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2012 Tax Returns Online

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2012 Tax Returns Online

2012 tax returns online Publication 15-B - Introductory Material Table of Contents Future Developments What's New Reminders Introduction Future Developments For the latest information about developments related to Publication 15-B, such as legislation enacted after it was published, go to www. 2012 tax returns online irs. 2012 tax returns online gov/pub15b. 2012 tax returns online What's New Cents-per-mile rule. 2012 tax returns online  The business mileage rate for 2014 is 56 cents per mile. 2012 tax returns online You may use this rate to reimburse an employee for business use of a personal vehicle, and under certain conditions, you may use the rate under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee. 2012 tax returns online See Cents-Per-Mile Rule in section 3. 2012 tax returns online Qualified parking exclusion and commuter transportation benefit. 2012 tax returns online . 2012 tax returns online  For 2014, the monthly exclusion for qualified parking is $250 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $130. 2012 tax returns online See Qualified Transportation Benefits in section 2. 2012 tax returns online Same-sex Marriage. 2012 tax returns online  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 2012 tax returns online For more information, see Revenue Ruling 2013-17, 2013-38 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 201, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2013-38_IRB/ar07. 2012 tax returns online html. 2012 tax returns online Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. 2012 tax returns online Notice 2013-61, 2013-44 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 432, is available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2013-44_IRB/ar10. 2012 tax returns online html. 2012 tax returns online Recent changes to certain rules for cafeteria plans. 2012 tax returns online  Notice 2013-71, 2013-47 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 532, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2013-47_IRB/ar10. 2012 tax returns online html, discusses recent changes to the “use-or-lose” rule for health flexible spending arrangements (FSAs) and clarifies the transitional rule for 2013-2014 non-calendar year salary reduction elections. 2012 tax returns online See Notice 2013-71 for details on these changes. 2012 tax returns online Reminders $2,500 limit on a health flexible spending arrangement (FSA). 2012 tax returns online  For plan years beginning after December 31, 2012, a cafeteria plan may not allow an employee to request salary reduction contributions for a health FSA in excess of $2,500. 2012 tax returns online For plan years beginning after December 31, 2013, the limit is unchanged at $2,500. 2012 tax returns online For more information, see Cafeteria Plans in section 1. 2012 tax returns online Additional Medicare Tax withholding. 2012 tax returns online  In addition to withholding Medicare tax at 1. 2012 tax returns online 45%, you must withhold a 0. 2012 tax returns online 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 tax returns online You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2012 tax returns online Additional Medicare Tax is only imposed on the employee. 2012 tax returns online There is no employer share of Additional Medicare Tax. 2012 tax returns online All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 2012 tax returns online Unless otherwise noted, references to Medicare tax include Additional Medicare Tax. 2012 tax returns online For more information on what wages are subject to Medicare tax, see Table 2-1, later, and the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15, (Circular E), Employer's Tax Guide. 2012 tax returns online For more information on Additional Medicare Tax, visit IRS. 2012 tax returns online gov and enter “Additional Medicare Tax” in the search box. 2012 tax returns online Photographs of missing children. 2012 tax returns online  The IRS is a proud partner with the National Center for Missing and Exploited Children. 2012 tax returns online Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2012 tax returns online You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2012 tax returns online Introduction This publication supplements Publication 15 (Circular E), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. 2012 tax returns online It contains information for employers on the employment tax treatment of fringe benefits. 2012 tax returns online Comments and suggestions. 2012 tax returns online   We welcome your comments about this publication and your suggestions for future editions. 2012 tax returns online   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2012 tax returns online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2012 tax returns online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2012 tax returns online   You can also send us comments from www. 2012 tax returns online irs. 2012 tax returns online gov/formspubs. 2012 tax returns online Click on More Information and then click on Comment on Tax Forms and Publications. 2012 tax returns online   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2012 tax returns online Prev  Up  Next   Home   More Online Publications
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The Individual Shared Responsibility Provision

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals share the responsibility for health insurance coverage beginning in 2014. Many people already have qualifying health insurance coverage (called minimum essential coverage) and do not need to do anything more than maintain that coverage.

