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Federal Income Tax Forms

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Federal Income Tax Forms

Federal income tax forms 4. Federal income tax forms   Sales and Trades of Investment Property Table of Contents IntroductionNominees. Federal income tax forms Topics - This chapter discusses: Useful Items - You may want to see: What Is a Sale or Trade?Dividend versus sale or trade. Federal income tax forms Worthless Securities Constructive Sales of Appreciated Financial Positions Section 1256 Contracts Marked to Market Basis of Investment PropertyCost Basis Basis Other Than Cost Adjusted Basis Stocks and Bonds How To Figure Gain or LossFair market value. Federal income tax forms Debt paid off. Federal income tax forms Payment of cash. Federal income tax forms Special Rules for Mutual Funds Nontaxable TradesLike-Kind Exchanges Corporate Stocks Exchange of Shares In One Mutual Fund For Shares In Another Mutual Fund Insurance Policies and Annuities U. Federal income tax forms S. Federal income tax forms Treasury Notes or Bonds Transfers Between Spouses Related Party TransactionsGain on Sale or Trade of Depreciable Property Capital Gains and LossesCapital or Ordinary Gain or Loss Holding Period Nonbusiness Bad Debts Short Sales Wash Sales Options Straddles Sales of Stock to ESOPs or Certain Cooperatives Rollover of Gain From Publicly Traded Securities Gains on Qualified Small Business Stock Exclusion of Gain From DC Zone Assets Reporting Capital Gains and LossesException 1. Federal income tax forms Exception 2. Federal income tax forms Section 1256 contracts and straddles. Federal income tax forms Market discount bonds. Federal income tax forms File Form 1099-B or Form 1099-S with the IRS. Federal income tax forms Capital Losses Capital Gain Tax Rates Special Rules for Traders in SecuritiesHow To Report Introduction This chapter explains the tax treatment of sales and trades of investment property. Federal income tax forms Investment property. Federal income tax forms   This is property that produces investment income. Federal income tax forms Examples include stocks, bonds, and Treasury bills and notes. Federal income tax forms Property used in a trade or business is not investment property. Federal income tax forms Form 1099-B. Federal income tax forms   If you sold property such as stocks, bonds, mutual funds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Federal income tax forms You should receive the statement by February 15 of the next year. Federal income tax forms It will show the gross proceeds from the sale. Federal income tax forms The IRS will also get a copy of Form 1099-B from the broker. Federal income tax forms   Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Federal income tax forms If you sold a covered security in 2013, your broker will send you a Form 1099-B (or substitute statement) that shows your basis. Federal income tax forms This will help you complete Form 8949. Federal income tax forms Generally, a covered security is a security you acquired after 2010, with certain exceptions explained in the Instructions for Form 8949. Federal income tax forms    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in this chapter. Federal income tax forms Also see the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040). Federal income tax forms Nominees. Federal income tax forms   If someone receives gross proceeds as a nominee for you, that person will give you a Form 1099-B, which will show gross proceeds received on your behalf. Federal income tax forms   If you receive a Form 1099-B that includes gross proceeds belonging to another person, see Nominees , later under Reporting Capital Gains and Losses for more information. Federal income tax forms Other property transactions. Federal income tax forms   Certain transfers of property are discussed in other IRS publications. Federal income tax forms These include: Sale of your main home, discussed in Publication 523, Selling Your Home; Installment sales, covered in Publication 537; Various types of transactions involving business property, discussed in Publication 544, Sales and Other Dispositions of Assets; Transfers of property at death, covered in Publication 559; and Disposition of an interest in a passive activity, discussed in Publication 925. Federal income tax forms Topics - This chapter discusses: What Is a Sale or Trade? , Basis of Investment Property , Adjusted Basis , How To Figure Gain or Loss , Nontaxable trades , Transfers Between Spouses , Related Party Transactions , Capital Gains and Losses , Reporting Capital Gains and Losses , and Special Rules for Traders in Securities . Federal income tax forms Useful Items - You may want to see: Publication 551 Basis of Assets Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 6781 Gains and Losses From Section 1256 Contracts and Straddles 8582 Passive Activity Loss Limitations 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Federal income tax forms What Is a Sale or Trade? This section explains what is a sale or trade. Federal income tax forms It also explains certain transactions and events that are treated as sales or trades. Federal income tax forms A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Federal income tax forms A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. Federal income tax forms Sale and purchase. Federal income tax forms   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Federal income tax forms The sale and purchase are two separate transactions. Federal income tax forms But see Like-Kind Exchanges under Nontaxable Trades, later. Federal income tax forms Redemption of stock. Federal income tax forms   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Federal income tax forms Dividend versus sale or trade. Federal income tax forms   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Federal income tax forms Both direct and indirect ownership of stock will be considered. Federal income tax forms The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend — see Dividends and Other Distributions in chapter 1, There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Federal income tax forms Redemption or retirement of bonds. Federal income tax forms   A redemption or retirement of bonds or notes at their maturity generally is treated as a sale or trade. Federal income tax forms See Stocks, stock rights, and bonds and Discounted Debt Instruments under Capital or Ordinary Gain or Loss, later. Federal income tax forms   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Federal income tax forms For details, see Regulations section 1. Federal income tax forms 1001-3. Federal income tax forms Surrender of stock. Federal income tax forms   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Federal income tax forms The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Federal income tax forms Trade of investment property for an annuity. Federal income tax forms   The transfer of investment property to a corporation, trust, fund, foundation, or other organization, in exchange for a fixed annuity contract that will make guaranteed annual payments to you for life, is a taxable trade. Federal income tax forms If the present value of the annuity is more than your basis in the property traded, you have a taxable gain in the year of the trade. Federal income tax forms Figure the present value of the annuity according to factors used by commercial insurance companies issuing annuities. Federal income tax forms Transfer by inheritance. Federal income tax forms   The transfer of property of a decedent to the executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or other disposition. Federal income tax forms No taxable gain or deductible loss results from the transfer. Federal income tax forms Termination of certain rights and obligations. Federal income tax forms   The cancellation, lapse, expiration, or other termination of a right or obligation (other than a securities futures contract) with respect to property that is a capital asset (or that would be a capital asset if you acquired it) is treated as a sale. Federal income tax forms Any gain or loss is treated as a capital gain or loss. Federal income tax forms   This rule does not apply to the retirement of a debt instrument. Federal income tax forms See Redemption or retirement of bonds , earlier. Federal income tax forms Worthless Securities Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Federal income tax forms This affects whether your capital loss is long term or short term. Federal income tax forms See Holding Period , later. Federal income tax forms Worthless securities also include securities that you abandon after March 12, 2008. Federal income tax forms To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Federal income tax forms All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Federal income tax forms If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Federal income tax forms Do not deduct them in the year the stock became worthless. Federal income tax forms How to report loss. Federal income tax forms   Report worthless securities in Form 8949, Part I or Part II, whichever applies. Federal income tax forms    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Federal income tax forms See Form 8949 and the Instructions for Form 8949. Federal income tax forms Filing a claim for refund. Federal income tax forms   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Federal income tax forms You must use Form 1040X, Amended U. Federal income tax forms S. Federal income tax forms Individual Income Tax Return, to amend your return for the year the security became worthless. Federal income tax forms You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Federal income tax forms (Claims not due to worthless securities or bad debts generally must be filed within 3 years from the date a return is filed, or 2 years from the date the tax is paid, whichever is later. Federal income tax forms ) For more information about filing a claim, see Publication 556. Federal income tax forms Constructive Sales of Appreciated Financial Positions You are treated as having made a constructive sale when you enter into certain transactions involving an appreciated financial position (defined later) in stock, a partnership interest, or certain debt instruments. Federal income tax forms You must recognize gain as if the position were disposed of at its fair market value on the date of the constructive sale. Federal income tax forms This gives you a new holding period for the position that begins on the date of the constructive sale. Federal income tax forms Then, when you close the transaction, you reduce your gain (or increase your loss) by the gain recognized on the constructive sale. Federal income tax forms Constructive sale. Federal income tax forms   You are treated as having made a constructive sale of an appreciated financial position if you: Enter into a short sale of the same or substantially identical property, Enter into an offsetting notional principal contract relating to the same or substantially identical property, Enter into a futures or forward contract to deliver the same or substantially identical property (including a forward contract that provides for cash settlement), or Acquire the same or substantially identical property (if the appreciated financial position is a short sale, an offsetting notional principal contract, or a futures or forward contract). Federal income tax forms   You are also treated as having made a constructive sale of an appreciated financial position if a person related to you enters into a transaction described above with a view toward avoiding the constructive sale treatment. Federal income tax forms For this purpose, a related person is any related party described under Related Party Transactions , later in this chapter. Federal income tax forms Exception for nonmarketable securities. Federal income tax forms   You are not treated as having made a constructive sale solely because you entered into a contract for sale of any stock, debt instrument, or partnership interest that is not a marketable security if it settles within 1 year of the date you enter into it. Federal income tax forms Exception for certain closed transactions. Federal income tax forms   Do not treat a transaction as a constructive sale if all of the following are true. Federal income tax forms You closed the transaction on or before the 30th day after the end of your tax year. Federal income tax forms You held the appreciated financial position throughout the 60-day period beginning on the date you closed the transaction. Federal income tax forms Your risk of loss was not reduced at any time during that 60-day period by holding certain other positions. Federal income tax forms   If a closed transaction is reestablished in a substantially similar position during the 60-day period beginning on the date the first transaction was closed, this exception still applies if the reestablished position is closed before the 30th day after the end of your tax year in which the first transaction was closed and, after that closing, (2) and (3) above are true. Federal income tax forms   This exception also applies to successive short sales of an entire appreciated financial position. Federal income tax forms For more information, see Revenue Ruling 2003-1 in Internal Revenue Bulletin 2003-3. Federal income tax forms This bulletin is available at www. Federal income tax forms irs. Federal income tax forms gov/pub/irs-irbs/irb03-03. Federal income tax forms pdf. Federal income tax forms Appreciated financial position. Federal income tax forms   This is any interest in stock, a partnership interest, or a debt instrument (including a futures or forward contract, a short sale, or an option) if disposing of the interest would result in a gain. Federal income tax forms Exceptions. Federal income tax forms   An appreciated financial