of law. 2010 tax return The list of organizations whose tax-exempt status has been automatically revoked is available on IRS. 2010 tax return gov. 2010 tax return This list (Auto-Revocation List) may be viewed and searched on Exempt Organizations Select Check. 2010 tax return The Auto-Revocation List includes each organization's name, Employer Identification Number (EIN) and last known address. 2010 tax return It also includes the effective date of the automatic revocation and the date it was posted to the list. 2010 tax return The IRS updates the list monthly to include additional organizations that lose their tax-exempt status. 2010 tax return Tax Effect of Loss of Tax-Exempt Status If your organization’s tax-exempt status is automatically revoked, you may be required to file one of the following federal income tax returns and pay any applicable income taxes: Form 1120, U. 2010 tax return S. 2010 tax return Corporation Income Tax Return, due by the 15th day of the 3rd month after the end of your organization’s tax year, or Form 1041, U. 2010 tax return S. 2010 tax return Income Tax Return for Estates and Trusts, due by the 15th day of the 4th month after the end of your organization’s tax year. 2010 tax return In addition, a section 501(c)(3) organization that loses its tax-exempt status cannot receive tax-deductible contributions and will not be identified in the IRS Business Master File extract as eligible to received tax-deductible contributions, or be included in Exempt Organizations Select Check (Pub 78 database). 2010 tax return An organization whose exemption was automatically revoked must apply for tax exemption in order to regain its tax exemption (even if it was not originally required to apply). 2010 tax return In some situations, an organization may be able to obtain exemption retroactive to its date of revocation. 2010 tax return For more information about automatic revocation, go to IRS. 2010 tax return gov and select Charities & Non-Profits and then select Revoked? Reinstated? Learn More. 2010 tax return Penalties Penalties for failure to file. 2010 tax return   Generally, an exempt organization that fails to file a required return must pay a penalty of $20 a day for each day the failure continues. 2010 tax return The same penalty will apply if the organization does not give all the information required on the return or does not give the correct information. 2010 tax return Maximum penalty. 2010 tax return   The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year. 2010 tax return Organization with gross receipts over $1 million. 2010 tax return   For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000. 2010 tax return Managers. 2010 tax return   If the organization is subject to this penalty, the IRS may specify a date by which the return or correct information must be supplied by the organization. 2010 tax return Failure to comply with this demand will result in a penalty imposed upon the manager of the organization, or upon any other person responsible for filing a correct return. 2010 tax return The penalty is $10 a day for each day that a return is not filed after the period given for filing. 2010 tax return The maximum penalty imposed on all persons with respect to any one return is $5,000. 2010 tax return Exception for reasonable cause. 2010 tax return   No penalty will be imposed if reasonable cause for failure to file timely can be shown. 2010 tax return Unrelated Business Income Tax Return Even though your organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. 2010 tax return Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. 2010 tax return If your organization has $1,000 or more of unrelated business income, you must file Form 990-T in addition to your required annual information return. 2010 tax return Estimated tax. 2010 tax return   Quarterly estimated tax payments are due if your organization expects to owe $500 or more in tax including unrelated business income. 2010 tax return Use Form 990-W to figure your organization's estimated tax payments. 2010 tax return Travel tour programs. 2010 tax return   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose to which tax exemption was granted to the organization. 2010 tax return   Whether travel tour activities conducted by an organization are substantially related to the organization's tax exempt purpose is determined by looking at all the relevant facts and circumstances, including, but not limited to, how a travel tour is developed, promoted, and operated. 2010 tax return Example. 2010 tax return ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). 2010 tax return As part of its activities, ABC operates a travel tour program. 2010 tax return The program is open to all current members of ABC and their guests. 2010 tax return ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. 2010 tax return Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. 2010 tax return XYZ pays ABC a per person fee for each participant. 2010 tax return Although the literature advertising the tours encourages ABC members to continue their lifelong learning by joining the tours, and a faculty member of ABC's related university frequently joins the tour as a guest of the alumni association, none of the tours include any scheduled instruction or curriculum related to the destinations being visited. 2010 tax return The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. 2010 tax return Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. 2010 tax return Therefore, ABC's tour program is an unrelated trade or business. 2010 tax return For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T. 2010 tax return Employment Tax Returns Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements, or if the taxes clearly do not apply. 2010 tax return For more information, obtain a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941. 2010 tax return Small Business Health Care Tax Credit. 2010 tax return   If your small tax-exempt organization provides health care coverage for your workers you may qualify for the small business health care tax credit. 2010 tax return Go to IRS. 2010 tax return gov and select Affordable Care Act Tax Provisions for more details. 2010 tax return See Small Business Health Care Tax Credit at www. 2010 tax return irs. 2010 tax return gov/newsroom/article/0,,id=223666,00. 2010 tax return html. 2010 tax return Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans. 2010 tax return   The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC). 2010 tax return The Act added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer's share of social security tax. 2010 tax return The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013. 2010 tax return This tax credit was extended through December 31, 2013, under the American Taxpayer Relief Act, passed on January 1, 2013. 2010 tax return   The credit can be as high as $6,240 for qualified tax-exempt organizations. 2010 tax return The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. 2010 tax return The amount of the credit for qualified tax-exempt organizations may not exceed the organization's employer social security tax for the period for which the credit is claimed. 2010 tax return   All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. 2010 tax return The process for certifying veterans for this credit is the same for all employers. 2010 tax return For more information, see Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit and the instructions to Form 8850. 