The individual shared responsibility provision requires you and each member of your family to either:

  • Have minimum essential coverage, or
  • Have an exemption from the responsibility to have minimum essential coverage, or
  • Make a shared responsibility payment when you file your 2014 federal income tax return in 2015.  

You will report minimum essential coverage, report exemptions, or make any individual shared responsibility payment when you file your 2014 federal income tax return in 2015.

Minimum Essential Coverage

 

If you and your family need to acquire minimum essential coverage, you may have several options.  They include:

  • Health insurance coverage provided by your employer,
  • Health insurance purchased through the Health Insurance Marketplace in the area where you live, where you may qualify for financial assistance,
  • Coverage provided under a government-sponsored program for which you are eligible (including Medicare, Medicaid, and health care programs for veterans),
  • Health insurance purchased directly from an insurance company, and
  • Other health insurance coverage that is recognized by the Department of Health & Human Services as minimum essential coverage.

U.S. citizens who are residents of a foreign country for an entire year, and residents of U.S. territories, are deemed to have minimum essential coverage. See questions 11 and 12 of our Questions and Answers for more information.  

For purposes of the individual shared responsibility payment, you are considered to have minimum essential coverage for the entire month as long as you have minimum essential coverage for at least one day during that month. For example, if you start a new job on June 26 and are covered under your employer’s health coverage starting on that day, you’re treated as having coverage for the entire month of June. Similarly, if you’re eligible for an exemption for any one day of a month, you’re treated as exempt for the entire month.

For more information about minimum essential coverage, check this minimum essential coverage chart and see questions 14-20 of our Questions and Answers.  

You can learn more at HealthCare.gov about which health insurance options are available to you, how to purchase health insurance coverage, and how to get financial assistance with the cost of insurance. If you purchase health insurance through the Marketplace and you meet certain requirements, you may be eligible for a premium tax credit to help pay your premiums. Learn more about the premium tax credit. The deadline for the initial open enrollment period is March 31, 2014. You may also qualify for a special enrollment period (e.g., you move to a different state). See HealthCare.gov to learn about special enrollment periods.

Exemptions

 

You may be exempt from the requirement to maintain minimum essential coverage and thus will not have to make a shared responsibility payment when you file your 2014 federal income tax return in 2015, if you meet certain criteria.

You may be exempt if you:

  • Have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income,
  • Have a gap in coverage for less than three consecutive months, or
  • Qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement.

Because of the Affordable Care Act, more Americans have access to coverage that is affordable. However, if there is no coverage available to you and your family that costs less than eight percent of your household income, you can qualify for an exemption.  

An exemption applies to individuals who purchase their insurance through the Marketplace during the initial enrollment period for 2014, which runs through March 31, 2014. This hardship exemption will apply from January 1, 2014, until the start of your health care coverage, which if you enroll between March 16 and March 31 would generally be May 1. (See this HHS Question and Answer  for more information.) Another hardship exemption may apply if you have been notified that your health insurance policy will not be renewed and you consider the other plans available to you unaffordable. (See this HHS guidance and Questions and Answers  for more information.)

How you get an exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, others only from the IRS, and yet others from either the Marketplace or the IRS. 

Learn more about exemptions in this chart and in questions 21-24 of our Questions and Answers. Also, see Healthcare.gov for more information on hardship exemptions.

Reporting Coverage or Exemptions

 

The individual shared responsibility provision goes into effect in 2014. You won’t need to report minimum essential coverage or exemptions or make any individual shared responsibility payment until you file your 2014 federal income tax return in 2015. Information will be made available later about how to report your coverage or exemption (or make a payment) on your 2014 income tax return.

