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Tax Preparation Forms

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Tax Preparation Forms

Tax preparation forms 1. Tax preparation forms   Filing Information Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Filing RequirementsWhen To File and Pay Foreign Currency Does My Return Have To Be On Paper? Where To File Nonresident Alien Spouse Treated as a ResidentSocial Security Number (SSN) How To Make the Choice Suspending the Choice Ending the Choice Estimated Tax Other Forms You May Have To File Topics - This chapter discusses: Whether you have to file a return, When to file your return and pay any tax due, How to treat foreign currency, How to file electronically, Where to file your return, When you can treat your nonresident alien spouse as a resident, and When you may have to make estimated tax payments. Tax preparation forms Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 519 U. Tax preparation forms S. Tax preparation forms Tax Guide for Aliens 970 Tax Benefits for Education Form (and Instructions) 1040-ES Estimated Tax for Individuals 1040X Amended U. Tax preparation forms S. Tax preparation forms Individual Income Tax Return 2350 Application for Extension of Time To File U. Tax preparation forms S. Tax preparation forms Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 4868 Application for Automatic Extension of Time To File U. Tax preparation forms S. Tax preparation forms Individual Income Tax Return 8822 Change of Address See chapter 7 for information about getting these publications and forms. Tax preparation forms Filing Requirements If you are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Tax preparation forms Your income, filing status, and age generally determine whether you must file an income tax return. Tax preparation forms Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table. Tax preparation forms Filing Status*   Amount Single $10,000 65 or older $11,500 Head of household $12,850 65 or older $14,350 Qualifying widow(er) $16,100 65 or older $17,300 Married filing jointly $20,000 Not living with spouse at end of year $3,900 One spouse 65 or older $21,200 Both spouses 65 or older $22,400 Married filing separately $3,900 *If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. Tax preparation forms Gross income. Tax preparation forms   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Tax preparation forms   For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount. Tax preparation forms If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business. Tax preparation forms Self-employed individuals. Tax preparation forms   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Tax preparation forms Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business. Tax preparation forms 65 or older. Tax preparation forms   You are considered to be age 65 on the day before your 65th birthday. Tax preparation forms For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Tax preparation forms Residents of U. Tax preparation forms S. Tax preparation forms possessions. Tax preparation forms   If you are (or were) a bona fide resident of a U. Tax preparation forms S. Tax preparation forms possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U. Tax preparation forms S. Tax preparation forms Possession. Tax preparation forms See the instructions for the form for more information. Tax preparation forms When To File and Pay If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. Tax preparation forms If you file on a fiscal year basis (a year ending on the last day of any month except December), the due date is 3 months and 15 days after the close of your fiscal year. Tax preparation forms In general, the tax shown on your return should be paid by the due date of the return, without regard to any extension of time for filing the return. Tax preparation forms When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Tax preparation forms — falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Tax preparation forms A tax return delivered by the U. Tax preparation forms S. Tax preparation forms mail or a designated delivery service that is postmarked or dated by the delivery service on or before the due date is considered to have been filed on or before that date. Tax preparation forms See your Form 1040 or Form 1040A instructions for a list of designated delivery services. Tax preparation forms Foreign wire transfers. Tax preparation forms   If you have a U. Tax preparation forms S. Tax preparation forms bank account, you can use: EFTPS (Electronic Federal Tax Payment System), or Federal Tax Application (same-day wire transfer). Tax preparation forms If you do not have a U. Tax preparation forms S. Tax preparation forms bank account, ask if your financial institution has a U. Tax preparation forms S. Tax preparation forms affiliate that can help you make same-day wire transfers. Tax preparation forms   For more information, visit www. Tax preparation forms eftps. Tax preparation forms gov. Tax preparation forms Extensions You can get an extension of time to file your return. Tax preparation forms In some circumstances, you also can get an extension of time to file and pay any tax due. Tax preparation forms However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Tax preparation forms This publication discusses four extensions: an automatic 2-month extension, an automatic 6-month extension, an additional extension for taxpayers out of the country, and an extension of time to meet tests. Tax preparation forms If you served in a combat zone or qualified hazardous duty area, see Publication 3 for a discussion of extensions of deadlines. Tax preparation forms Automatic 2-month extension. Tax preparation forms   