2010 tax return Notice 2012-13, 2012-9 I. 2010 tax return R. 2010 tax return B. 2010 tax return 421, also provides additional guidance on submission Form 8850. 2010 tax return   Organizations described in section 501(c) and exempt from taxation under section 501(a) may claim the credit for qualified veterans who begin work on or after Nov. 2010 tax return 22, 2011, and before January 1, 2013. 2010 tax return After the required certification is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, Form 5884-C. 2010 tax return File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. 2010 tax return It is recommended that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit as the forms are processed separately. 2010 tax return In addition to Form 5884-C and its instructions, tax-exempt employers should see Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit. 2010 tax return Trust fund recovery penalty. 2010 tax return   If any person required to collect, truthfully account for, and pay over any of these taxes willfully fails to satisfy any of these requirements or willfully tries in any way to evade or defeat any of them, that person will be subject to a penalty. 2010 tax return The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. 2010 tax return The term person includes: An officer or employee of a corporation, or A member or employee of a partnership. 2010 tax return Exception. 2010 tax return   The penalty is not imposed on any unpaid volunteer director or member of a board of trustees of an exempt organization if the unpaid volunteer serves solely in an honorary capacity, does not participate in the day-to-day or financial operations of the organization, and does not have actual knowledge of the failure on which the penalty is imposed. 2010 tax return   This exception does not apply if it results in no one being liable for the penalty. 2010 tax return FICA and FUTA tax exceptions. 2010 tax return   Payments for services performed by a minister of a church in the exercise of the ministry, or a member of a religious order performing duties required by the order, are generally not subject to FICA or FUTA taxes. 2010 tax return FUTA tax exception. 2010 tax return   Payments for services performed by an employee of a religious, charitable, educational, or other organization described in section 501(c)(3) that are generally subject to FICA taxes if the payments are $100 or more for the year, are not subject to FUTA taxes. 2010 tax return FICA tax exemption election. 2010 tax return   Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274. 2010 tax return   To elect the exemption, Form 8274 must be filed before the first date on which a quarterly employment tax return would otherwise be due from the electing organization. 2010 tax return The organization can make the election only if it is opposed for religious reasons to the payment of FICA taxes. 2010 tax return   The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business. 2010 tax return Revoking the election. 2010 tax return   The election can be revoked by the IRS if the organization fails to file Form W-2, Wage and Tax Statement, for 2 years and fails to furnish certain information upon request by the IRS. 2010 tax return Such revocation will apply retroactively to the beginning of the 2-year period. 2010 tax return Definitions. 2010 tax return   For purposes of this election, the term church means a church, a convention or association of churches, or an elementary or secondary school that is controlled, operated, or principally supported by a church or by a convention or association of churches. 2010 tax return   The term qualified church-controlled organization means any church-controlled section 501(c)(3) tax-exempt organization, other than an organization that both: Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that are not unrelated trades or businesses. 2010 tax return Effect on employees. 2010 tax return   If a church or qualified church-controlled organization has made an election, payment for services performed for that church or organization, other than in an unrelated trade or business, will not be subject to FICA taxes. 2010 tax return However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. 2010 tax return The tax applies to income of $108. 2010 tax return 28 or more for the tax year from that church or organization, and no deductions for trade or business expenses are allowed against this self-employment income. 2010 tax return   Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return. 2010 tax return Political Organization Income Tax Return Generally, a political organization is treated as an organization exempt from tax. 2010 tax return Certain political organizations, however, must file an annual income tax return, Form 1120-POL, U. 2010 tax return S. 2010 tax return Income Tax Return for Certain Political Organizations, for any year they have political organization taxable income in excess of the $100 specific deduction allowed under section 527. 2010 tax return A political organization that has $25,000 ($100,000 for a qualified state or local political organization) or more in gross receipts for the tax year must file Form 990 or Form 990-EZ (and Schedule B of the form), unless excepted. 2010 tax return See Forms 990 and 990-EZ , earlier. 2010 tax return Political organization. 2010 tax return   A political organization is a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function. 2010 tax return Exempt function. 2010 tax return   An exempt function means influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, local public office or office in a political organization, or the election of the Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. 2010 tax return It also includes certain office expenses of a holder of public office or an office in a political organization. 2010 tax return Certain political organizations are required to notify the IRS that they are section 527 organizations. 2010 tax return These organizations must use Form 8871. 2010 tax return Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. 2010 tax return For a discussion on these forms, see Reporting Requirements for a Political Organization, later. 2010 tax return Political organization taxable income. 2010 tax return   Political organization taxable income is the excess of: Gross income for the tax year (excluding exempt function income) minus Deductions directly connected with the earning of gross income. 2010 tax return To figure taxable income, allow for a $100 specific deduction, but do not allow for the net operating loss deduction, the dividends-received deduction, and other special deductions for corporations. 2010 tax return Exempt organization not a political organization. 2010 tax return   An organization exempt under section 501(c) that spends any amount for an exempt function must file Form 1120-POL for any year which it has political taxable income. 2010 tax return These organizations must include in gross income the lesser of: The total amount of its exempt function expenditures, or The organization's net investment income. 2010 tax return Separate fund. 2010 tax return   A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. 2010 tax return The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization. 2010 tax return Section 501(c)(3) organizations are precluded from, and may suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office. 2010 tax return Due date. 2010 tax return   Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. 2010 tax return Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. 