Making a Payment

 

If you or any of your dependents don’t have minimum essential coverage and don’t have an exemption, you will need to make an individual shared responsibility payment on your tax return. It is important to remember that choosing to make the individual shared responsibility payment instead of purchasing minimum essential coverage means you will also have to pay the entire cost of all your medical care. You won't be protected from the kind of very high medical bills that can sometimes lead to bankruptcy.

If you must make an individual shared responsibility payment, the annual payment amount is the greater of a percentage of your household income or a flat dollar amount, but is capped at the national average premium for a bronze level health plan available through the Marketplace. You will owe 1/12th of the annual payment for each month you or your dependent(s) don’t have either coverage or an exemption.

For 2014, the annual payment amount is:

  • The greater of:
    • 1 percent of your household income that is above the tax return filing threshold for your filing status, or
    • Your family's flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285,
  • But capped at the cost of the national average premium for a bronze level health plan available through the Marketplace in 2014.

Check out these basic examples of the payment calculation and the federal tax filing requirement thresholds. For more detailed examples, see the individual shared responsibility provision final regulations.

The percentages and flat dollar amounts increase over the first three years. In 2015, the income percentage increases to 2 percent of household income and the flat dollar amount increases to $325 per adult ($162.50 per child under 18). In 2016, these figures increase to 2.5 percent of household income and $695 per adult ($347.50 per child under 18). After 2016, these figures increase with inflation. 

Information will be made available later about how you will account for the payment on your 2014 federal income tax return filed in 2015.

More Information

 

More detailed information about the individual shared responsibility provision is available in our Questions and Answers. The Department of the Treasury and the IRS have issued the following legal guidance related to the individual shared responsibility provision, including detailed examples of the payment calculation:

  • Final regulations on the individual shared responsibility provision.
  • Notice 2013-42, which provides transition relief from the individual shared responsibility provision for employees and their families who are eligible to enroll in employer-sponsored health plans with a plan year other than a calendar year if the plan year begins in 2013 and ends in 2014.
  • Proposed regulations on minimum essential coverage and other rules regarding the shared responsibility provision.
  • Notice 2014-10, which provides transition relief for individuals enrolled in coverage under certain limited-benefit Medicaid and TRICARE programs that are not minimum essential coverage.

Additional information on exemptions and minimum essential coverage is available in final regulations issued by the Department of Health & Human Services.

