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H&r Block 2011 Tax Return

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H&r Block 2011 Tax Return

H&r block 2011 tax return Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. H&r block 2011 tax return SIMPLE plans. H&r block 2011 tax return Qualified plans. H&r block 2011 tax return Ordering forms and publications. H&r block 2011 tax return Tax questions. H&r block 2011 tax return Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/pub560. H&r block 2011 tax return What's New Compensation limit increased for 2013 and 2014. H&r block 2011 tax return  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. H&r block 2011 tax return This limit increases to $260,000 for 2014. H&r block 2011 tax return Elective deferral limit for 2013 and 2014. H&r block 2011 tax return  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. H&r block 2011 tax return These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. H&r block 2011 tax return Defined contribution limit increased for 2013 and 2014. H&r block 2011 tax return  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. H&r block 2011 tax return This limit increases to $52,000 for 2014. H&r block 2011 tax return SIMPLE plan salary reduction contribution limit for 2013 and 2014. H&r block 2011 tax return  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. H&r block 2011 tax return Catch-up contribution limit remains unchanged for 2013 and 2014. H&r block 2011 tax return  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. H&r block 2011 tax return The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. H&r block 2011 tax return The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. H&r block 2011 tax return The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. H&r block 2011 tax return The catch-up contribution limit. H&r block 2011 tax return The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. H&r block 2011 tax return See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. H&r block 2011 tax return All section references are to the Internal Revenue Code, unless otherwise stated. H&r block 2011 tax return Reminders In-plan Roth rollovers. H&r block 2011 tax return  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. H&r block 2011 tax return An in-plan Roth rollover is not treated as a distribution for most purposes. H&r block 2011 tax return Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. H&r block 2011 tax return For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 872, available at  www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2010-51_IRB/ar11. H&r block 2011 tax return html. H&r block 2011 tax return In-plan Roth rollovers expanded. H&r block 2011 tax return  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. H&r block 2011 tax return Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. H&r block 2011 tax return For more information, see Notice 2013-74, 2013-52 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 819, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2013-52_IRB/ar11. H&r block 2011 tax return html. H&r block 2011 tax return Credit for startup costs. H&r block 2011 tax return  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. H&r block 2011 tax return The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. H&r block 2011 tax return You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. H&r block 2011 tax return You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. H&r block 2011 tax return At least one participant must be a non-highly compensated employee. H&r block 2011 tax return The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. H&r block 2011 tax return You. H&r block 2011 tax return A member of a controlled group that includes you. H&r block 2011 tax return A predecessor of (1) or (2). H&r block 2011 tax return The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. H&r block 2011 tax return However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. H&r block 2011 tax return You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. H&r block 2011 tax return To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. H&r block 2011 tax return Retirement savings contributions credit. H&r block 2011 tax return  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. H&r block 2011 tax return The maximum contribution eligible for the credit is $2,000. H&r block 2011 tax return To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. H&r block 2011 tax return For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). H&r block 2011 tax return Photographs of missing children. H&r block 2011 tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block 2011 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block 2011 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block 2011 tax return Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. H&r block 2011 tax return In this publication, “you” refers to the employer. H&r block 2011 tax return See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. H&r block 2011 tax return This publication covers the following types of retirement plans. H&r block 2011 tax return SEP (simplified employee pension) plans. H&r block 2011 tax return SIMPLE (savings incentive match plan for employees) plans. H&r block 2011 tax return Qualified plans (also called H. H&r block 2011 tax return R. H&r block 2011 tax return 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. H&r block 2011 tax return SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. H&r block 2011 tax return You can deduct contributions you make to the plan for your employees. H&r block 2011 tax return If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. H&r block 2011 tax return You can also deduct trustees' fees if contributions to the plan do not cover them. H&r block 2011 tax return Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. H&r block 2011 tax return Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. H&r block 2011 tax return These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. H&r block 2011 tax return What this publication covers. H&r block 2011 tax return   This publication contains the information you need to understand the following topics. H&r block 2011 tax return What type of plan to set up. H&r block 2011 tax return How to set up a plan. H&r block 2011 tax return How much you can contribute to a plan. H&r block 2011 tax return How much of your contribution is deductible. H&r block 2011 tax return How to treat certain distributions. H&r block 2011 tax return How to report information about the plan to the IRS and your employees. H&r block 2011 tax return Basic features of SEP, SIMPLE, and qualified plans. H&r block 2011 tax return The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. H&r block 2011 tax return SEP plans. H&r block 2011 tax return   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. H&r block 2011 tax return Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. H&r block 2011 tax return SIMPLE plans. H&r block 2011 tax return   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. H&r block 2011 tax return Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. H&r block 2011 tax return In addition, you will