2010 tax return If any due date falls on a Saturday, Sunday, or legal holiday, the organization can file the return on the next business day. 2010 tax return    Form 1120-POL is not required of an exempt organization that makes expenditures for political purposes if its gross income does not exceed its directly connected deductions by more than $100 for the tax year. 2010 tax return Extension of time to file. 2010 tax return    Use Form 7004 to request an automatic 6-month extension of time to file Form 1120-POL. 2010 tax return The extension will be granted if you complete Form 7004 properly, make a proper estimate of the tax (if applicable), file Form 1120-POL by the due date, and pay any tax due. 2010 tax return Failure to file. 2010 tax return   A political organization that fails to file Form 1120-POL is subject to a penalty equal to 5% of the tax due for each month (or partial month) the return is late up to a maximum of 25% of the tax due, unless the organization shows the failure was due to reasonable cause. 2010 tax return For more information about filing Form 1120-POL, refer to the instructions accompanying the form. 2010 tax return Failure to pay on time. 2010 tax return   An organization that does not pay the tax when due generally may have to pay a penalty of 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. 2010 tax return The penalty will not be imposed if the organization can show that the failure to pay on time was due to reasonable cause. 2010 tax return Reporting Requirements for a Political Organization Certain political organizations are required to notify the IRS that the organization is to be treated as a section 527 political organization. 2010 tax return The organization is also required to periodically report certain contributions received and expenditures made by the organization. 2010 tax return To notify the IRS of section 527 treatment, an organization must file Form 8871. 2010 tax return To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872. 2010 tax return Form 8871 A political organization must electronically file Form 8871 to notify the IRS that it is to be treated as a section 527 organization. 2010 tax return However, an organization is not required to file Form 8871 if: It reasonably expects its annual gross receipts to always be less than $25,000. 2010 tax return It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U. 2010 tax return S. 2010 tax return C. 2010 tax return 431(4)). 2010 tax return It is a state or local candidate committee. 2010 tax return It is a state or local committee of a political party. 2010 tax return It is a section 501(c) organization that has made an “exempt function expenditure. 2010 tax return ” All other political organizations are required to file Form 8871. 2010 tax return An organization must provide on Form 8871: Its name and address (including any business address, if different) and its electronic mailing address; Its purpose; The names and addresses of its officers, highly compensated employees, contact person, custodian of records, and members of its board of directors; The name and address of, and relationship to, any related entities (within the meaning of section 168(h)(4)); and Whether it intends to claim an exemption from filing Form 8872, Form 990, or Form 990-EZ. 2010 tax return Employer identification number. 2010 tax return   If your organization needs an EIN, you can apply for one: Online—Click on the Employer ID Numbers (EINs) link at www. 2010 tax return IRS. 2010 tax return gov/businesses/small. 2010 tax return By telephone at 1-800-829-4933 from 7:00 a. 2010 tax return m. 2010 tax return to 10:00 p. 2010 tax return m. 2010 tax return in the organization's local time zone. 2010 tax return By mailing or faxing Form SS-4. 2010 tax return   If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance. 2010 tax return Due dates. 2010 tax return   The initial Form 8871 must be filed within 24 hours of the date on which the organization was established. 2010 tax return If there is a material change, an amended Form 8871 must be filed within 30 days of the material change. 2010 tax return When the organization terminates its existence, it must file a final Form 8871 within 30 days of termination. 2010 tax return   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. 2010 tax return How to file. 2010 tax return   An organization must file Form 8871 electronically via the IRS Internet website at www. 2010 tax return IRS. 2010 tax return gov/polorgs (Keyword: political orgs). 2010 tax return Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status. 2010 tax return   After electronically submitting Form 8871, the political organization must print, sign, and mail Form 8453-X to the IRS. 2010 tax return Upon receipt of the Form 8453-X, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872. 2010 tax return Penalties Failure to file. 2010 tax return   An organization that is required to file Form 8871, but fails to do so on a timely basis, will not be treated as a tax-exempt section 527 organization for any period before the date Form 8871 is filed. 2010 tax return Also, the taxable income of the organization for that period will include its exempt function income (including contributions received, membership dues, and political fundraising receipts) minus any deductions directly connected with the production of that income. 2010 tax return   Failure to file an amended Form 8871 will cause the organization not to be treated as a tax-exempt section 527 organization. 2010 tax return If an organization is treated as not being a tax-exempt section 527 organization, the taxable income of the organization will be determined by considering any exempt function income and deductions during the period beginning on the date of the material change and ending on the date that the amended Form 8871 is filed. 2010 tax return    The tax is computed by multiplying the organization's taxable income by the highest corporate tax rate. 2010 tax return Fraudulent returns. 2010 tax return   Any individual or corporation that willfully delivers or discloses to the IRS any list, return, account, statement or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation) or imprisoned for not more than 1 year or both. 2010 tax return Waiver of penalties. 2010 tax return   The IRS may waive any additional tax assessed on an organization for failure to file Form 8871 if the failure was due to reasonable cause and not willful neglect. 2010 tax return Additional information. 2010 tax return   For more information on Form 8871, see the form and its instructions. 2010 tax return For a discussion on the public inspection requirements for the form, see Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms , later. 2010 tax return Form 8872 Every tax-exempt section 527 political organization that accepts a contribution or makes an expenditure, for an exempt function during the calendar year, must file Form 8872 except: A political organization that is not required to file Form 8871 (discussed earlier). 2010 tax return A political organization that is subject to tax on its income because it did not file or amend Form 8871. 2010 tax return A qualified state or local political organization (QSLPO), discussed below. 2010 tax return All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872. 2010 tax return Qualified state or local political organization. 2010 tax return   A state or local political organization may be a QSLPO if: All of its political activities relate solely to state or local public office (or office in a state or local political organization). 