Page Last Reviewed or Updated: 25-Mar-2014

The 2012 Tax Returns Online

2012 tax returns online 2. 2012 tax returns online   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. 2012 tax returns online ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. 2012 tax returns online In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. 2012 tax returns online Those cases are called “abusive tax shelters. 2012 tax returns online ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. 2012 tax returns online Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . 2012 tax returns online Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 2012 tax returns online Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. 2012 tax returns online They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. 2012 tax returns online Despite appearances to the contrary, the taxpayer generally risks little. 2012 tax returns online Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. 2012 tax returns online Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. 2012 tax returns online (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. 2012 tax returns online ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. 2012 tax returns online This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. 2012 tax returns online Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. 2012 tax returns online However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. 2012 tax returns online Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. 2012 tax returns online These provisions include the following. 2012 tax returns online Disclosure of reportable transactions. 2012 tax returns online   You must disclose information for each reportable transaction in which you participate. 2012 tax returns online See Reportable Transaction Disclosure Statement , later. 2012 tax returns online   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. 2012 tax returns online To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. 2012 tax returns online   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. 2012 tax returns online They must provide this number to all persons to whom they acted as a material advisor. 2012 tax returns online They must provide the number at the time the transaction is entered into. 2012 tax returns online If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. 2012 tax returns online For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. 2012 tax returns online Requirement to maintain list. 2012 tax returns online   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. 2012 tax returns online The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. 2012 tax returns online See Regulations section 301. 2012 tax returns online 6112-1 for more information (including what information is required to be included on the list). 2012 tax returns online Confidentiality privilege. 2012 tax returns online   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. 2012 tax returns online Appraisal requirement for donated property. 2012 tax returns online   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. 2012 tax returns online If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. 2012 tax returns online If you file electronically, see Form 8453, U. 2012 tax returns online S. 2012 tax returns online Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. 2012 tax returns online For more information about appraisals, including exceptions, see Publication 561. 2012 tax returns online Passive activity loss and credit limits. 2012 tax returns online   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. 2012 tax returns online For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. 2012 tax returns online Interest on penalties. 2012 tax returns online   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. 2012 tax returns online Accounting method restriction. 2012 tax returns online   Tax shelters generally cannot use the cash method of accounting. 2012 tax returns online Uniform capitalization rules. 2012 tax returns online   The uniform capitalization rules generally apply to producing property or acquiring it for resale. 2012 tax returns online Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. 2012 tax returns online For more information, see Publication 538. 2012 tax returns online Denial of deduction for interest on an underpayment due to a reportable transaction. 2012 tax returns online   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. 2012 tax returns online This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. 2012 tax returns online Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. 2012 tax returns online The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. 2012 tax returns online Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. 2012 tax returns online So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. 2012 tax returns online In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. 2012 tax returns online The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. 2012 tax returns online Investor Reporting You may be required to file a reportable transaction disclosure statement. 2012 tax returns online Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. 2012 tax returns online Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. 2012 tax returns online Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). 2012 tax returns online In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. 2012 tax returns online  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. 2012 tax returns online If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. 2012 tax returns online If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. 2012 tax returns online See Penalty for failure to disclose a reportable transaction , later under Penalties. 2012 tax returns online The following discussion briefly describes reportable transactions. 2012 tax returns online For more details, see the Instructions for Form 8886. 2012 tax returns online Reportable transaction. 2012 tax returns online   A reportable transaction is any of the following. 2012 tax returns online A listed transaction. 2012 tax returns online A confidential transaction. 2012 tax returns online A transaction with contractual protection. 2012 tax returns online A loss transaction. 2012 tax returns online A transaction of interest entered into after November 1, 2006. 2012 tax returns online Note. 2012 tax returns online Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. 2012 tax returns online Listed transaction. 2012 tax returns online   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. 2012 tax returns online These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. 2012 tax returns online For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2009-31_IRB/ar07. 2012 tax returns online html. 2012 tax returns online Confidential transaction. 2012 tax returns online   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. 2012 tax returns online A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. 2012 tax returns online The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. 2012 tax returns online Transaction with contractual protection. 2012 tax returns online   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. 2012 tax returns online For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2007-07_IRB/ar15. 2012 tax returns online html. 2012 tax returns online Loss transaction. 2012 tax returns online   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. 2012 tax returns online A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. 2012 tax returns online   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. 2012 tax returns online For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2004-50_IRB/ar11. 2012 tax returns online html. 2012 tax returns online Transaction of interest. 2012 tax returns online   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. 2012 tax returns online The IRS has identified the following transactions of interest. 2012 tax returns online “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 545, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2007-36_IRB/ar20. 