contribute matching or nonelective contributions. H&r block 2011 tax return The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. H&r block 2011 tax return Qualified plans. H&r block 2011 tax return   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. H&r block 2011 tax return However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. H&r block 2011 tax return Table 1. H&r block 2011 tax return Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). H&r block 2011 tax return Smaller of $51,000 or 25%1 of participant's compensation. H&r block 2011 tax return 2 25%1 of all participants' compensation. H&r block 2011 tax return 2 Any time up to the due date of employer's return (including extensions). H&r block 2011 tax return SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. H&r block 2011 tax return 4  Matching or nonelective contributions: Due date of employer's return (including extensions). H&r block 2011 tax return Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. H&r block 2011 tax return   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. H&r block 2011 tax return 2 Same as maximum contribution. H&r block 2011 tax return Any time between 1/1 and 10/1 of the calendar year. H&r block 2011 tax return   For a new employer coming into existence after 10/1, as soon as administratively feasible. H&r block 2011 tax return Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). H&r block 2011 tax return 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). H&r block 2011 tax return  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. H&r block 2011 tax return   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. H&r block 2011 tax return 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. H&r block 2011 tax return 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. H&r block 2011 tax return   By the end of the tax year. H&r block 2011 tax return Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. H&r block 2011 tax return See Minimum Funding Requirement in chapter 4. H&r block 2011 tax return Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. H&r block 2011 tax return Based on actuarial assumptions and computations. H&r block 2011 tax return By the end of the tax year. H&r block 2011 tax return 1Net earnings from self-employment must take the contribution into account. H&r block 2011 tax return See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . H&r block 2011 tax return  2Compensation is generally limited to $255,000 in 2013. H&r block 2011 tax return  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. H&r block 2011 tax return  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. H&r block 2011 tax return What this publication does not cover. H&r block 2011 tax return   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. H&r block 2011 tax return You may also need professional help and guidance. H&r block 2011 tax return   Also, this publication does not cover all the rules that may be of interest to employees. H&r block 2011 tax return For example, it does not cover the following topics. H&r block 2011 tax return The comprehensive IRA rules an employee needs to know. H&r block 2011 tax return These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). H&r block 2011 tax return The comprehensive rules that apply to distributions from retirement plans. H&r block 2011 tax return These rules are covered in Publication 575, Pension and Annuity Income. H&r block 2011 tax return The comprehensive rules that apply to section 403(b) plans. H&r block 2011 tax return These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). H&r block 2011 tax return Comments and suggestions. H&r block 2011 tax return   We welcome your comments about this publication and your suggestions for future editions. H&r block 2011 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block 2011 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block 2011 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block 2011 tax return   You can send your comments from www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/formspubs. H&r block 2011 tax return Click on “More Information” and then on “Give us feedback. H&r block 2011 tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block 2011 tax return Ordering forms and publications. H&r block 2011 tax return   Visit www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block 2011 tax return Internal Revenue Service 1201 N. H&r block 2011 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block 2011 tax return   If you have a tax question, check the information available on IRS. H&r block 2011 tax return gov or call 1-800-829-1040. H&r block 2011 tax return We cannot answer tax questions sent to either of the above addresses. H&r block 2011 tax return Note. H&r block 2011 tax return Forms filed electronically with the Department of Labor are not available on the IRS website. H&r block 2011 tax return Instead, see www. H&r block 2011 tax return efast. H&r block 2011 tax return dol. 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The H&r Block 2011 Tax Return

H&r block 2011 tax return 2. H&r block 2011 tax return   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. H&r block 2011 tax return ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. H&r block 2011 tax return In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. H&r block 2011 tax return Those cases are called “abusive tax shelters. H&r block 2011 tax return ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. H&r block 2011 tax return Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . H&r block 2011 tax return Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. H&r block 2011 tax return Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. H&r block 2011 tax return They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. H&r block 2011 tax return Despite appearances to the contrary, the taxpayer generally risks little. H&r block 2011 tax return Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. H&r block 2011 tax return Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. H&r block 2011 tax return (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. H&r block 2011 tax return ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. H&r block 2011 tax return This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. H&r block 2011 tax return Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. H&r block 2011 tax return However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. H&r block 2011 tax return Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. H&r block 2011 tax return These provisions include the following. H&r block 2011 tax return Disclosure of reportable transactions. H&r block 2011 tax return   You must disclose information for each reportable transaction in which you participate. H&r block 2011 tax return See Reportable Transaction Disclosure Statement , later. H&r block 2011 tax return   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. H&r block 2011 tax return To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. H&r block 2011 tax return   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. H&r block 2011 tax return They must provide this number to all persons to whom they acted