You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien, and on the regular due date of your return: You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Tax preparation forms   If you use a calendar year, the regular due date of your return is April 15. Tax preparation forms Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return. Tax preparation forms Married taxpayers. Tax preparation forms   If you file a joint return, either you or your spouse can qualify for the automatic extension. Tax preparation forms If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies for it. Tax preparation forms How to get the extension. Tax preparation forms   To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. Tax preparation forms Automatic 6-month extension. Tax preparation forms   If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). Tax preparation forms To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). Tax preparation forms For more information about filing electronically, see E-file options , later. Tax preparation forms   The form must show your properly estimated tax liability based on the information available to you. Tax preparation forms    You may not be eligible. Tax preparation forms You cannot use the automatic 6-month extension of time to file if: You want the IRS to figure your tax, or You are under a court order to file by the regular due date. Tax preparation forms E-file options. Tax preparation forms    You can use e-file to get an extension of time to file. Tax preparation forms You can either file Form 4868 electronically or you can pay part or all of your estimate of tax due using a credit or debit card. Tax preparation forms   First, complete Form 4868 to use as a worksheet. Tax preparation forms If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Tax preparation forms    Then, do one of the following. Tax preparation forms E-file Form 4868. Tax preparation forms You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Tax preparation forms You will need to provide certain information from your tax return for 2012. Tax preparation forms If you wish to make a payment by electronic funds withdrawal, see the instructions for Form 4868. Tax preparation forms If you e-file Form 4868, do not also send a paper Form 4868. Tax preparation forms E-file and pay by credit or debit card. Tax preparation forms You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card. Tax preparation forms You can do this by phone or over the Internet. Tax preparation forms If you do this, you do not file Form 4868. Tax preparation forms For more information, see the instructions for your tax return. Tax preparation forms When to file. Tax preparation forms   Generally, you must request the 6-month extension by the regular due date of your return. Tax preparation forms Previous 2-month extension. Tax preparation forms   If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. Tax preparation forms The 2-month period and the 6-month period start at the same time. Tax preparation forms You have to request the additional 4 months by the new due date allowed by the 2-month extension. Tax preparation forms   The additional 4 months of time to file (unlike the original 2-month extension) is not an extension of time to pay. Tax preparation forms You must make an accurate estimate of your tax based on the information available to you. Tax preparation forms If you find you cannot pay the full amount due with Form 4868, you can still get the extension. Tax preparation forms You will owe interest on the unpaid amount from the original due date of the return. Tax preparation forms   You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Tax preparation forms Penalties for paying the tax late are assessed from the original due date of your return, unless you qualify for the automatic 2-month extension. Tax preparation forms In that situation, penalties for paying late are assessed from the extended due date of the payment (June 15 for calendar year taxpayers). Tax preparation forms Additional extension of time for taxpayers out of the country. Tax preparation forms   In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Tax preparation forms   To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. Tax preparation forms Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You will not receive any notification from the Internal Revenue Service unless your request is denied. Tax preparation forms   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350, discussed next. Tax preparation forms Extension of time to meet tests. Tax preparation forms   You generally cannot get an extension of more than 6 months. Tax preparation forms However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension. Tax preparation forms   You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. Tax preparation forms The tests, the exclusions, and the deduction are explained in chapter 4. Tax preparation forms   You should request an extension if all three of the following apply. Tax preparation forms You are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien. Tax preparation forms You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due. Tax preparation forms Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. Tax preparation forms   If you are granted an extension, it generally will be to 30 days beyond the date on which you can reasonably expect to qualify for an exclusion or deduction under either the bona fide residence test or the physical presence test. Tax preparation forms However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension until after the end of the second year. Tax preparation forms How to get an extension. Tax preparation forms   To obtain an extension, file Form 2350 either by giving it to a