2012 tax returns online html. 2012 tax returns online Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 544, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2007-36_IRB/ar19. 2012 tax returns online html. 2012 tax returns online Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 1194, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2008-47_IRB/ar11. 2012 tax returns online html. 2012 tax returns online Certain transactions involving a U. 2012 tax returns online S. 2012 tax returns online taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. 2012 tax returns online R. 2012 tax returns online B. 2012 tax returns online 312, available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2009-03_IRB/ar10. 2012 tax returns online html. 2012 tax returns online   For updates to this list, go to www. 2012 tax returns online irs. 2012 tax returns online gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. 2012 tax returns online Penalties Investing in an abusive tax shelter may lead to substantial expenses. 2012 tax returns online First, the promoter generally charges a substantial fee. 2012 tax returns online If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. 2012 tax returns online You may also be subject to the penalty for failure to pay tax. 2012 tax returns online These penalties are explained in the following paragraphs. 2012 tax returns online Accuracy-related penalties. 2012 tax returns online   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). 2012 tax returns online Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. 2012 tax returns online Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. 2012 tax returns online   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. 2012 tax returns online   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). 2012 tax returns online Negligence or disregard of rules or regulations. 2012 tax returns online   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. 2012 tax returns online The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. 2012 tax returns online    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. 2012 tax returns online It also includes any failure to keep adequate books and records. 2012 tax returns online A return position that has a reasonable basis is not negligence. 2012 tax returns online   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. 2012 tax returns online   The penalty for disregard of rules and regulations can be avoided if all the following are true. 2012 tax returns online You keep adequate books and records. 2012 tax returns online You have a reasonable basis for your position on the tax issue. 2012 tax returns online You make an adequate disclosure of your position. 2012 tax returns online Use Form 8275 to make your disclosure and attach it to your return. 2012 tax returns online To disclose a position contrary to a regulation, use Form 8275-R. 2012 tax returns online Use Form 8886 to disclose a reportable transaction (discussed earlier). 2012 tax returns online Substantial understatement of tax. 2012 tax returns online   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. 2012 tax returns online An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. 2012 tax returns online The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. 2012 tax returns online   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. 2012 tax returns online In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. 2012 tax returns online Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. 2012 tax returns online   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. 2012 tax returns online An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. 2012 tax returns online Substantial valuation misstatement. 2012 tax returns online   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. 2012 tax returns online The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. 2012 tax returns online You underpaid your tax by more than $5,000 because of the misstatement. 2012 tax returns online You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. 2012 tax returns online   You may be assessed a penalty of 40% for a gross valuation misstatement. 2012 tax returns online If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. 2012 tax returns online The penalty rate is also 40% if the property's correct value or adjusted basis is zero. 2012 tax returns online Transaction lacking economic substance. 2012 tax returns online   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. 2012 tax returns online For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. 2012 tax returns online   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. 2012 tax returns online   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. 2012 tax returns online   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. 2012 tax returns online Relevant facts include any facts affecting the tax treatment of the transaction. 2012 tax returns online    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. 2012 tax returns online Undisclosed foreign financial asset understatement. 2012 tax returns online   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. 2012 tax returns online An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. 2012 tax returns online The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. 2012 tax returns online Any foreign business you control, reportable on Form 5471, Information Return of U. 2012 tax returns online S. 2012 tax returns online Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. 2012 tax returns online S. 2012 tax returns online Persons With Respect to Certain Foreign Partnerships. 2012 tax returns online Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. 2012 tax returns online S. 2012 tax returns online Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. 2012 tax returns online Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. 2012 tax returns online    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. 2012 tax returns online See the Instructions for Form 8938 for details. 2012 tax returns online    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. 2012 tax returns online Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. 2012 tax returns online Penalty for incorrect appraisals. 2012 tax returns online   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. 2012 tax returns online For details on the penalty amount and exceptions, see Publication 561. 2012 tax returns online Penalty for failure to disclose a reportable transaction. 2012 tax returns online   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). 2012 tax returns online For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). 2012 tax returns online This penalty is in addition to any other penalty that may be imposed. 2012 tax returns online   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. 2012 tax returns online For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. 2012 tax returns online irs. 2012 tax returns online gov/irb/2007-09_IRB/ar12. 2012 tax returns online html. 2012 tax returns online Accuracy-related penalty for a reportable transaction understatement. 2012 tax returns online   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. 2012 tax returns online This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. 2012 tax returns online The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. 2012 tax returns online You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. 2012 tax returns online The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. 2012 tax returns online   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. 2012 tax returns online Civil fraud penalty. 2012 tax returns online   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. 2012 tax returns online Joint return. 2012 tax returns online   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. 2012 tax returns online Failure to pay tax. 2012 tax returns online   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. 2012 tax returns online Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. 2012 tax returns online Prev  Up  Next   Home   More Online Publications