position does not include the following. Federal income tax forms Any position from which all of the appreciation is accounted for under marked-to-market rules, including section 1256 contracts (described later under Section 1256 Contracts Marked to Market ). Federal income tax forms Any position in a debt instrument if: The position unconditionally entitles the holder to receive a specified principal amount, The interest payments (or other similar amounts) with respect to the position are payable at a fixed rate or a variable rate described in Regulations section 1. Federal income tax forms 860G-1(a)(3), and The position is not convertible, either directly or indirectly, into stock of the issuer (or any related person). Federal income tax forms Any hedge with respect to a position described in (2). Federal income tax forms Certain trust instruments treated as stock. Federal income tax forms   For the constructive sale rules, an interest in an actively traded trust is treated as stock unless substantially all of the value of the property held by the trust is debt that qualifies for the exception to the definition of an appreciated financial position (explained in (2) above). Federal income tax forms Sale of appreciated financial position. Federal income tax forms   A transaction treated as a constructive sale of an appreciated financial position is not treated as a constructive sale of any other appreciated financial position, as long as you continue to hold the original position. Federal income tax forms However, if you hold another appreciated financial position and dispose of the original position before closing the transaction that resulted in the constructive sale, you are treated as if, at the same time, you constructively sold the other appreciated financial position. Federal income tax forms Section 1256 Contracts Marked to Market If you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. Federal income tax forms Section 1256 Contract A section 1256 contract is any: Regulated futures contract, Foreign currency contract, Nonequity option, Dealer equity option, or Dealer securities futures contract. Federal income tax forms Exceptions. Federal income tax forms   A section 1256 contract does not include: Interest rate swaps, Currency swaps, Basis swaps, Interest rate caps, Interest rate floors, Commodity swaps, Equity swaps, Equity index swaps, Credit default swaps, or Similar agreements. Federal income tax forms For more details, including definitions of these terms, see section 1256. Federal income tax forms Regulated futures contract. Federal income tax forms   This is a contract that: Provides that amounts which must be deposited to, or can be withdrawn from, your margin account depend on daily market conditions (a system of marking to market), and Is traded on, or subject to the rules of, a qualified board of exchange. Federal income tax forms A qualified board of exchange is a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission, any board of trade or exchange approved by the Secretary of the Treasury, or a national securities exchange registered with the Securities and Exchange Commission. Federal income tax forms Foreign currency contract. Federal income tax forms   This is a contract that: Requires delivery of a foreign currency that has positions traded through regulated futures contracts (or settlement of which depends on the value of that type of foreign currency), Is traded in the interbank market, and Is entered into at arm's length at a price determined by reference to the price in the interbank market. Federal income tax forms   Bank forward contracts with maturity dates longer than the maturities ordinarily available for regulated futures contracts are considered to meet the definition of a foreign currency contract if the above three conditions are satisfied. Federal income tax forms   Special rules apply to certain foreign currency transactions. Federal income tax forms These transactions may result in ordinary gain or loss treatment. Federal income tax forms For details, see Internal Revenue Code section 988 and Regulations sections 1. Federal income tax forms 988-1(a)(7) and 1. Federal income tax forms 988-3. Federal income tax forms Nonequity option. Federal income tax forms   This is any listed option (defined later) that is not an equity option. Federal income tax forms Nonequity options include debt options, commodity futures options, currency options, and broad-based stock index options. Federal income tax forms A broad-based stock index is based on the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index). Federal income tax forms Warrants based on a stock index that are economically, substantially identical in all material respects to options based on a stock index are treated as options based on a stock index. Federal income tax forms Cash-settled options. Federal income tax forms   Cash-settled options based on a stock index and either traded on or subject to the rules of a qualified board of exchange are nonequity options if the Securities and Exchange Commission (SEC) determines that the stock index is broad based. Federal income tax forms   This rule does not apply to options established before the SEC determines that the stock index is broad based. Federal income tax forms Listed option. Federal income tax forms   This is any option traded on, or subject to the rules of, a qualified board or exchange (as discussed earlier under Regulated futures contract). Federal income tax forms A listed option, however, does not include an option that is a right to acquire stock from the issuer. Federal income tax forms Dealer equity option. Federal income tax forms   This is any listed option that, for an options dealer: Is an equity option, Is bought or granted by that dealer in the normal course of the dealer's business activity of dealing in options, and Is listed on the qualified board of exchange where that dealer is registered. Federal income tax forms   An “options dealer” is any person registered with an appropriate national securities exchange as a market maker or specialist in listed options. Federal income tax forms Equity option. Federal income tax forms   This is any option: To buy or sell stock, or That is valued directly or indirectly by reference to any stock or narrow-based security index. Federal income tax forms  Equity options include options on a group of stocks only if the group is a narrow-based stock index. Federal income tax forms Dealer securities futures contract. Federal income tax forms   For any dealer in securities futures contracts or options on those contracts, this is a securities futures contract (or option on such a contract) that: Is entered into by the dealer (or, in the case of an option, is purchased or granted by the dealer) in the normal course of the dealer's activity of dealing in this type of contract (or option), and Is traded on a qualified board or exchange (as defined under Regulated futures contract , earlier). Federal income tax forms A securities futures contract that is not a dealer securities futures contract is treated as described later under Securities Futures Contracts . Federal income tax forms Marked-to-Market Rules A section 1256 contract that you hold at the end of the tax year will generally be treated as sold at its fair market value on the last business day of the tax year, and you must recognize any gain or loss that results. Federal income tax forms That gain or loss is taken into account in figuring your gain or loss when you later dispose of the contract, as shown in the example under 60/40 rule, below. Federal income tax forms Hedging exception. Federal income tax forms   The marked-to-market rules do not apply to hedging transactions. Federal income tax forms See Hedging Transactions , later. Federal income tax forms 60/40 rule. Federal income tax forms   Under the marked-to-market system, 60% of your capital gain or loss will be treated as a long-term capital gain or loss, and 40% will be treated as a short-term capital gain or loss. Federal income tax forms This is true regardless of how long you actually held the property. Federal income tax forms Example. Federal income tax forms On June 22, 2012, you bought a regulated futures contract for $50,000. Federal income tax forms On December 31, 2012 (the last business day of your tax year), the fair market value of the contract was $57,000. Federal income tax forms You recognized a $7,000 gain on your 2012 tax return, treated as 60% long-term and 40% short-term capital gain. Federal income tax forms On February 1, 2013, you sold the contract for $56,000. Federal income tax forms Because you recognized a $7,000 gain on your 2012 return, you recognize a $1,000 loss ($57,000 − $56,000) on your 2013 tax return, treated as 60% long-term and 40% short-term capital loss. Federal income tax forms Limited partners or entrepreneurs. Federal income tax forms   The 60/40 rule does not apply to dealer equity options or dealer securities futures contracts that result in capital gain or loss allocable to limited partners or limited entrepreneurs (defined later under Hedging Transactions ). Federal income tax forms Instead, these gains or losses are treated as short term. Federal income tax forms Terminations and transfers. Federal income tax forms   The marked-to-market rules also apply if your obligation or rights under section 1256 contracts are terminated or transferred during the tax year. Federal income tax forms In this case, use the fair market value of each section 1256 contract at the time of termination or transfer to determine the gain or loss. Federal income tax forms Terminations or transfers may result from any offsetting, delivery, exercise, assignment, or lapse of your obligation or rights under section 1256 contracts. Federal income tax forms Loss carryback election. Federal income tax forms   An individual having a net section 1256 contracts loss (defined later), generally can elect to carry this loss back 3 years instead of carrying it over to the next year. Federal income tax forms See How To Report , later, for information about reporting this election on your return. Federal income tax forms   The loss carried back to any year under this election cannot be more than the net section 1256 contracts gain in that year. Federal income tax forms In addition, the amount of loss carried back to an earlier tax year cannot increase or produce a net operating loss for that year. Federal income tax forms   The loss is carried to the earliest carryback year first, and any unabsorbed loss amount can then be carried to each of the next 2 tax years. Federal income tax forms In each carryback year, treat 60% of the carryback amount as a long-term capital loss and 40% as a short-term capital loss from section 1256 contracts. Federal income tax forms   If only a portion of the net section 1256 contracts loss is absorbed by carrying the loss back, the unabsorbed portion can be carried forward, under the capital loss carryover rules, to the year following the loss. Federal income tax forms (See Capital Losses under Reporting Capital Gains and Losses, later. Federal income tax forms ) Figure your capital loss carryover as if, for the loss year, you had an additional short-term capital gain of 40% of the amount of net section 1256 contracts loss absorbed in the carryback years and an additional long-term capital gain of 60% of the absorbed loss. Federal income tax forms In the carryover year, treat any capital loss carryover from losses on section 1256 contracts as if it were a loss from section 1256 contracts for that year. Federal income tax forms Net section 1256 contracts loss. Federal income tax forms   This loss is the lesser of: The net capital loss for your tax year determined by taking into account only the gains and losses from section 1256 contracts, or The capital loss carryover to the next tax year determined without this election. Federal income tax forms Net section 1256 contracts gain. Federal income tax forms   This gain is the lesser of: The capital gain net income for the carryback year determined by taking into account only gains and losses from section 1256 contracts, or The capital gain net income for that year. Federal income tax forms  Figure your net section 1256 contracts gain for any carryback year without regard to the net section 1256 contracts loss for the loss year or any later tax year. Federal income tax forms Traders in section 1256 contracts. Federal income tax forms   Gain or loss from the trading of section 1256 contracts is capital gain or loss subject to the marked-to-market rules. Federal income tax forms However, this does not apply to contracts held for purposes of hedging property if any loss from the property would be an ordinary loss. Federal income tax forms Treatment of underlying property. Federal income tax forms   The determination of whether an individual's gain or loss from any property is ordinary or capital gain or loss is made without regard to the fact that the individual is actively engaged in dealing in or trading section 1256 contracts related to that property. Federal income tax forms How To Report If you disposed of regulated futures or foreign currency contracts in 2013 (or had unrealized profit or loss on these contracts that were open at the end of 2012 or 2013), you should receive Form 1099-B, or substitute statement, from your broker. Federal income tax forms Form 6781. Federal income tax forms   Use Part I of Form 6781 to report your gains and losses from all section 1256 contracts that are open at the end of the year or that were closed out during the year. Federal income tax forms This includes the amount shown in box 10 of Form 1099-B. Federal income tax forms Then enter the net amount of these gains and losses on Schedule D (Form 1040), line 4 or line 11, as appropriate. Federal income tax forms Include a copy of Form 6781 with your income tax return. Federal income tax forms   If the Form 1099-B you