as a material advisor. H&r block 2011 tax return They must provide the number at the time the transaction is entered into. H&r block 2011 tax return If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. H&r block 2011 tax return For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. H&r block 2011 tax return Requirement to maintain list. H&r block 2011 tax return   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. H&r block 2011 tax return The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. H&r block 2011 tax return See Regulations section 301. H&r block 2011 tax return 6112-1 for more information (including what information is required to be included on the list). H&r block 2011 tax return Confidentiality privilege. H&r block 2011 tax return   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. H&r block 2011 tax return Appraisal requirement for donated property. H&r block 2011 tax return   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. H&r block 2011 tax return If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. H&r block 2011 tax return If you file electronically, see Form 8453, U. H&r block 2011 tax return S. H&r block 2011 tax return Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. H&r block 2011 tax return For more information about appraisals, including exceptions, see Publication 561. H&r block 2011 tax return Passive activity loss and credit limits. H&r block 2011 tax return   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. H&r block 2011 tax return For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. H&r block 2011 tax return Interest on penalties. H&r block 2011 tax return   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. H&r block 2011 tax return Accounting method restriction. H&r block 2011 tax return   Tax shelters generally cannot use the cash method of accounting. H&r block 2011 tax return Uniform capitalization rules. H&r block 2011 tax return   The uniform capitalization rules generally apply to producing property or acquiring it for resale. H&r block 2011 tax return Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. H&r block 2011 tax return For more information, see Publication 538. H&r block 2011 tax return Denial of deduction for interest on an underpayment due to a reportable transaction. H&r block 2011 tax return   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. H&r block 2011 tax return This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. H&r block 2011 tax return Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. H&r block 2011 tax return The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. H&r block 2011 tax return Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. H&r block 2011 tax return So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. H&r block 2011 tax return In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. H&r block 2011 tax return The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. H&r block 2011 tax return Investor Reporting You may be required to file a reportable transaction disclosure statement. H&r block 2011 tax return Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. H&r block 2011 tax return Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. H&r block 2011 tax return Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). H&r block 2011 tax return In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. H&r block 2011 tax return  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. H&r block 2011 tax return If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. H&r block 2011 tax return If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. H&r block 2011 tax return See Penalty for failure to disclose a reportable transaction , later under Penalties. H&r block 2011 tax return The following discussion briefly describes reportable transactions. H&r block 2011 tax return For more details, see the Instructions for Form 8886. H&r block 2011 tax return Reportable transaction. H&r block 2011 tax return   A reportable transaction is any of the following. H&r block 2011 tax return A listed transaction. H&r block 2011 tax return A confidential transaction. H&r block 2011 tax return A transaction with contractual protection. H&r block 2011 tax return A loss transaction. H&r block 2011 tax return A transaction of interest entered into after November 1, 2006. H&r block 2011 tax return Note. H&r block 2011 tax return Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. H&r block 2011 tax return Listed transaction. H&r block 2011 tax return   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. H&r block 2011 tax return These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. H&r block 2011 tax return For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2009-31_IRB/ar07. H&r block 2011 tax return html. H&r block 2011 tax return Confidential transaction. H&r block 2011 tax return   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. H&r block 2011 tax return A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. H&r block 2011 tax return The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. H&r block 2011 tax return Transaction with contractual protection. H&r block 2011 tax return   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. H&r block 2011 tax return For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2007-07_IRB/ar15. H&r block 2011 tax return html. H&r block 2011 tax return Loss transaction. H&r block 2011 tax return   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. H&r block 2011 tax return A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. H&r block 2011 tax return   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. H&r block 2011 tax return For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2004-50_IRB/ar11. H&r block 2011 tax return html. H&r block 2011 tax return Transaction of interest. H&r block 2011 tax return   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. H&r block 2011 tax return The IRS has identified the following transactions of interest. H&r block 2011 tax return “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 545, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2007-36_IRB/ar20. H&r block 2011 tax return html. H&r block 2011 tax return Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 544, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2007-36_IRB/ar19. H&r block 2011 tax return html. H&r block 2011 tax return Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 1194, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2008-47_IRB/ar11. H&r block 2011 tax return html. H&r block 2011 tax return Certain transactions involving a U. H&r block 2011 tax return S. H&r block 2011 tax return taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. H&r block 2011 tax return R. H&r block 2011 tax return B. H&r block 2011 tax return 312, available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2009-03_IRB/ar10. H&r block 2011 tax return html. H&r block 2011 tax return   For updates to this list, go to www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. H&r block 2011 tax return Penalties Investing in an abusive tax shelter may lead to substantial expenses. H&r block 2011 tax return First, the promoter generally charges a substantial