2010 tax return It is subject to a state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS. 2010 tax return The state agency and the organization make the reports publicly available. 2010 tax return No federal candidate or office holder: Controls or materially participates in the direction of the organization, Solicits contributions for the organization, or Directs the disbursements of the organization. 2010 tax return Information required on Form 8872. 2010 tax return   If an organization pays an individual $500 or more for the calendar year, the organization is required to disclose the individual's name, address, occupation, employer, amount of the expense, the date the expense was paid, and the purpose of the expense on Form 8872. 2010 tax return   If an organization receives contributions of $200 or more from one contributor for the calendar year, the organization must disclose the donor's name, address, occupation, employer, and the date the contributions were made. 2010 tax return   For additional information that is required, see Form 8872. 2010 tax return Due dates. 2010 tax return   The due dates for filing Form 8872 vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election is held, or any other calendar year (a nonelection year). 2010 tax return   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. 2010 tax return Election year filing. 2010 tax return    In election years, Form 8872 must be filed on either a quarterly or a monthly basis. 2010 tax return Both a pre-election report and a post-election report are also required to be filed in an election year. 2010 tax return An election year is any year in which a regularly scheduled general election for federal office is held (an even-numbered year). 2010 tax return Nonelection year filing. 2010 tax return    In nonelection years, the form must be filed on a semiannual or monthly basis. 2010 tax return A complete listing of these filing periods are in the Form 8872 Instructions. 2010 tax return A nonelection year is any odd-numbered year. 2010 tax return How to file. 2010 tax return   Form 8872 can be filed either electronically or by mail. 2010 tax return However, organizations that have, or expect to have, contributions or expenditures of $50,000 or more for the year must file electronically. 2010 tax return    To file by mail, send Form 8872 to the:   Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0027 Electronic filing. 2010 tax return   File electronically via the IRS internet website at www. 2010 tax return IRS. 2010 tax return gov/polorgs. 2010 tax return You will need a user ID and password to electronically file Form 8872. 2010 tax return Organizations that have completed the electronic filing of Form 8871 and submitted a completed and signed Form 8453-X will receive a username and password in the mail. 2010 tax return   Organizations that have completed the electronic filing of Form 8871, but have not received their user ID and password can request one by writing to the following address: Internal Revenue Service Attn: Request for 8872 Password Mail Stop 6273 Ogden, UT 84201 Lost username and password. 2010 tax return   If you have forgotten or misplaced the username and password issued to your organization after you filed your initial Form 8871, send a letter requesting a new username and password to the address under Electronic filing. 2010 tax return You can also fax your request to (801) 620-3249. 2010 tax return It may take 3-6 weeks for your new username and password to arrive, as they will be mailed to the organization. 2010 tax return Penalty A penalty will be imposed if the organization is required to file Form 8872 and it: Fails to file the form by the due date, or Files the form but fails to report all of the information required or reports incorrect information. 2010 tax return The penalty is 35% of the total amount of contributions and expenditures to which a failure relates. 2010 tax return Fraudulent returns. 2010 tax return   Any individual or corporation that willfully delivers or discloses any list, return, account, statement, or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned for not more than 1 year, or both. 2010 tax return Waiver of penalties. 2010 tax return   The IRS may waive any additional tax assessed on an organization for failure to file Form 8872 if the failure was due to reasonable cause and not willful neglect. 2010 tax return Donee Information Return Dispositions of donated property. 2010 tax return   If an organization receives charitable deduction property and within three years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282, Donee Information Return. 2010 tax return However, an organization is not required to file Form 8282 if: The property is valued at $500 or less, or The property is consumed or distributed for charitable purposes. 2010 tax return   Form 8282 must be filed with the IRS within 125 days after the disposition. 2010 tax return Additionally, a copy of Form 8282 must be given to the donor. 2010 tax return If the organization fails to file the required information return, penalties may apply. 2010 tax return Charitable deduction property. 2010 tax return   This is any property (other than money or publicly traded securities) for which the donee organization signed an appraisal summary or Form 8283, Noncash Charitable Contributions. 2010 tax return Publicly traded securities. 2010 tax return   These are securities for which market quotations are readily available on an established securities market as of the date of the contribution. 2010 tax return Appraisal summary. 2010 tax return   If the value of the donated property exceeds $5,000, the donor must get a qualified appraisal for contributions of property, see the Exceptions. 2010 tax return below. 2010 tax return Exceptions. 2010 tax return   A written appraisal is not needed if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane), if your deduction for the vehicle is limited to the gross proceeds from its sale, Intellectual property, Certain securities considered to have market quotations readily available (see Regulations section 1. 2010 tax return 170A-13(c)(7)(xi)(B)), Inventory and other property donated by a corporation that are qualified contributions for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A), or Any donation of stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2010 tax return   The donee organization is not a qualified appraiser for the purpose of valuing the donated property. 2010 tax return For more information, get Publication 561, Determining the Value of Donated Property. 2010 tax return Form 8283. 2010 tax return   For noncash donations over $5,000, the donor must attach Form 8283 to the tax return to support the charitable deduction. 2010 tax return The donee must sign Part IV of Section B, Form 8283 unless publicly traded securities are donated. 2010 tax return The person who signs for the donee must be an official authorized to sign the donee's tax or information returns, or a person specifically authorized to sign by that official. 2010 tax return The signature does not represent concurrence in the appraised value of the contributed property. 2010 tax return A signed acknowledgment represents receipt of the property described on Form 8283 on the date specified on the form. 2010 tax return The signature also indicates knowledge of the information reporting requirements on dispositions, as previously discussed. 2010 tax return A copy of Form 8283 must be given to the donee. 