local IRS representative or other IRS employee or by mailing it to the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You must file Form 2350 by the due date for filing your return. Tax preparation forms Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15. Tax preparation forms What if tests are not met. Tax preparation forms   If you obtain an extension and unforeseen events make it impossible for you to meet either the bona fide residence test or the physical presence test, you should file your income tax return as soon as possible because you must pay interest on any tax due after the regular due date of the return (even though an extension was granted). Tax preparation forms    You should make any request for an extension early, so that if it is denied you still can file your return on time. Tax preparation forms Otherwise, if you file late and additional tax is due, you may be subject to a penalty. Tax preparation forms Return filed before test is met. Tax preparation forms   If you file a return before you meet the bona fide residence test or the physical presence test, you must include all income from both U. Tax preparation forms S. Tax preparation forms and foreign sources and pay the tax on that income. Tax preparation forms If you later meet either of the tests, you can claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction on Form 1040X. Tax preparation forms Foreign Currency You must express the amounts you report on your U. Tax preparation forms S. Tax preparation forms tax return in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms How you do this depends on your functional currency. Tax preparation forms Your functional currency generally is the U. Tax preparation forms S. Tax preparation forms dollar unless you are required to use the currency of a foreign country. Tax preparation forms You must make all federal income tax determinations in your functional currency. Tax preparation forms The U. Tax preparation forms S. Tax preparation forms dollar is the functional currency for all taxpayers except some qualified business units (QBUs). Tax preparation forms A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Tax preparation forms Even if you have a QBU, your functional currency is the dollar if any of the following apply. Tax preparation forms You conduct the business in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms The principal place of business is located in the United States. Tax preparation forms You choose to or are required to use the U. Tax preparation forms S. Tax preparation forms dollar as your functional currency. Tax preparation forms The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Tax preparation forms Make all income tax determinations in your functional currency. Tax preparation forms If your functional currency is the U. Tax preparation forms S. Tax preparation forms dollar, you must immediately translate into U. Tax preparation forms S. Tax preparation forms dollars all items of income, expense, etc. Tax preparation forms (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Tax preparation forms Use the exchange rate prevailing when you receive, pay, or accrue the item. Tax preparation forms If there is more than one exchange rate, use the one that most properly reflects your income. Tax preparation forms You can generally get exchange rates from banks and U. Tax preparation forms S. Tax preparation forms Embassies. Tax preparation forms If your functional currency is not the U. Tax preparation forms S. Tax preparation forms dollar, make all income tax determinations in your functional currency. Tax preparation forms At the end of the year, translate the results, such as income or loss, into U. Tax preparation forms S. Tax preparation forms dollars to report on your income tax return. Tax preparation forms Blocked Income You generally must report your foreign income in terms of U. Tax preparation forms S. Tax preparation forms dollars and, with one exception (see Fulbright Grant, later), you must pay taxes due on it in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms If, because of restrictions in a foreign country, your income is not readily convertible into U. Tax preparation forms S. Tax preparation forms dollars or into other money or property that is readily convertible into U. Tax preparation forms S. Tax preparation forms dollars, your income is “blocked” or “deferrable” income. Tax preparation forms You can report this income in one of two ways: Report the income and pay your federal income tax with U. Tax preparation forms S. Tax preparation forms dollars that you have in the United States or in some other country, or Postpone the reporting of the income until it becomes unblocked. Tax preparation forms If you choose to postpone the reporting of the income, you must file an information return with your tax return. Tax preparation forms For this information return, you should use another Form 1040 labeled “Report of Deferrable Foreign Income, pursuant to Rev. Tax preparation forms Rul. Tax preparation forms 74-351. Tax preparation forms ” You must declare on the information return that you will include the deferrable income in your taxable income for the year that it becomes unblocked. Tax preparation forms You also must state that you waive any right to claim that the deferrable income was includible in your income for any earlier year. Tax preparation forms You must report your income on your information return using the foreign currency in which you received that income. Tax preparation forms If you have blocked income from more than one foreign country, include a separate information return for each country. Tax preparation forms Income becomes unblocked and reportable for tax purposes when it becomes convertible, or