fee. H&r block 2011 tax return If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. H&r block 2011 tax return You may also be subject to the penalty for failure to pay tax. H&r block 2011 tax return These penalties are explained in the following paragraphs. H&r block 2011 tax return Accuracy-related penalties. H&r block 2011 tax return   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). H&r block 2011 tax return Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. H&r block 2011 tax return Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. H&r block 2011 tax return   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. H&r block 2011 tax return   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). H&r block 2011 tax return Negligence or disregard of rules or regulations. H&r block 2011 tax return   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. H&r block 2011 tax return The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. H&r block 2011 tax return    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. H&r block 2011 tax return It also includes any failure to keep adequate books and records. H&r block 2011 tax return A return position that has a reasonable basis is not negligence. H&r block 2011 tax return   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. H&r block 2011 tax return   The penalty for disregard of rules and regulations can be avoided if all the following are true. H&r block 2011 tax return You keep adequate books and records. H&r block 2011 tax return You have a reasonable basis for your position on the tax issue. H&r block 2011 tax return You make an adequate disclosure of your position. H&r block 2011 tax return Use Form 8275 to make your disclosure and attach it to your return. H&r block 2011 tax return To disclose a position contrary to a regulation, use Form 8275-R. H&r block 2011 tax return Use Form 8886 to disclose a reportable transaction (discussed earlier). H&r block 2011 tax return Substantial understatement of tax. H&r block 2011 tax return   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. H&r block 2011 tax return An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. H&r block 2011 tax return The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. H&r block 2011 tax return   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. H&r block 2011 tax return In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. H&r block 2011 tax return Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. H&r block 2011 tax return   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. H&r block 2011 tax return An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. H&r block 2011 tax return Substantial valuation misstatement. H&r block 2011 tax return   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. H&r block 2011 tax return The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. H&r block 2011 tax return You underpaid your tax by more than $5,000 because of the misstatement. H&r block 2011 tax return You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. H&r block 2011 tax return   You may be assessed a penalty of 40% for a gross valuation misstatement. H&r block 2011 tax return If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. H&r block 2011 tax return The penalty rate is also 40% if the property's correct value or adjusted basis is zero. H&r block 2011 tax return Transaction lacking economic substance. H&r block 2011 tax return   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. H&r block 2011 tax return For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. H&r block 2011 tax return   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. H&r block 2011 tax return   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. H&r block 2011 tax return   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. H&r block 2011 tax return Relevant facts include any facts affecting the tax treatment of the transaction. H&r block 2011 tax return    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. H&r block 2011 tax return Undisclosed foreign financial asset understatement. H&r block 2011 tax return   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. H&r block 2011 tax return An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. H&r block 2011 tax return The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. H&r block 2011 tax return Any foreign business you control, reportable on Form 5471, Information Return of U. H&r block 2011 tax return S. H&r block 2011 tax return Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. H&r block 2011 tax return S. H&r block 2011 tax return Persons With Respect to Certain Foreign Partnerships. H&r block 2011 tax return Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. H&r block 2011 tax return S. H&r block 2011 tax return Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. H&r block 2011 tax return Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. H&r block 2011 tax return    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. H&r block 2011 tax return See the Instructions for Form 8938 for details. H&r block 2011 tax return    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. H&r block 2011 tax return Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. H&r block 2011 tax return Penalty for incorrect appraisals. H&r block 2011 tax return   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. H&r block 2011 tax return For details on the penalty amount and exceptions, see Publication 561. H&r block 2011 tax return Penalty for failure to disclose a reportable transaction. H&r block 2011 tax return   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). H&r block 2011 tax return For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). H&r block 2011 tax return This penalty is in addition to any other penalty that may be imposed. H&r block 2011 tax return   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. H&r block 2011 tax return For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. H&r block 2011 tax return irs. H&r block 2011 tax return gov/irb/2007-09_IRB/ar12. H&r block 2011 tax return html. H&r block 2011 tax return Accuracy-related penalty for a reportable transaction understatement. H&r block 2011 tax return   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. H&r block 2011 tax return This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. H&r block 2011 tax return The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. H&r block 2011 tax return You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. H&r block 2011 tax return The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. H&r block 2011 tax return   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. H&r block 2011 tax return Civil fraud penalty. H&r block 2011 tax return   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. H&r block 2011 tax return Joint return. H&r block 2011 tax return   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. H&r block 2011 tax return Failure to pay tax. H&r block 2011 tax return   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. H&r block 2011 tax return Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. H&r block 2011 tax return Prev  Up  Next   Home   More Online Publications