2010 tax return Information Provided to Donors In some situations, a donor must obtain certain information from a donee organization to obtain a deduction for a charitable contribution. 2010 tax return In other situations, the donee organization is required to provide information to the donor. 2010 tax return A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. 2010 tax return (See Disclosure statement. 2010 tax return later. 2010 tax return ) This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. 2010 tax return See Quid pro quo contribution below for an example. 2010 tax return Failure to make the required disclosure may result in a penalty to the organization. 2010 tax return A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization. 2010 tax return In certain circumstances, an organization may be able to meet both of these requirements with the same written document. 2010 tax return Disclosure of Quid Pro Quo Contributions A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution over $75. 2010 tax return Quid pro quo contribution. 2010 tax return   A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution. 2010 tax return Your charitable organization must provide the donor a written statement informing the donor of the fair market value of the items or services it provided in exchange for the contribution. 2010 tax return Generally, a written statement is required for each payment, whenever the contribution portion is over $75. 2010 tax return Example. 2010 tax return If a donor gives your charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. 2010 tax return In this example, the charitable part of the payment is $60. 2010 tax return Even though the deductible part of the payment is not more than $75, a written statement must be filed because the total payment is more than $75. 2010 tax return If your organization fails to disclose quid pro quo contributions, the organization may be subject to a penalty. 2010 tax return Disclosure statement. 2010 tax return   The required written disclosure statement must: Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received. 2010 tax return The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. 2010 tax return If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution. 2010 tax return   No disclosure statement is required if any of the following are true. 2010 tax return The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, 1990-1 C. 2010 tax return B. 2010 tax return 471, Revenue Procedure 90-12, and Revenue Procedure 92-49, 1992-1 C. 2010 tax return B. 2010 tax return 507 (as adjusted for inflation), Revenue Procedure 92-49. 2010 tax return There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop). 2010 tax return There is only an intangible religious benefit provided to the donor. 2010 tax return The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. 2010 tax return For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. 2010 tax return A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods. 2010 tax return The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of: Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedure 90-12 (as adjusted for inflation), Revenue Procedure 90-12. 2010 tax return Good faith estimate of fair market value (FMV). 2010 tax return   An organization can use any reasonable method to estimate the FMV of goods or services it provided to a donor, as long as it applies the method in good faith. 2010 tax return   The organization can estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. 2010 tax return Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued. 2010 tax return Example 1. 2010 tax return A charity provides a 1-hour tennis lesson with a tennis professional for the first $500 payment it receives. 2010 tax return The tennis professional provides 1-hour lessons on a commercial basis for $100. 2010 tax return A good faith estimate of the lesson's FMV is $100. 2010 tax return Example 2. 2010 tax return For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. 2010 tax return A good faith estimate of the FMV of the right to hold the event in the museum can be made by using the cost of renting a hotel ballroom with a capacity, amenities, and atmosphere comparable to the museum room, even though the hotel ballroom lacks the unique art displayed in the museum room. 2010 tax return If the hotel ballroom rents for $2,500, a good faith estimate of the FMV of the right to hold the event in the museum is $2,500. 2010 tax return Example 3. 2010 tax return For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. 2010 tax return The artist does not provide tours on a commercial basis. 2010 tax return Tours of the museum normally are free to the public. 2010 tax return A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist. 2010 tax return Penalty for failure to disclose. 2010 tax return   A penalty is imposed on a charity that does not make the required disclosure of a quid pro quo contribution of more than $75. 2010 tax return The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing. 2010 tax return The charity can avoid the penalty if it can show that the failure was due to reasonable cause. 2010 tax return Acknowledgment of Charitable Contributions of $250 or More A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment from the charitable organization. 2010 tax return The donor must get the acknowledgment by the earlier of: The date the donor files the original return for the year the contribution is made, or The due date, including extensions, for filing the return. 2010 tax return The donor is responsible for requesting and obtaining the written acknowledgment from the donee. 2010 tax return A charitable organization that receives a payment made as a contribution is treated as the donee organization for this purpose even if the organization (according to the donor's instructions or otherwise) distributes the amount received to one or more charities. 2010 tax return Quid pro quo contribution. 2010 tax return   If the donee provides goods or services to the donor in exchange for the contribution (a quid pro quo contribution), the acknowledgment must include a good faith estimate of the value of the goods or services. 2010 tax return See Disclosure of Quid Pro Quo Contributions earlier. 2010 tax return Form of acknowledgment. 2010 tax return   Although there is no prescribed format for the written acknowledgment, it must provide enough information to substantiate the amount of the contribution. 2010 tax return For more information, see IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements. 2010 tax return Cash contributions. 2010 tax return   To deduct a contribution of cash, a check, or other monetary gift (regardless of the amount), a donor must maintain a bank record or a written communication from the donee organization showing the donee's name, date, and amount of the contribution. 2010 tax return In the case of a lump-sum contribution (rather than a contribution by payroll deduction) made through the Combined Federal Campaign or a similar program such as a United Way Campaign, the written communication must include the name of the donee organization that is the ultimate recipient of the charitable contribution. 2010 tax return Contributions by payroll deduction. 2010 tax return   An organization may substantiate an employee's contribution by deduction from its payroll by: A pay stub, Form W-2, or other document showing a contribution to a donee organization, together with A pledge card or other document from the donee organization that shows its name. 2010 tax return   For contributions of $250 or more, the document must state that the donee organization provides no goods or services for any payroll contributions. 