receive includes a straddle or hedging transaction, defined later, it may be necessary to show certain adjustments on Form 6781. Federal income tax forms Follow the Form 6781 instructions for completing Part I. Federal income tax forms Loss carryback election. Federal income tax forms   To carry back your loss under the election procedures described earlier, file Form 1040X or Form 1045, Application for Tentative Refund, for the year to which you are carrying the loss with an amended Form 6781 and an amended Schedule D (Form 1040) attached. Federal income tax forms Follow the instructions for completing Form 6781 for the loss year to make this election. Federal income tax forms Hedging Transactions The marked-to-market rules, described earlier, do not apply to hedging transactions. Federal income tax forms A transaction is a hedging transaction if both of the following conditions are met. Federal income tax forms You entered into the transaction in the normal course of your trade or business primarily to manage the risk of: Price changes or currency fluctuations on ordinary property you hold (or will hold), or Interest rate or price changes, or currency fluctuations, on your current or future borrowings or ordinary obligations. Federal income tax forms You clearly identified the transaction as being a hedging transaction before the close of the day on which you entered into it. Federal income tax forms This hedging transaction exception does not apply to transactions entered into by or for any syndicate. Federal income tax forms A syndicate is a partnership, S corporation, or other entity (other than a regular corporation) that allocates more than 35% of its losses to limited partners or limited entrepreneurs. Federal income tax forms A limited entrepreneur is a person who has an interest in an enterprise (but not as a limited partner) and who does not actively participate in its management. Federal income tax forms However, an interest is not considered held by a limited partner or entrepreneur if the interest holder actively participates (or did so for at least 5 full years) in the management of the entity, or is the spouse, child (including a legally adopted child), grandchild, or parent of an individual who actively participates in the management of the entity. Federal income tax forms Hedging loss limit. Federal income tax forms   If you are a limited partner or entrepreneur in a syndicate, the amount of a hedging loss you can claim is limited. Federal income tax forms A “hedging loss” is the amount by which the allowable deductions in a tax year that resulted from a hedging transaction (determined without regard to the limit) are more than the income received or accrued during the tax year from this transaction. Federal income tax forms   Any hedging loss allocated to you for the tax year is limited to your taxable income for that year from the trade or business in which the hedging transaction occurred. Federal income tax forms Ignore any hedging transaction items in determining this taxable income. Federal income tax forms If you have a hedging loss that is disallowed because of this limit, you can carry it over to the next tax year as a deduction resulting from a hedging transaction. Federal income tax forms   If the hedging transaction relates to property other than stock or securities, the limit on hedging losses applies if the limited partner or entrepreneur is an individual. Federal income tax forms   The limit on hedging losses does not apply to any hedging loss to the extent that it is more than all your unrecognized gains from hedging transactions at the end of the tax year that are from the trade or business in which the hedging transaction occurred. Federal income tax forms The term “unrecognized gain” has the same meaning as defined under Loss Deferral Rules in Straddles, later. Federal income tax forms Sale of property used in a hedge. Federal income tax forms   Once you identify personal property as being part of a hedging transaction, you must treat gain from its sale or exchange as ordinary income, not capital gain. Federal income tax forms Self-Employment Income Gains and losses derived in the ordinary course of a commodity or option dealer's trading in section 1256 contracts and property related to these contracts are included in net earnings from self-employment. Federal income tax forms See the Instructions for Schedule SE (Form 1040). Federal income tax forms In addition, the rules relating to contributions to self-employment retirement plans apply. Federal income tax forms For information on retirement plan contributions, see Publication 560 and Publication 590. Federal income tax forms Basis of Investment Property Basis is a way of measuring your investment in property for tax purposes. Federal income tax forms You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Federal income tax forms Investment property you buy normally has an original basis equal to its cost. Federal income tax forms If you get property in some way other than buying it, such as by gift or inheritance, its fair market value may be important in figuring the basis. Federal income tax forms Cost Basis The basis of property you buy is usually its cost. Federal income tax forms The cost is the amount you pay in cash, debt obligations, or other property or services. Federal income tax forms Unstated interest. Federal income tax forms   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, minus the amount considered to be unstated interest. Federal income tax forms You generally have unstated interest if your interest rate is less than the applicable federal rate. Federal income tax forms For more information, see Unstated Interest and Original Issue Discount (OID) in Publication 537. Federal income tax forms Basis Other Than Cost There are times when you must use a basis other than cost. Federal income tax forms In these cases, you may need to know the property's fair market value or the adjusted basis of the previous owner. Federal income tax forms Fair market value. Federal income tax forms   This is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Federal income tax forms Sales of similar property, around the same date, may be helpful in figuring fair market value. Federal income tax forms Property Received for Services If you receive investment property for services, you must include the property's fair market value in income. Federal income tax forms The amount you include in income then becomes your basis in the property. Federal income tax forms If the services were performed for a price that was agreed to beforehand, this price will be accepted as the fair market value of the property if there is no evidence to the contrary. Federal income tax forms Restricted property. Federal income tax forms   If you receive, as payment for services, property that is subject to certain restrictions, your basis in the property generally is its fair market value when it becomes substantially vested. Federal income tax forms Property becomes substantially vested when it is transferable or is no longer subject to substantial risk of forfeiture, whichever happens first. Federal income tax forms See Restricted Property in Publication 525 for more information. Federal income tax forms Bargain purchases. Federal income tax forms   If you buy investment property at less than fair market value, as payment for services, you must include the difference in income. Federal income tax forms Your basis in the property is the price you pay plus the amount you include in income. Federal income tax forms Property Received in Taxable Trades If you received investment property in trade for other property, the basis of the new property is its fair market value at the time of the trade unless you received the property in a nontaxable trade. Federal income tax forms Example. Federal income tax forms You trade A Company stock for B Company stock having a fair market value of $1,200. Federal income tax forms If the adjusted basis of the A Company stock is less than $1,200, you have a taxable gain on the trade. Federal income tax forms If the adjusted basis of the A Company stock is more than $1,200, you have a deductible loss on the trade. Federal income tax forms The basis of your B Company stock is $1,200. Federal income tax forms If you later sell the B Company stock for $1,300, you will have a gain of $100. Federal income tax forms Property Received in Nontaxable Trades If you have a nontaxable trade, you do not recognize gain or loss until you dispose of the property you received in the trade. Federal income tax forms See Nontaxable Trades , later. Federal income tax forms The basis of property you received in a nontaxable or partly nontaxable trade is generally the same as the adjusted basis of the property you gave up. Federal income tax forms Increase this amount by any cash you paid, additional costs you had, and any gain recognized. Federal income tax forms Reduce this amount by any cash or unlike property you received, any loss recognized, and any liability of yours that was assumed or treated as assumed. Federal income tax forms Property Received From Your Spouse If property is transferred to you from your spouse (or former spouse, if the transfer is incident to your divorce), your basis is the same as your spouse's or former spouse's adjusted basis just before the transfer. Federal income tax forms See Transfers Between Spouses , later. Federal income tax forms Recordkeeping. Federal income tax forms The transferor must give you the records necessary to determine the adjusted basis and holding period of the property as of the date of the transfer. Federal income tax forms Property Received as a Gift To figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you. Federal income tax forms Fair market value less than donor's adjusted basis. Federal income tax forms   If the fair market value of the property at the time of the gift was less than the donor's adjusted basis just before the gift, your basis for gain on its sale or other disposition is the same as the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Federal income tax forms Your basis for loss is its fair market value at the time of the gift plus or minus any required adjustments to basis during the period you hold the property. Federal income tax forms No gain or loss. Federal income tax forms   If you use the basis for figuring a gain and the result is a loss, and then use the basis for figuring a loss and the result is a gain, you will have neither a gain nor a loss. Federal income tax forms Example. Federal income tax forms You receive a gift of investment property having an adjusted basis of $10,000 at the time of the gift. Federal income tax forms The fair market value at the time of the gift is $9,000. Federal income tax forms You later sell the property for $9,500. Federal income tax forms You have neither gain nor loss. Federal income tax forms Your basis for figuring gain is $10,000, and $9,500 minus $10,000 results in a $500 loss. Federal income tax forms Your basis for figuring loss is $9,000, and $9,500 minus $9,000 results in a $500 gain. Federal income tax forms Fair market value equal to or more than donor's adjusted basis. Federal income tax forms   If the fair market value of the property at the time of the gift was equal to or more than the donor's adjusted basis just before the gift, your basis for gain or loss on its sale or other disposition is the donor's adjusted basis plus or minus any required adjustments to basis during the period you hold the property. Federal income tax forms Also, you may be allowed to add to the donor's adjusted basis all or part of any gift tax paid, depending on the date of the gift. Federal income tax forms Gift received before 1977. Federal income tax forms   If you received property as a gift before 1977, your basis in the property is the donor's adjusted basis increased by the total gift tax paid on the gift. Federal income tax forms However, your basis cannot be more than the fair market value of the gift at the time it was given to you. Federal income tax forms Example 1. Federal income tax forms You were given XYZ Company stock in 1976. Federal income tax forms At the time of the gift, the stock had a fair market value of $21,000. Federal income tax forms The donor's adjusted basis was $20,000. Federal income tax forms The donor paid a gift tax of $500 on the gift. Federal income tax forms Your basis for gain or loss is $20,500, the donor's adjusted basis plus the amount of gift tax paid. Federal income tax forms Example 2. Federal income tax forms The facts are the same as in Example 1 except that the gift tax paid was $1,500. Federal income tax forms Your basis is $21,000, the donor's adjusted basis plus the gift tax paid, but limited to the fair market value of the stock at the time of the gift. Federal income tax forms Gift received after 1976. Federal income tax forms   If you received property as a gift after 1976, your basis is the donor's adjusted basis increased by the part of the gift tax paid that was for the net increase in value of the gift. Federal income tax forms You figure this part by multiplying the gift tax paid on the gift by a fraction. Federal income tax forms The numerator (top part) is the net increase in value of the gift and the denominator (bottom part) is the amount of the gift. Federal income tax forms   The net increase in value of the gift is the fair market value of the gift minus the donor's adjusted basis. Federal income tax forms The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Federal income tax forms Example. Federal income tax forms In 2013, you received a gift of property from your mother. Federal income tax forms At the time of the gift, the property had a fair market value of $101,000 and an adjusted basis to her of $40,000. Federal income tax forms The amount of the gift for gift tax purposes was $87,000 ($101,000 minus the $14,000 annual exclusion), and your mother paid a gift tax of $21,000. Federal income tax forms You figure your basis in the following way: Fair market value $101,000 Minus: Adjusted basis 40,000 Net increase in value of gift $61,000 Gift tax paid $21,000 Multiplied by . Federal income tax forms 701 ($61,000 ÷ $87,000) . Federal income tax forms 701 Gift tax due to net increase in value $14,721 Plus: Adjusted basis of property to  your mother 40,000 Your basis in the property $54,721 Part sale, part gift. Federal income tax forms   If you get property in a transfer that is partly a sale and partly a gift, your basis is the larger of the amount you paid for the property or the transferor's adjusted basis in the property at the time of the transfer. Federal income tax forms Add to that amount the amount of any gift tax paid on the gift, as described in the preceding discussion. Federal income tax forms For figuring loss, your basis is limited to the property's fair market value at the time of the transfer. Federal income tax forms Gift tax information. Federal income tax forms   For information on gift tax, see Publication 950, Introduction to Estate and Gift Taxes. Federal income tax forms For information on figuring the amount of gift tax to add to your basis, see Property Received as a Gift in Publication 551. Federal income tax forms Property Received as Inheritance Before or after 2010. Federal income tax forms   If you inherited property from a decedent who died before or after 2010, or who died in 2010 and the executor of the decedent's estate elected not to file Form 8939, Allocation of Increase in Basis for Property Acquired From a Decedent, your basis in that property generally is its fair market value (its appraised value on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return) on: The date of the decedent's death, or The later alternate valuation date if the estate qualifies for, and elects to use, alternate valuation. Federal income tax forms If no Form 706 was filed, use the appraised value on the date of death for state inheritance or transmission taxes. Federal income tax forms For stocks and bonds, if no Form 706 was filed and there are no state inheritance or transmission taxes, see the Form 706 instructions for figuring the fair market value of the stocks and bonds on the date of the decedent's death. Federal income tax forms Appreciated property you gave the decedent. Federal income tax forms   Your basis in certain appreciated property that you inherited is the decedent's adjusted basis in the property immediately before death rather than its fair market value. Federal income tax forms This applies to appreciated property that you or your spouse gave the decedent as a gift during the 1-year period ending on the date of death. Federal income tax forms Appreciated property is any property whose fair market value on the day you gave it to the decedent was more than its adjusted basis. Federal income tax forms More information. Federal income tax forms   See Publication 551 for more information on the basis of inherited property, including community property, property held by a surviving tenant in a joint tenancy or tenancy by the entirety, a qualified joint interest, and a farm or closely held business. Federal income tax forms Inherited in 2010 and executor elected to file Form 8939. Federal income tax forms   If you inherited property from a decedent who died in 2010 and the executor made the election to file Form 8939, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to figure your basis. Federal income tax forms Adjusted Basis Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. Federal income tax forms The result of these adjustments to the basis is the adjusted basis. Federal income tax forms Adjustments to the basis of stocks and bonds are explained in the following discussion. Federal income tax forms For information about other adjustments to basis, see Publication 551. Federal income tax forms Stocks and Bonds The basis of stocks or bonds you own generally is the purchase price plus the costs of purchase, such as commissions and recording or transfer fees. Federal income tax forms If you acquired stock or bonds other than by purchase, your basis is usually determined by fair market value or the previous owner's adjusted basis as discussed earlier under Basis Other Than Cost . Federal income tax forms The basis of stock must be adjusted for certain events that occur after purchase. Federal income tax forms For example, if you receive more stock from nontaxable stock dividends or stock splits, you must reduce the basis of your original stock. Federal income tax forms You must also reduce your basis when you receive nondividend distributions (discussed in chapter 1). Federal income tax forms These distributions, up to the amount of your basis, are a nontaxable return of capital. Federal income tax forms The IRS partners with companies that offer Form 8949 and Schedule D (Form 1040) software that can import trades from many brokerage firms and accounting software to help you keep track of your adjusted basis in securities. Federal income tax forms To find out more, go to www. Federal income tax forms irs. Federal income tax forms gov/Filing/Filing-Options. Federal income tax forms Identifying stock or bonds sold. Federal income tax forms   If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. Federal income tax forms Adequate identification. Federal income tax forms   You will make an adequate identification if you show that certificates representing shares of stock from a lot that you bought on a certain date or for a certain price were delivered to your broker or other agent. Federal income tax forms Broker holds stock. Federal income tax forms   If you have left the stock certificates with your broker or other agent, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Federal income tax forms  Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent. Federal income tax forms Single stock certificate. Federal income tax forms   If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Federal income tax forms   If you sell part of the stock represented by a single certificate directly to the buyer instead of through a broker, you will make an adequate identification if you keep a written record of the particular stock that you intend to sell. Federal income tax forms Bonds. Federal income tax forms   These methods of identification also apply to bonds sold or transferred. Federal income tax forms Identification not possible. Federal income tax forms   If you buy and sell securities at various times in varying quantities and you cannot adequately identify the shares you sell, the basis of the securities you sell is the basis of the securities you acquired first. Federal income tax forms Except for certain mutual fund shares, discussed later, you cannot use the average price per share to figure gain or loss on the sale of the shares. Federal income tax forms Example. Federal income tax forms You bought 100 shares of stock of XYZ Corporation in 1998 for $10 a share. Federal income tax forms In January 1999 you bought another 200 shares for $11 a share. Federal income tax forms In July 1999 you gave your son 50 shares. Federal income tax forms In December 2001 you bought 100 shares for $9 a share. Federal income tax forms In April 2013 you sold 130 shares. Federal income tax forms You cannot identify the shares you disposed of, so you must use the stock you acquired first to figure the basis. Federal income tax forms The shares of stock you gave your son had a basis of $500 (50 × $10). Federal income tax forms You figure the basis of the 130 shares of stock you sold in 2013 as follows: 50 shares (50 × $10) balance of stock bought in 1998 $ 500 80 shares (80 × $11) stock bought in January 1999 880 Total basis of stock sold in 2013 $1,380 Shares in a mutual fund or REIT. Federal income tax forms    The basis of shares in a mutual fund (or other regulated investment company) or a real estate investment trust (REIT) is generally figured in the same way as the basis of other stock and usually includes any commissions or load charges paid for the purchase. Federal income tax forms Example. Federal income tax forms You bought 100 shares of Fund A for $10 a share. Federal income tax forms You paid a $50 commission to the broker for the purchase. Federal income tax forms Your cost basis for each share is $10. Federal income tax forms 50 ($1,050 ÷ 100). Federal income tax forms Commissions and load charges. Federal income tax forms   The fees and charges you pay to acquire or redeem shares of a mutual fund are not deductible. Federal income tax forms You can usually add acquisition fees and charges to your cost of the shares and thereby increase your basis. Federal income tax forms A fee paid to redeem the shares is usually a reduction in the redemption price (sales price). Federal income tax forms   You cannot add your entire acquisition fee or load charge to the cost of the mutual fund shares acquired if all of the following conditions apply. Federal income tax forms You get a reinvestment right because of the purchase of the shares or the payment of the fee or charge. Federal income tax forms You dispose of the shares within 90 days of the purchase date. Federal income tax forms You acquire new shares in the same mutual fund or another mutual fund, for which the fee or charge is reduced or waived because of the reinvestment right you got when you acquired the original shares. Federal income tax forms   The amount of the original fee or charge in excess of the reduction in (3) is added to the cost of the original shares. Federal income tax forms The rest of the original fee or charge is added to the cost basis of the new shares (unless all three conditions above also apply to the purchase of the new shares). Federal income tax forms Choosing average basis for mutual fund shares. Federal income tax forms   You can choose to use the average basis of mutual fund shares if you acquired the identical shares at various times and prices, or you acquired the shares after 2010 in connection with a dividend reinvestment plan, and left them on deposit in an account kept by a custodian or agent. Federal income tax forms The methods you can use to figure average basis are explained later. Federal income tax forms Undistributed capital gains. Federal income tax forms   If you had to include in your income any undistributed capital gains of the mutual fund or REIT, increase your basis in the stock by the difference between the amount you included and the amount of tax paid for you by the fund or REIT. Federal income tax forms See Undistributed capital gains of mutual funds and REITs under Capital Gain Distributions in chapter 1. Federal income tax forms Reinvestment right. Federal income tax forms   This is the right to acquire mutual fund shares in the same or another mutual fund without paying a fee or load charge, or by paying a reduced fee or load charge. Federal income tax forms      The original cost basis of mutual fund shares you acquire by reinvesting your distributions is the amount of the distributions used to purchase each full or fractional share. Federal income tax forms This rule applies even if the distribution is an exempt-interest dividend that you do not report as income. Federal income tax forms Table 4-1. Federal income tax forms This is a worksheet you can use to keep track of the adjusted basis of your mutual fund shares. Federal income tax forms Enter the cost per share when you acquire new shares and any adjustments to their basis when the adjustment occurs. Federal income tax forms This worksheet will help you figure the adjusted basis when you sell or redeem shares. Federal income tax forms Table 4-1. Federal income tax forms Mutual Fund Record Mutual Fund Acquired1 Adjustment to Basis Per Share Adjusted2 Basis Per Share Sold or redeemed Date Number of Shares Cost Per Share Date Number of Shares                                                                                                                                                                                                                                                                         1 Include share received from reinvestment of distributions. Federal income tax forms 2 Cost plus or minus adjustments. Federal income tax forms Automatic investment service. Federal income tax forms   If you participate in an automatic investment service, your basis for each share of stock, including fractional shares, bought by the bank or other agent is the purchase price plus a share of the broker's commission. Federal income tax forms Dividend reinvestment plans. Federal income tax forms   If you participate in a dividend reinvestment plan and receive stock from the corporation at a discount, your basis is the full fair market value of the stock on the dividend payment date. Federal income tax forms You must include the amount of the discount in your income. Federal income tax forms Public utilities. Federal income tax forms   If, before 1986, you excluded from income the value of stock you had received under a qualified public utility reinvestment plan, your basis in that stock is zero. Federal income tax forms Stock dividends. Federal income tax forms   Stock dividends are distributions made by a corporation of its own stock. Federal income tax forms Generally, stock dividends are not taxable to you. Federal income tax forms However, see Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1 for some exceptions. Federal income tax forms If the stock dividends are not taxable, you must divide your basis for the old stock between the old and new stock. Federal income tax forms New and old stock identical. Federal income tax forms   If the new stock you received as a nontaxable dividend is identical to the old stock on which the dividend was declared, divide the adjusted basis of the old stock by the number of shares of old and new stock. Federal income tax