2010 tax return The amount withheld from each payment of wages to a taxpayer is treated as a separate contribution. 2010 tax return Acknowledgment of Vehicle Contribution If an exempt organization receives a contribution of a qualified vehicle with a claimed value of more than $500, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. 2010 tax return The donee organization can use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. 2010 tax return See section 3. 2010 tax return 03 of Notice 2005-44 for guidance on the information that must be included in a contemporaneous written acknowledgment and the deadline for furnishing the acknowledgment to the donor. 2010 tax return Any donee organization that provides a contemporaneous written acknowledgment to a donor is required to report to the IRS the information contained in the acknowledgment. 2010 tax return The report is due by February 28 (March 31 if filing electronically) of the year following the year in which the donee organization provides the acknowledgment to the donor. 2010 tax return The organization must file the report on Copy A of Form 1098-C. 2010 tax return An organization that files Form 1098-C on paper should send it with Form 1096, Annual Summary and Transmittal of U. 2010 tax return S. 2010 tax return Information Returns. 2010 tax return See the Instructions for Form 1096 for the correct filing location. 2010 tax return An organization that is required to file 250 or more Forms 1098-C during the calendar year must file the forms electronically or magnetically. 2010 tax return Specifications for filing Form 1098-C electronically or magnetically can be found in Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically at www. 2010 tax return IRS. 2010 tax return gov/pub/irs-pdf/p1220. 2010 tax return pdf. 2010 tax return Acknowledgment For a contribution of a qualified vehicle with a claimed value of $500 or less, do not file Form 1098-C. 2010 tax return However, you can use it as the contemporaneous written acknowledgment under section 170(f)(8) by providing the donor with Copy C only. 2010 tax return See the Instructions for Form 1098-C. 2010 tax return Generally, the organization should complete Form 1098-C as the written acknowledgment to the donor and the IRS. 2010 tax return The contents of the acknowledgment depend upon whether the organization: Sells a qualified vehicle without any significant intervening use or material improvement, Intends to make a significant intervening use of or material improvement to a qualified vehicle prior to sale, or Sells a qualified vehicle to a needy individual at a price significantly below fair market value, or a gratuitous transfer to a needy individual in direct furtherance of a charitable purpose of the organization of relieving the poor and distressed or the underprivileged who are in need of a means of transportation. 2010 tax return For more information on the acknowledgment, see Notice 2005-44, 2005-25 I. 2010 tax return R. 2010 tax return B. 2010 tax return 1287, at www. 2010 tax return irs. 2010 tax return gov/irb/2005-25_IRB/2005-25_IRB/ar09. 2010 tax return html. 2010 tax return Material improvements or significant intervening use. 2010 tax return   To constitute significant intervening use, the organization must actually use the vehicle to substantially further the organization's regularly conducted activities, and the use must be significant, not incidental. 2010 tax return Factors in determining whether a use is a significant intervening use depend on the nature, extent, frequency, and duration. 2010 tax return For this purpose, use includes providing transportation on a regular basis for a significant period of time or significant use directly related to training in vehicle repair. 2010 tax return Use does not include the use of a vehicle to provide training in business skills, such as marketing or sales. 2010 tax return Examples of significant use include: Driving a vehicle every day for 1 year to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. 2010 tax return Driving a vehicle for 10,000 miles over a 1-year period to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. 2010 tax return   Material improvements include major repairs and additions that improve the condition of the vehicle in a manner that significantly increases the value. 2010 tax return To be a material improvement, the improvement cannot be funded by an additional payment to the organization from the donor of the vehicle. 2010 tax return Material improvements do not include cleaning, minor repairs, routine maintenance, painting, removal of dents or scratches, cleaning or repair of upholstery, and installation of theft deterrent devices. 2010 tax return Penalties. 2010 tax return   If your charitable organization receives contributions of used motor vehicles, boats, and airplanes valued over $500 it may be subject to a penalty if it knowingly: Fails to furnish an acknowledgement in a timely manner, showing the required information, or Furnishes a false or fraudulent acknowledgement of the contribution. 2010 tax return    Other penalties may apply. 2010 tax return See Part O in the 2012 General Instructions for Certain Information Returns. 2010 tax return   An acknowledgment containing a certification will be presumed to be false or fraudulent if the qualified vehicle is sold to a buyer other than a needy individual without a significant intervening use or material improvement within 6 months of the date of the contribution. 2010 tax return   If a charity sells a donated vehicle at auction, the IRS will not accept as substantiation an acknowledgment from the charity stating that the vehicle is to be transferred to a needy individual for significantly below fair market value. 2010 tax return Vehicles sold at auction are not sold at prices significantly below fair market value, and the IRS will not treat vehicles sold at auction as qualifying for this exception. 2010 tax return   The penalty for a false or fraudulent acknowledgment where the donee certifies that the vehicle will not be transferred for money, other property, or services before completion of material improvements or significant intervening use or the donee certifies that the vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of the donee's charitable purpose is the larger of $5,000 or the claimed value of the vehicle multiplied by 39. 2010 tax return 6%. 2010 tax return   The penalty for an acknowledgment relating to a qualified vehicle being sold in an arm's length transaction to an unrelated party is the larger of the gross proceeds from the sale or the sales price stated in the acknowledgment multiplied by 39. 2010 tax return 6%. 2010 tax return Qualified Intellectual Property A taxpayer who contributes qualified intellectual property to a charity may be entitled to a charitable deduction, in addition to any initial deduction allowed in the year of contribution. 2010 tax return The additional deduction is based on a specified percentage of the qualified donee income with respect to the qualified intellectual property. 