forms The result is your basis for each share of stock. Federal income tax forms Example 1. Federal income tax forms You owned one share of common stock that you bought for $45. Federal income tax forms The corporation distributed two new shares of common stock for each share held. Federal income tax forms You then had three shares of common stock. Federal income tax forms Your basis in each share is $15 ($45 ÷ 3). Federal income tax forms Example 2. Federal income tax forms You owned two shares of common stock. Federal income tax forms You bought one for $30 and the other for $45. Federal income tax forms The corporation distributed two new shares of common stock for each share held. Federal income tax forms You had six shares after the distribution—three with a basis of $10 each ($30 ÷ 3) and three with a basis of $15 each ($45 ÷ 3). Federal income tax forms New and old stock not identical. Federal income tax forms   If the new stock you received as a nontaxable dividend is not identical to the old stock on which it was declared, the basis of the new stock is calculated differently. Federal income tax forms Divide the adjusted basis of the old stock between the old and the new stock in the ratio of the fair market value of each lot of stock to the total fair market value of both lots on the date of distribution of the new stock. Federal income tax forms Example. Federal income tax forms You bought a share of common stock for $100. Federal income tax forms Later, the corporation distributed a share of preferred stock for each share of common stock held. Federal income tax forms At the date of distribution, your common stock had a fair market value of $150 and the preferred stock had a fair market value of $50. Federal income tax forms You figure the basis of the old and new stock by dividing your $100 basis between them. Federal income tax forms The basis of your common stock is $75 (($150 ÷ $200) × $100), and the basis of the new preferred stock is $25 (($50 ÷ $200) × $100). Federal income tax forms Stock bought at various times. Federal income tax forms   Figure the basis of stock dividends received on stock you bought at various times and at different prices by allocating to each lot of stock the share of the stock dividends due to it. Federal income tax forms Taxable stock dividends. Federal income tax forms   If your stock dividend is taxable when you receive it, the basis of your new stock is its fair market value on the date of distribution. Federal income tax forms The basis of your old stock does not change. Federal income tax forms Stock splits. Federal income tax forms   Figure the basis of stock splits in the same way as stock dividends if identical stock is distributed on the stock held. Federal income tax forms Stock rights. Federal income tax forms   A stock right is a right to acquire a corporation's stock. Federal income tax forms It may be exercised, it may be sold if it has a market value, or it may expire. Federal income tax forms Stock rights are rarely taxable when you receive them. Federal income tax forms See Distributions of Stock and Stock Rights under Dividends and Other Distributions in chapter 1. Federal income tax forms Taxable stock rights. Federal income tax forms   If you receive stock rights that are taxable, the basis of the rights is their fair market value at the time of distribution. Federal income tax forms The basis of the old stock does not change. Federal income tax forms Nontaxable stock rights. Federal income tax forms   If you receive nontaxable stock rights and allow them to expire, they have no basis. Federal income tax forms   If you exercise or sell the nontaxable stock rights and if, at the time of distribution, the stock rights had a fair market value of 15% or more of the fair market value of the old stock, you must divide the adjusted basis of the old stock between the old stock and the stock rights. Federal income tax forms Use a ratio of the fair market value of each to the total fair market value of both at the time of distribution. Federal income tax forms   If the fair market value of the stock rights was less than 15%, their basis is zero. Federal income tax forms However, you can choose to divide the basis of the old stock between the old stock and the stock rights. Federal income tax forms To make the choice, attach a statement to your return for the year in which you received the rights, stating that you choose to divide the basis of the stock. Federal income tax forms Basis of new stock. Federal income tax forms   If you exercise the stock rights, the basis of the new stock is its cost plus the basis of the stock rights exercised. Federal income tax forms Example. Federal income tax forms You own 100 shares of ABC Company stock, which cost you $22 per share. Federal income tax forms The ABC Company gave you 10 nontaxable stock rights that would allow you to buy 10 more shares at $26 per share. Federal income tax forms At the time the stock rights were distributed, the stock had a market value of $30, not including the stock rights. Federal income tax forms Each stock right had a market value of $3. Federal income tax forms The market value of the stock rights was less than 15% of the market value of the stock, but you chose to divide the basis of your stock between the stock and the rights. Federal income tax forms You figure the basis of the rights and the basis of the old stock as follows: 100 shares × $22 = $2,200, basis of old stock   100 shares × $30 = $3,000, market value of old stock   10 rights × $3 = $30, market value of rights   ($3,000 ÷ $3,030) × $2,200 = $2,178. Federal income tax forms 22, new basis of old stock   ($30 ÷ $3,030) × $2,200 = $21. Federal income tax forms 78, basis of rights   If you sell the rights, the basis for figuring gain or loss is $2. Federal income tax forms 18 ($21. Federal income tax forms 78 ÷ 10) per right. Federal income tax forms If you exercise the rights, the basis of the stock you acquire is the price you pay ($26) plus the basis of the right exercised ($2. Federal income tax forms 18), or $28. Federal income tax forms 18 per share. Federal income tax forms The remaining basis of the old stock is $21. Federal income tax forms 78 per share. Federal income tax forms Investment property received in liquidation. Federal income tax forms   In general, if you receive investment property as a distribution in partial or complete liquidation of a corporation and if you recognize gain or loss when you acquire the property, your basis in the property is its fair market value at the time of the distribution. Federal income tax forms S corporation stock. Federal income tax forms   You must increase your basis in stock of an S corporation by your pro rata share of the following items. Federal income tax forms All income items of the S corporation, including tax-exempt income, that are separately stated and passed through to you as a shareholder. Federal income tax forms The nonseparately stated income of the S corporation. Federal income tax forms The amount of the deduction for depletion (other than oil and gas depletion) that is more than the basis of the property being depleted. Federal income tax forms   You must decrease your basis in stock of an S corporation by your pro rata share of the following items. Federal income tax forms Distributions by the S corporation that were not included in your income. Federal income tax forms All loss and deduction items of the S corporation that are separately stated and passed through to you. Federal income tax forms Any nonseparately stated loss of the S corporation. Federal income tax forms Any expense of the S corporation that is not deductible in figuring its taxable income and not properly chargeable to a capital account. Federal income tax forms The amount of your deduction for depletion of oil and gas wells to the extent the deduction is not more than your share of the adjusted basis of the wells. Federal income tax forms However, your basis in the stock cannot be reduced below zero. Federal income tax forms Specialized small business investment company stock or partnership interest. Federal income tax forms   If you bought this stock or interest as replacement property for publicly traded securities you sold at a gain, you must reduce the basis of the stock or interest by the amount of any postponed gain on that sale. Federal income tax forms See Rollover of Gain From Publicly Traded Securities , later. Federal income tax forms Qualified small business stock. Federal income tax forms   If you bought this stock as replacement property for other qualified small business stock you sold at a gain, you must reduce the basis of this replacement stock by the amount of any postponed gain on the earlier sale. Federal income tax forms See Gains on Qualified Small Business Stock , later. Federal income tax forms Short sales. Federal income tax forms   If you cannot deduct payments you make to a lender in lieu of dividends on stock used in a short sale, the amount you pay to the lender is a capital expense, and you must add it to the basis of the stock used to close the short sale. Federal income tax forms   See Payments in lieu of dividends , later, for information about deducting payments in lieu of dividends. Federal income tax forms Premiums on bonds. Federal income tax forms   If you buy a bond at a premium, the premium is treated as part of your basis in the bond. Federal income tax forms If you choose to amortize the premium paid on a taxable bond, you must reduce the basis of the bond by the amortized part of the premium each year over the life of the bond. Federal income tax forms   Although you cannot deduct the premium on a tax-exempt bond, you must amortize it to determine your adjusted basis in the bond. Federal income tax forms You must reduce the basis of the bond by the premium you amortized for the period you held the bond. Federal income tax forms   See Bond Premium Amortization in chapter 3 for more information. Federal income tax forms Market discount on bonds. Federal income tax forms   If you include market discount on a bond in income currently, increase the basis of your bond by the amount of market discount you include in your income. Federal income tax forms See Market Discount Bonds in chapter 1 for more information. Federal income tax forms Bonds purchased at par value. Federal income tax forms   A bond purchased at par value (face amount) has no premium or discount. Federal income tax forms When you sell or otherwise dispose of the bond, you figure the gain or loss by comparing the bond proceeds to the purchase price of the bond. Federal income tax forms Example. Federal income tax forms You purchased a bond several years ago for its par value of $10,000. Federal income tax forms You sold the bond this year for $10,100. Federal income tax forms You have a gain of $100. Federal income tax forms However, if you had sold the bond for $9,900, you would have a loss of $100. Federal income tax forms Acquisition discount on short-term obligations. Federal income tax forms   If you include acquisition discount on a short-term obligation in your income currently, increase the basis of the obligation by the amount of acquisition discount you include in your income. Federal income tax forms See Discount on Short-Term Obligations in chapter 1 for more information. Federal income tax forms Original issue discount (OID) on debt instruments. Federal income tax forms   Increase the basis of a debt instrument by the OID you include in your income. Federal income tax forms See Original Issue Discount (OID) in chapter 1. Federal income tax forms Discounted tax-exempt obligations. Federal income tax forms   OID on tax-exempt obligations is generally not taxable. Federal income tax forms However, when you dispose of a tax-exempt obligation issued after September 3, 1982, that you acquired after March 1, 1984, you must accrue OID on the obligation to determine its adjusted basis. Federal income tax forms The accrued OID is added to the basis of the obligation to determine your gain or loss. Federal income tax forms   For information on determining OID on a long-term obligation, see Debt Instruments Issued After July 1, 1982, and Before 1985 or Debt Instruments Issued After 1984, whichever applies, in Publication 1212 under Figuring OID on Long-Term Debt Instruments. Federal income tax forms   If the tax-exempt obligation has a maturity of 1 year or less, accrue OID under the rules for acquisition discount on short-term obligations. Federal income tax forms See Discount on Short-Term Obligations in chapter 1. Federal income tax forms Stripped tax-exempt obligation. Federal income tax forms   If you acquired a stripped tax-exempt bond or coupon after October 22, 1986, you must accrue OID on it to determine its adjusted basis when you dispose of it. Federal income tax forms For stripped tax-exempt bonds or coupons acquired after June 10, 1987, part of this OID may be taxable. Federal income tax forms You accrue the OID on these obligations in the manner described in chapter 1 under Stripped Bonds and Coupons . Federal income tax forms   Increase your basis in the stripped tax-exempt bond or coupon by the taxable and nontaxable accrued OID. Federal income tax forms Also increase your basis by the interest that accrued (but was not paid and was not previously reflected in your basis) before the date you sold the bond or coupon. Federal income tax forms In addition, for bonds acquired after June 10, 1987, add to your basis any accrued market discount not previously reflected in basis. Federal income tax forms How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Federal income tax forms Gain. Federal income tax forms   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Federal income tax forms Loss. Federal income tax forms   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Federal income tax forms Amount realized. Federal income tax forms   