2010 tax return To qualify for the additional charitable deduction, the donor must provide notice to the donee at the time of the contribution that the donor intends to treat the contribution as qualified intellectual property contribution for purposes of sections 170(m) and 6050L. 2010 tax return Every donee organization described in section 170(c) (except a private foundation as defined in section 509(a) that is not described in section 170(b)(1)(F)) that receives or accrues net income from a charitable gift of qualified intellectual property must file Form 8899. 2010 tax return Form 8899. 2010 tax return   Form 8899, Notice of Income From Donated Intellectual Property, is used by a donee to report net income from qualified intellectual property to the donor of the property and to the IRS and is due by the last day of the first full month following the close of the donee’s tax year. 2010 tax return This form must be filed for each tax year of the donee in which the donated property produces net income, but only if all or part of that tax year occurs during the 10-year period beginning on the date of the contribution and that tax year does not begin after the expiration of the legal life of the donated property. 2010 tax return Qualified donee income. 2010 tax return   Qualified donee income is any net income received by or accrued to the donee that is properly allocable to the qualified intellectual property for the tax year of the donee which ends within or with the tax year of the donor. 2010 tax return Income is not treated as allocated to qualified intellectual property if it is received or accrued after the earlier of the expiration of the legal life of the qualified intellectual property, or the 10-year period beginning with the date of
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The 2010 Tax Return

2010 tax return 3. 2010 tax return   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. 2010 tax return Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. 2010 tax return In addition, you will contribute matching or nonelective contributions. 2010 tax return SIMPLE plans can only be maintained on a calendar-year basis. 2010 tax return A SIMPLE plan can be set up in either of the following ways. 2010 tax return Using SIMPLE IRAs (SIMPLE IRA plan). 2010 tax return As part of a 401(k) plan (SIMPLE 401(k) plan). 2010 tax return Many financial institutions will help you set up a SIMPLE plan. 2010 tax return SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. 2010 tax return Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. 2010 tax return For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. 2010 tax return Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. 2010 tax return You meet the employee limit. 2010 tax return You do not maintain another qualified plan unless the other plan is for collective bargaining employees. 2010 tax return Employee limit. 2010 tax return   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. 2010 tax return Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. 2010 tax return Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). 2010 tax return   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. 2010 tax return Grace period for employers who cease to meet the 100-employee limit. 2010 tax return   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. 2010 tax return   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. 2010 tax return Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. 2010 tax return Coverage under the plan has not significantly changed during the grace period. 2010 tax return The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. 2010 tax return    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. 2010 tax return Other qualified plan. 2010 tax return   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. 2010 tax return Exception. 2010 tax return   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. 2010 tax return Who Can Participate in a SIMPLE IRA Plan? Eligible employee. 2010 tax return   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. 2010 tax return The term “employee” includes a self-employed individual who received earned income. 2010 tax return   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. 2010 tax return For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. 2010 tax return However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. 2010 tax return Excludable employees. 2010 tax return   The following employees do not need to be covered under a SIMPLE IRA plan. 2010 tax return Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. 2010 tax return Nonresident alien employees who have received no U. 2010 tax return S. 2010 tax return source wages, salaries, or other personal services compensation from you. 2010 tax return Compensation. 2010 tax return   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. 2010 tax return Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. 2010 tax return If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. 2010 tax return How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. 2010 tax return Each form is a model savings incentive match plan for employees (SIMPLE) plan document. 2010 tax return Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. 2010 tax return Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. 2010 tax return Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. 2010 tax return The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. 2010 tax return Keep the original form. 2010 tax return Do not file it with the IRS. 2010 tax return Other uses of the forms. 2010 tax return   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. 2010 tax return Meeting employer notification requirements for the SIMPLE IRA plan. 2010 tax return Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. 2010 tax return Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. 2010 tax return Deadline for setting up a SIMPLE IRA plan. 2010 tax return   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. 2010 tax return This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. 2010 tax return If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. 2010 tax return A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. 2010 tax return Setting up a SIMPLE IRA. 2010 tax return   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. 2010 tax return A SIMPLE IRA must be set up for each eligible employee. 2010 tax return Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. 2010 tax return   A SIMPLE IRA cannot be a Roth IRA. 2010 tax return Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. 2010 tax return Deadline for setting up a SIMPLE IRA. 2010 tax return   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. 2010 tax return See Time limits for contributing funds , later, under Contribution Limits. 2010 tax return Credit for startup costs. 2010 tax return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. 2010 tax return For more information, see Credit for startup costs under Reminders, earlier. 2010 tax return Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. 2010 tax return The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. 2010 tax return Your decision to make either matching contributions or nonelective contributions (discussed later). 2010 tax return A summary description provided by the financial institution. 2010 tax return Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. 2010 tax return Election period. 2010 tax return   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). 2010 tax return However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. 2010 tax return   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. 2010 tax return For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. 