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Federal income tax forms Amount realized includes the money you receive plus the fair market value of any property or services you receive. Federal income tax forms   If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Federal income tax forms For more information, see Publication 537. Federal income tax forms   If a buyer of property issues a debt instrument to the seller of the property, the amount realized is determined by reference to the issue price of the debt instrument, which may or may not be the fair market value of the debt instrument. Federal income tax forms See Regulations section 1. Federal income tax forms 1001-1(g). Federal income tax forms However, if the debt instrument was previously issued by a third party (one not part of the sale transaction), the fair market value of the debt instrument is used to determine the amount realized. Federal income tax forms Fair market value. Federal income tax forms   Fair market value is the price at which property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Federal income tax forms Example. Federal income tax forms You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Federal income tax forms Your gain is $3,000 ($10,000 – $7,000). Federal income tax forms If you also receive a note for $6,000 that has an issue price of $6,000, your gain is $9,000 ($10,000 + $6,000 – $7,000). Federal income tax forms Debt paid off. Federal income tax forms   A debt against the property, or against you, that is paid off as a part of the transaction or that is assumed by the buyer must be included in the amount realized. Federal income tax forms This is true even if neither you nor the buyer is personally liable for the debt. Federal income tax forms For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Federal income tax forms Example. Federal income tax forms You sell stock that you had pledged as security for a bank loan of $8,000. Federal income tax forms Your basis in the stock is $6,000. Federal income tax forms The buyer pays off your bank loan and pays you $20,000 in cash. Federal income tax forms The amount realized is $28,000 ($20,000 + $8,000). Federal income tax forms Your gain is $22,000 ($28,000 – $6,000). Federal income tax forms Payment of cash. Federal income tax forms   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Federal income tax forms Determine your gain or loss by subtracting the cash you pay and the adjusted basis of the property you trade in from the amount you realize. Federal income tax forms If the result is a positive number, it is a gain. Federal income tax forms If the result is a negative number, it is a loss. Federal income tax forms No gain or loss. Federal income tax forms   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Federal income tax forms In this case, you may have neither a gain nor a loss. Federal income tax forms See No gain or loss in the discussion on the basis of property you received as a gift under Basis Other Than Cost, earlier. Federal income tax forms Special Rules for Mutual Funds To figure your gain or loss when you dispose of mutual fund shares, you need to determine which shares were sold and the basis of those shares. Federal income tax forms If your shares in a mutual fund were acquired all on the same day and for the same price, figuring their basis is not difficu
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Free Tax Return Preparation for Qualifying Taxpayers

The Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $52,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns. IRS-certified volunteers provide free basic income tax return preparation with electronic filing to qualified individuals.

In addition to VITA, the Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older, specializing in questions about pensions and retirement-related issues unique to seniors. The IRS-certified volunteers who provide tax counseling are often retired individuals associated with non-profit organizations that receive grants from the IRS.

Find a VITA or TCE Site Near You

VITA and TCE sites are generally located at community and neighborhood centers, libraries, schools, shopping malls and other convenient locations across the country. To locate the nearest VITA or TCE site near you, use the VITA Locator Tool or call 800-906-9887.

At select tax sites, taxpayers also have an option to prepare their own basic federal and state tax return for free using Web-based tax preparation software with an IRS-certified volunteer to help guide you through the process. This option is only available at locations that list “Self-Prep” in the site listing.

Please note that when using the locator tool, you will exit IRS.gov and open Google Maps if you need directions to a specific location.

Find an AARP TCE Tax-Aide Site Near You

A majority of the TCE sites are operated by the AARP Foundation’s Tax Aide program. To locate the nearest AARP TCE Tax-Aide site between January and April use the AARP Site Locator Tool or call 888-227-7669.

Before going to a VITA or TCE site, check out the What to Bring page to ensure you have all the required documents and information our volunteers will need to help you. 

Page Last Reviewed or Updated: 25-Mar-2014

The Federal Income Tax Forms

Federal income tax forms 2. Federal income tax forms   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. Federal income tax forms Employment Tax ReturnsException. Federal income tax forms FUTA tax exception. Federal income tax forms FICA tax exemption election. Federal income tax forms Revoking the election. Federal income tax forms Definitions. Federal income tax forms Effect on employees. Federal income tax forms Political Organization Income Tax ReturnExempt function. Federal income tax forms Political organization taxable income. Federal income tax forms Separate fund. Federal income tax forms Failure to file. Federal income tax forms Failure to pay on time. Federal income tax forms Reporting Requirements for a Political OrganizationForm 8871 Form 8872 Donee Information ReturnCharitable deduction property. Federal income tax forms Publicly traded securities. Federal income tax forms Exceptions. Federal income tax forms Form 8283. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms S. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms S. Federal income tax forms 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. Federal income tax forms B. Federal income tax forms 418, www. Federal income tax forms irs. Federal income tax forms gov/pub/irs-tege/rp1995-48. Federal income tax forms 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. Federal income tax forms S. Federal income tax forms possession, that normally has annual gross receipts from sources within the United States of $50,000 or less. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms 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). Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Form 990-N is due by the 15th day of the fifth month after the close of the tax year. Federal income tax forms 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. Federal income tax forms To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization. Federal income tax forms Exceptions. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms The following political organizations are not required to file Form 990 or Form 990-EZ. Federal income tax forms A state or local committee of a political party. Federal income tax forms A political committee of a state or local candidate. Federal income tax forms A caucus or association of state or local officials. Federal income tax forms A political organization that is required to report as a political committee under the Federal Election Campaign Act. Federal income tax forms 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. Federal income tax forms Form 990-EZ. Federal income tax forms   This is a shortened version of Form 990. Federal income tax forms It is designed for use by small exempt organizations and nonexempt charitable trusts. Federal income tax forms   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. Federal income tax forms Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year are less than $500,000. Federal income tax forms If your organization does not meet either of these conditions, you cannot file Form 990-EZ. Federal income tax forms Instead you must file Form 990. Federal income tax forms Group return. Federal income tax forms   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. Federal income tax forms This return is in addition to the central organization's separate annual return if it must file a return. Federal income tax forms It cannot be included in the group return. Federal income tax forms See the instructions for Form 990 for the conditions under which this procedure may be used. Federal income tax forms    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. Federal income tax forms Schedule A (Form 990 or 990-EZ). Federal income tax forms   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. Federal income tax forms Schedule B (Form 990, Form 990-EZ, or 990-PF). Federal income tax forms   Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors. Federal income tax forms Schedule O (Form 990). Federal income tax forms   Organizations that file Form 990 must use this schedule to provide required additional information or if additional space is needed. Federal income tax forms   Other schedules may be required to be filed with Form 990 or 990-EZ. Federal income tax forms See the instructions for Form 990 or the instructions for Form 990-EZ for more information. Federal income tax forms Report significant new or changed program services and changes to organizational documents. Federal income tax forms    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. Federal income tax forms 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. Federal income tax forms See Miscellaneous Rules, Organization Changes and Exempt Status, later. Federal income tax forms Form 990-PF All private foundations exempt under section 501(c)(3) must file Form 990-PF. Federal income tax forms These organizations are discussed in chapter 3. Federal income tax forms Electronic Filing You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically. Federal income tax forms If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. Federal income tax forms See Regulations section 301. Federal income tax forms 6033-4 for more information. Federal income tax forms The IRS may waive the requirement to file electronically in cases of undue hardship. Federal income tax forms For information on filing a waiver, see Notice 2010-13, 2010-4 I. Federal income tax forms R. Federal income tax forms B. Federal income tax forms 327, available at www. Federal income tax forms irs. Federal income tax forms gov/ir/2010-04_IRSB/ar14. Federal income tax forms html. Federal income tax forms Form 990. Federal income tax forms   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. Federal income tax forms Form 990-PF. Federal income tax forms   An organization is required to file Form 990-PF electronically if it files at least 250 returns during the calendar year. Federal income tax forms 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. Federal income tax forms Thus, for a calendar year taxpayer, Forms 990, 990-EZ, or 990-PF is due May 15 of the following year. Federal income tax forms Extension of time to file. Federal income tax forms   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. Federal income tax forms   Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. Federal income tax forms For more information, see Form 8868 and its instructions. Federal income tax forms   When filing Form 8868 for an automatic 3-month extension, neither a signature, nor an explanation is required. Federal income tax forms However, when filing Form 8868 for an additional 3-month extension, both a signature and an explanation are required. Federal income tax forms Application for exemption pending. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms For more information on the filing requirements, see the Instructions for Forms 990, 990-EZ, and 990-PF. Federal income tax forms State reporting requirements. Federal income tax forms   Copies of Forms 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. Federal income tax forms See the instructions for those forms. Federal income tax forms Form 8870. Federal income tax forms   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. Federal income tax forms For more information, see Form 8870 and the instructions for that form. Federal income tax forms 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. Federal income tax forms The list of organizations whose tax-exempt status has been automatically revoked is available on IRS. Federal income tax forms gov. Federal income tax forms This list (Auto-Revocation List) may be viewed and searched on Exempt Organizations Select Check. Federal income tax forms The Auto-Revocation List includes each organization's name, Employer Identification Number (EIN) and last known address. Federal income tax forms It also includes the effective date of the automatic revocation and the date it was posted to the list. Federal income tax forms The IRS updates the list monthly to include additional organizations that lose their tax-exempt status. Federal income tax forms 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. Federal income tax forms S. Federal income tax forms 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. Federal income tax forms S. Federal income tax forms 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. Federal income tax forms 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). Federal income tax forms 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). Federal income tax forms In some situations, an organization may be able to obtain exemption retroactive to its date of revocation. Federal income tax forms For more information about automatic revocation, go to IRS. Federal income tax forms gov and select Charities & Non-Profits and then select Revoked? Reinstated? Learn More. Federal income tax forms Penalties Penalties for failure to file. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms Maximum penalty. Federal income tax forms   The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year. Federal income tax forms Organization with gross receipts over $1 million. Federal income tax forms   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. Federal income tax forms Managers. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms The penalty is $10 a day for each day that a return is not filed after the period given for filing. Federal income tax forms The maximum penalty imposed on all persons with respect to any one return is $5,000. Federal income tax forms Exception for reasonable cause. Federal income tax forms   No penalty will be imposed if reasonable cause for failure to file timely can be shown. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Estimated tax. Federal income tax forms   Quarterly estimated tax payments are due if your organization expects to owe $500 or more in tax including unrelated business income. Federal income tax forms Use Form 990-W to figure your organization's estimated tax payments. Federal income tax forms Travel tour programs. Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms Example. Federal income tax forms ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). Federal income tax forms As part of its activities, ABC operates a travel tour program. Federal income tax forms The program is open to all current members of ABC and their guests. Federal income tax forms ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. Federal income tax forms Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. Federal income tax forms XYZ pays ABC a per person fee for each participant. Federal income tax forms 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. Federal income tax forms The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. Federal income tax forms Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. Federal income tax forms Therefore, ABC's tour program is an unrelated trade or business. Federal income tax forms For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Small Business Health Care Tax Credit. Federal income tax forms   If your small tax-exempt organization provides health care coverage for your workers you may qualify for the small business health care tax credit. Federal income tax forms Go to IRS. Federal income tax forms gov and select Affordable Care Act Tax Provisions for more details. Federal income tax forms See Small Business Health Care Tax Credit at www. Federal income tax forms irs. Federal income tax forms gov/newsroom/article/0,,id=223666,00. Federal income tax forms html. Federal income tax forms Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans. Federal income tax forms   The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC). Federal income tax forms 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. Federal income tax forms The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013. Federal income tax forms This tax credit was extended through December 31, 2013, under the American Taxpayer Relief Act, passed on January 1, 2013. Federal income tax forms   The credit can be as high as $6,240 for qualified tax-exempt organizations. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms   All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. Federal income tax forms The process for certifying veterans for this credit is the same for all employers. Federal income tax forms For more information, see Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit and the instructions to Form 8850. Federal income tax forms Notice 2012-13, 2012-9 I. Federal income tax forms R. Federal income tax forms B. Federal income tax forms 421, also provides additional guidance on submission Form 8850. Federal income tax forms   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. Federal income tax forms 22, 2011, and before January 1, 2013. Federal income tax forms 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. Federal income tax forms File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Trust fund recovery penalty. Federal income tax forms   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. Federal income tax forms The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. Federal income tax forms The term person includes: An officer or employee of a corporation, or A member or employee of a partnership. Federal income tax forms Exception. Federal income tax forms   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. Federal income tax forms   This exception does not apply if it results in no one being liable for the penalty. Federal income tax forms FICA and FUTA tax exceptions. Federal income tax forms   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. Federal income tax forms FUTA tax exception. Federal income tax forms   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. Federal income tax forms FICA tax exemption election. Federal income tax forms   Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274. Federal income tax forms   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. Federal income tax forms The organization can make the election only if it is opposed for religious reasons to the payment of FICA taxes. Federal income tax forms   The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business. Federal income tax forms Revoking the election. Federal income tax forms   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. Federal income tax forms Such revocation will apply retroactively to the beginning of the 2-year period. Federal income tax forms Definitions. Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms Effect on employees. Federal income tax forms   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. Federal income tax forms However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. Federal income tax forms The tax applies to income of $108. Federal income tax forms 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. Federal income tax forms   Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return. Federal income tax forms Political Organization Income Tax Return Generally, a political organization is treated as an organization exempt from tax. Federal income tax forms Certain political organizations, however, must file an annual income tax return, Form 1120-POL, U. Federal income tax forms S. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms See Forms 990 and 990-EZ , earlier. Federal income tax forms Political organization. Federal income tax forms   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. Federal income tax forms Exempt function. Federal income tax forms   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. Federal income tax forms It also includes certain office expenses of a holder of public office or an office in a political organization. Federal income tax forms Certain political organizations are required to notify the IRS that they are section 527 organizations. Federal income tax forms These organizations must use Form 8871. Federal income tax forms Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. Federal income tax forms For a discussion on these forms, see Reporting Requirements for a Political Organization, later. Federal income tax forms Political organization taxable income. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms Exempt organization not a political organization. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms Separate fund. Federal income tax forms   A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. Federal income tax forms The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization. Federal income tax forms 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. Federal income tax forms Due date. Federal income tax forms   Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. Federal income tax forms Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. Federal income tax forms If any due date falls on a Saturday, Sunday, or legal holiday, the organization can file the return on the next business day. Federal income tax forms    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. Federal income tax forms Extension of time to file. Federal income tax forms    Use Form 7004 to request an automatic 6-month extension of time to file Form 1120-POL. Federal income tax forms 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. Federal income tax forms Failure to file. Federal income tax forms   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. Federal income tax forms For more information about filing Form 1120-POL, refer to the instructions accompanying the form. Federal income tax forms Failure to pay on time. Federal income tax forms   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. Federal income tax forms The penalty will not be imposed if the organization can show that the failure to pay on time was due to reasonable cause. Federal income tax forms 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. Federal income tax forms The organization is also required to periodically report certain contributions received and expenditures made by the organization. Federal income tax forms To notify the IRS of section 527 treatment, an organization must file Form 8871. Federal income tax forms To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U. Federal income tax forms S. Federal income tax forms C. Federal income tax forms 431(4)). Federal income tax forms It is a state or local candidate committee. Federal income tax forms It is a state or local committee of a political party. Federal income tax forms It is a section 501(c) organization that has made an “exempt function expenditure. Federal income tax forms ” All other political organizations are required to file Form 8871. Federal income tax forms 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. Federal income tax forms Employer identification number. Federal income tax forms   If your organization needs an EIN, you can apply for one: Online—Click on the Employer ID Numbers (EINs) link at www. Federal income tax forms IRS. Federal income tax forms gov/businesses/small. Federal income tax forms By telephone at 1-800-829-4933 from 7:00 a. Federal income tax forms m. Federal income tax forms to 10:00 p. Federal income tax forms m. Federal income tax forms in the organization's local time zone. Federal income tax forms By mailing or faxing Form SS-4. Federal income tax forms   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. Federal income tax forms Due dates. Federal income tax forms   The initial Form 8871 must be filed within 24 hours of the date on which the organization was established. Federal income tax forms If there is a material change, an amended Form 8871 must be filed within 30 days of the material change. Federal income tax forms When the organization terminates its existence, it must file a final Form 8871 within 30 days of termination. Federal income tax forms   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. Federal income tax forms How to file. Federal income tax forms   An organization must file Form 8871 electronically via the IRS Internet website at www. Federal income tax forms IRS. Federal income tax forms gov/polorgs (Keyword: political orgs). Federal income tax forms Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status. Federal income tax forms   After electronically submitting Form 8871, the political organization must print, sign, and mail Form 8453-X to the IRS. Federal income tax forms 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. Federal income tax forms Penalties Failure to file. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms   Failure to file an amended Form 8871 will cause the organization not to be treated as a tax-exempt section 527 organization. Federal income tax forms 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. Federal income tax forms    The tax is computed by multiplying the organization's taxable income by the highest corporate tax rate. Federal income tax forms Fraudulent returns. Federal income tax forms   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. Federal income tax forms Waiver of penalties. Federal income tax forms   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. Federal income tax forms Additional information. Federal income tax forms   For more information on Form 8871, see the form and its instructions. Federal income tax forms 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. Federal income tax forms 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). Federal income tax forms A political organization that is subject to tax on its income because it did not file or amend Form 8871. Federal income tax forms A qualified state or local political organization (QSLPO), discussed below. Federal income tax forms All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872. Federal income tax forms Qualified state or local political organization. Federal income tax forms   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). Federal income tax forms 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. Federal income tax forms The state agency and the organization make the reports publicly available. Federal income tax forms 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. Federal income tax forms Information required on Form 8872. Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms   For additional information that is required, see Form 8872. Federal income tax forms Due dates. Federal income tax forms   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). Federal income tax forms   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. Federal income tax forms Election year filing. Federal income tax forms    In election years, Form 8872 must be filed on either a quarterly or a monthly basis. Federal income tax forms Both a pre-election report and a post-election report are also required to be filed in an election year. Federal income tax forms An election year is any year in which a regularly scheduled general election for federal office is held (an even-numbered year). Federal income tax forms Nonelection year filing. Federal income tax forms    In nonelection years, the form must be filed on a semiannual or monthly basis. Federal income tax forms A complete listing of these filing periods are in the Form 8872 Instructions. Federal income tax forms A nonelection year is any odd-numbered year. Federal income tax forms How to file. Federal income tax forms   Form 8872 can be filed either electronically or by mail. Federal income tax forms However, organizations that have, or expect to have, contributions or expenditures of $50,000 or more for the year must file electronically. Federal income tax forms    To file by mail, send Form 8872 to the:   Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0027 Electronic filing. Federal income tax forms   File electronically via the IRS internet website at www. Federal income tax forms IRS. Federal income tax forms gov/polorgs. Federal income tax forms You will need a user ID and password to electronically file Form 8872. Federal income tax forms 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. Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms You can also fax your request to (801) 620-3249. Federal income tax forms It may take 3-6 weeks for your new username and password to arrive, as they will be mailed to the organization. Federal income tax forms 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. Federal income tax forms The penalty is 35% of the total amount of contributions and expenditures to which a failure relates. Federal income tax forms Fraudulent returns. Federal income tax forms   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. Federal income tax forms Waiver of penalties. Federal income tax forms   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. Federal income tax forms Donee Information Return Dispositions of donated property. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms   Form 8282 must be filed with the IRS within 125 days after the disposition. Federal income tax forms Additionally, a copy of Form 8282 must be given to the donor. Federal income tax forms If the organization fails to file the required information return, penalties may apply. Federal income tax forms Charitable deduction property. Federal income tax forms   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. Federal income tax forms Publicly traded securities. Federal income tax forms   These are securities for which market quotations are readily available on an established securities market as of the date of the contribution. Federal income tax forms Appraisal summary. Federal income tax forms   If the value of the donated property exceeds $5,000, the donor must get a qualified appraisal for contributions of property, see the Exceptions. Federal income tax forms below. Federal income tax forms Exceptions. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms   The donee organization is not a qualified appraiser for the purpose of valuing the donated property. Federal income tax forms For more information, get Publication 561, Determining the Value of Donated Property. Federal income tax forms Form 8283. Federal income tax forms   For noncash donations over $5,000, the donor must attach Form 8283 to the tax return to support the charitable deduction. Federal income tax forms The donee must sign Part IV of Section B, Form 8283 unless publicly traded securities are donated. Federal income tax forms 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. Federal income tax forms The signature does not represent concurrence in the appraised value of the contributed property. Federal income tax forms A signed acknowledgment represents receipt of the property described on Form 8283 on the date specified on the form. Federal income tax forms The signature also indicates knowledge of the information reporting requirements on dispositions, as previously discussed. Federal income tax forms A copy of Form 8283 must be given to the donee. Federal income tax forms 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. Federal income tax forms In other situations, the donee organization is required to provide information to the donor. Federal income tax forms A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. Federal income tax forms (See Disclosure statement. Federal income tax forms later. Federal income tax forms ) This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. Federal income tax forms See Quid pro quo contribution below for an example. Federal income tax forms Failure to make the required disclosure may result in a penalty to the organization. Federal income tax forms A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization. Federal income tax forms In certain circumstances, an organization may be able to meet both of these requirements with the same written document. Federal income tax forms 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. Federal income tax forms Quid pro quo contribution. Federal income tax forms   A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution. Federal income tax forms 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. Federal income tax forms Generally, a written statement is required for each payment, whenever the contribution portion is over $75. Federal income tax forms Example. Federal income tax forms If a donor gives your charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. Federal income tax forms In this example, the charitable part of the payment is $60. Federal income tax forms 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. Federal income tax forms If your organization fails to disclose quid pro quo contributions, the organization may be subject to a penalty. Federal income tax forms Disclosure statement. Federal income tax forms   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. Federal income tax forms The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. Federal income tax forms 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. Federal income tax forms   No disclosure statement is required if any of the following are true. Federal income tax forms The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, 1990-1 C. Federal income tax forms B. Federal income tax forms 471, Revenue Procedure 90-12, and Revenue Procedure 92-49, 1992-1 C. Federal income tax forms B. Federal income tax forms 507 (as adjusted for inflation), Revenue Procedure 92-49. Federal income tax forms 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). Federal income tax forms There is only an intangible religious benefit provided to the donor. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Good faith estimate of fair market value (FMV). Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued. Federal income tax forms Example 1. Federal income tax forms A charity provides a 1-hour tennis lesson with a tennis professional for the first $500 payment it receives. Federal income tax forms The tennis professional provides 1-hour lessons on a commercial basis for $100. Federal income tax forms A good faith estimate of the lesson's FMV is $100. Federal income tax forms Example 2. Federal income tax forms For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Example 3. Federal income tax forms For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. Federal income tax forms The artist does not provide tours on a commercial basis. Federal income tax forms Tours of the museum normally are free to the public. Federal income tax forms A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist. Federal income tax forms Penalty for failure to disclose. Federal income tax forms   A penalty is imposed on a charity that does not make the required disclosure of a quid pro quo contribution of more than $75. Federal income tax forms The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing. Federal income tax forms The charity can avoid the penalty if it can show that the failure was due to reasonable cause. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms The donor is responsible for requesting and obtaining the written acknowledgment from the donee. Federal income tax forms 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. Federal income tax forms Quid pro quo contribution. Federal income tax forms   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. Federal income tax forms See Disclosure of Quid Pro Quo Contributions earlier. Federal income tax forms Form of acknowledgment. Federal income tax forms   Although there is no prescribed format for the written acknowledgment, it must provide enough information to substantiate the amount of the contribution. Federal income tax forms For more information, see IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements. Federal income tax forms Cash contributions. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms Contributions by payroll deduction. Federal income tax forms   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. Federal income tax forms   For contributions of $250 or more, the document must state that the donee organization provides no goods or services for any payroll contributions. Federal income tax forms The amount withheld from each payment of wages to a taxpayer is treated as a separate contribution. Federal income tax forms 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. Federal income tax forms The donee organization can use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. Federal income tax forms See section 3. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms The organization must file the report on Copy A of Form 1098-C. Federal income tax forms An organization that files Form 1098-C on paper should send it with Form 1096, Annual Summary and Transmittal of U. Federal income tax forms S. Federal income tax forms Information Returns. Federal income tax forms See the Instructions for Form 1096 for the correct filing location. Federal income tax forms An organization that is required to file 250 or more Forms 1098-C during the calendar year must file the forms electronically or magnetically. Federal income tax forms 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. Federal income tax forms IRS. Federal income tax forms gov/pub/irs-pdf/p1220. Federal income tax forms pdf. Federal income tax forms Acknowledgment For a contribution of a qualified vehicle with a claimed value of $500 or less, do not file Form 1098-C. Federal income tax forms However, you can use it as the contemporaneous written acknowledgment under section 170(f)(8) by providing the donor with Copy C only. Federal income tax forms See the Instructions for Form 1098-C. Federal income tax forms Generally, the organization should complete Form 1098-C as the written acknowledgment to the donor and the IRS. Federal income tax forms 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. Federal income tax forms For more information on the acknowledgment, see Notice 2005-44, 2005-25 I. Federal income tax forms R. Federal income tax forms B. Federal income tax forms 1287, at www. Federal income tax forms irs. Federal income tax forms gov/irb/2005-25_IRB/2005-25_IRB/ar09. Federal income tax forms html. Federal income tax forms Material improvements or significant intervening use. Federal income tax forms   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. Federal income tax forms Factors in determining whether a use is a significant intervening use depend on the nature, extent, frequency, and duration. Federal income tax forms 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. Federal income tax forms Use does not include the use of a vehicle to provide training in business skills, such as marketing or sales. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms   Material improvements include major repairs and additions that improve the condition of the vehicle in a manner that significantly increases the value. Federal income tax forms To be a material improvement, the improvement cannot be funded by an additional payment to the organization from the donor of the vehicle. Federal income tax forms 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. Federal income tax forms Penalties. Federal income tax forms   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. Federal income tax forms    Other penalties may apply. Federal income tax forms See Part O in the 2012 General Instructions for Certain Information Returns. Federal income tax forms   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. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms   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. Federal income tax forms 6%. Federal income tax forms   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. Federal income tax forms 6%. Federal income tax forms 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. Federal income tax forms The additional deduction is based on a specified percentage of the qualified donee income with respect to the qualified intellectual property. Federal income tax forms 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. Federal income tax forms 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. Federal income tax forms Form 8899. Federal income tax forms   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. Federal income tax forms 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. Federal income tax forms Qualified donee income. Federal income tax forms   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. Federal income tax forms 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