2010 tax return Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. 2010 tax return Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. 2010 tax return You, as the employer, must make either matching contributions or nonelective contributions, defined later. 2010 tax return No other contributions can be made to the SIMPLE IRA plan. 2010 tax return These contributions, which you can deduct, must be made timely. 2010 tax return See Time limits for contributing funds , later. 2010 tax return Salary reduction contributions. 2010 tax return   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. 2010 tax return These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. 2010 tax return You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. 2010 tax return   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. 2010 tax return Catch-up contributions. 2010 tax return   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. 2010 tax return The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. 2010 tax return Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. 2010 tax return However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. 2010 tax return The catch-up contribution limit. 2010 tax return The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. 2010 tax return Employer matching contributions. 2010 tax return   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. 2010 tax return This requirement does not apply if you make nonelective contributions as discussed later. 2010 tax return Example. 2010 tax return In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. 2010 tax return Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. 2010 tax return You make 3% matching contributions. 2010 tax return The total contribution you make for John is $2,000, figured as follows. 2010 tax return Salary reduction contributions ($25,000 × . 2010 tax return 05) $1,250 Employer matching contribution ($25,000 × . 2010 tax return 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. 2010 tax return Salary reduction contributions ($40,000 × . 2010 tax return 10) $4,000 Employer matching contribution ($40,000 × . 2010 tax return 03) 1,200 Total contributions $5,200 Lower percentage. 2010 tax return   If you choose a matching contribution less than 3%, the percentage must be at least 1%. 2010 tax return You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. 2010 tax return You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. 2010 tax return Nonelective contributions. 2010 tax return   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. 2010 tax return If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. 2010 tax return Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). 2010 tax return   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. 2010 tax return Example 1. 2010 tax return In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. 2010 tax return Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. 2010 tax return You make a 2% nonelective contribution. 2010 tax return Both of you are under age 50. 2010 tax return The total contribution you make for Jane is $4,320, figured as follows. 2010 tax return Salary reduction contributions ($36,000 × . 2010 tax return 10) $3,600 2% nonelective contributions ($36,000 × . 2010 tax return 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. 2010 tax return Salary reduction contributions ($50,000 × . 2010 tax return 10) $5,000 2% nonelective contributions ($50,000 × . 2010 tax return 02) 1,000 Total contributions $6,000 Example 2. 2010 tax return Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. 2010 tax return Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . 2010 tax return 02) 1,500 Total contributions $13,500 Time limits for contributing funds. 2010 tax return   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. 2010 tax return You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. 2010 tax return Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. 2010 tax return When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. 2010 tax return You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. 2010 tax return Example 1. 2010 tax return Your tax year is the fiscal year ending June 30. 2010 tax return Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. 2010 tax return Example 2. 2010 tax return You are a sole proprietor whose tax year is the calendar year. 2010 tax return Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. 2010 tax return Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. 2010 tax return For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120 or Form 1120S. 2010 tax return Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. 2010 tax return (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. 2010 tax return ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. 2010 tax return SIMPLE IRA plan contributions are not subject to federal income tax withholding. 2010 tax return However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. 2010 tax return Matching and nonelective contributions are not subject to these taxes. 2010 tax return Reporting on Form W-2. 2010 tax return   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. 2010 tax return You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. 2010 tax return You must also include them in box 12. 2010 tax return Mark the “Retirement plan” checkbox in box 13. 2010 tax return For more information, see the Form W-2 instructions. 2010 tax return Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. 2010 tax return Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. 2010 tax return However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. 2010 tax return Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. 2010 tax return Early withdrawals generally are subject to a 10% additional tax. 2010 tax return However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. 2010 tax return More information. 2010 tax return   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. 2010 tax return More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. 2010 tax return SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. 2010 tax return A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. 2010 tax return However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. 2010 tax return Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. 2010 tax return If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. 2010 tax return See Catch-up contributions , earlier under Contribution Limits. 2010 tax return You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. 2010 tax return No other contributions can be made to the trust. 2010 tax return No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. 2010 tax return The employee's rights to any contributions are nonforfeitable. 2010 tax return No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). 2010 tax return Compensation is defined earlier in this chapter. 2010 tax return Employee notification. 2010 tax return   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. 2010 tax return See Notification Requirement in this chapter. 2010 tax return Credit for startup costs. 2010 tax return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. 2010 tax return For more information, see Credit for startup costs under Reminders, earlier. 2010 tax return Note on Forms. 2010 tax return   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. 2010 tax return To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. 2010 tax return Prev  Up  Next   Home   More Online Publications