when it is converted, into U. Tax preparation forms S. Tax preparation forms dollars or into other money or property that is convertible into U. Tax preparation forms S. Tax preparation forms currency. Tax preparation forms Also, if you use blocked income for your personal expenses or dispose of it by gift, bequest, or devise, you must treat it as unblocked and reportable. Tax preparation forms If you have received blocked income on which you have not paid tax, you should check to see whether that income is still blocked. Tax preparation forms If it is not, you should take immediate steps to pay tax on it, file a declaration or amended declaration of estimated tax, and include the income on your tax return for the year in which the income became unblocked. Tax preparation forms If you choose to postpone reporting blocked income and in a later tax year you wish to begin including it in gross income although it is still blocked, you must obtain the permission of the IRS to do so. Tax preparation forms To apply for permission, file Form 3115, Application for Change in Accounting Method. Tax preparation forms You also must request permission from the IRS on Form 3115 if you have not chosen to defer the reporting of blocked income in the past, but now wish to begin reporting blocked income under the deferred method. Tax preparation forms See the instructions for Form 3115 for information on changing your accounting method. Tax preparation forms Fulbright Grant All income must be reported in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms In most cases, the tax also must be paid in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms If, however, at least 70% of your Fulbright grant has been paid in nonconvertible foreign currency (blocked income), you can use the currency of the host country to pay the part of the U. Tax preparation forms S. Tax preparation forms tax that is based on the blocked income. Tax preparation forms Paying U. Tax preparation forms S. Tax preparation forms tax in foreign currency. Tax preparation forms   To qualify for this method of payment, you must prepare a statement that shows the following information. Tax preparation forms You were a Fulbright grantee and were paid in nonconvertible foreign currency. Tax preparation forms The total grant you received during the year and the amount you received in nonconvertible foreign currency. Tax preparation forms At least 70% of the grant was paid in nonconvertible foreign currency. Tax preparation forms The statement must be certified by the U. Tax preparation forms S. Tax preparation forms educational foundation or commission paying the grant or other person having control of grant payments to you. Tax preparation forms   You should prepare at least two copies of this statement. Tax preparation forms Attach one copy to your Form 1040 and keep the other copy for identification purposes when you make a tax deposit of nonconvertible foreign currency. Tax preparation forms Figuring actual tax. Tax preparation forms   When you prepare your income tax return, you may owe tax or the entire liability may have been satisfied with your estimated tax payments. Tax preparation forms If you owe tax, figure the part due to (and payable in) the nonconvertible foreign currency by using the following formula. Tax preparation forms   Adjusted gross income that is blocked income × Total U. Tax preparation forms S. Tax preparation forms tax = Tax on blocked income     Total adjusted  gross income     You must attach all of the following to the return. Tax preparation forms A copy of the certified statement discussed earlier. Tax preparation forms A detailed statement showing the allocation of tax attributable to amounts received in foreign currency and the rates of exchange used in determining your tax liability in U. Tax preparation forms S. Tax preparation forms dollars. Tax preparation forms The original deposit receipt for any balance of tax due that you paid in nonconvertible foreign currency. Tax preparation forms Figuring estimated tax on nonconvertible foreign currency. Tax preparation forms   If you are liable for estimated tax (discussed later), figure the amount you can pay to the IRS in nonconvertible foreign currency using the following formula. Tax preparation forms   Adjusted gross income that is blocked income × Total estimated U. Tax preparation forms S. Tax preparation forms tax = Estimated tax on blocked income     Total adjusted  gross income     If you must pay your host country income tax on your grant, subtract any estimated foreign tax credit that applies to your grant from the estimated tax on the blocked income. Tax preparation forms Deposit of foreign currency with disbursing officer. Tax preparation forms   Once you have determined the amount of the actual tax or estimated tax that you can pay in nonconvertible foreign currency, deposit that amount with the disbursing officer of the Department of State in the foreign country in which the foundation or commission paying the grant is located. Tax preparation forms Estimated tax installments. Tax preparation forms   You can either deposit the full estimated tax amount before the first installment due date or make four equal payments before the installment due dates. Tax preparation forms See Estimated Tax , later. Tax preparation forms Deposit receipt. Tax preparation forms   Upon accepting the foreign currency, the disbursing officer will give you a receipt in duplicate. Tax preparation forms The original of this receipt (showing the amount of foreign currency deposited and its equivalent in U. Tax preparation forms S. Tax preparation forms dollars) should be attached to your Form 1040 or payment voucher from Form 1040-ES. Tax preparation forms Keep the copy for your records. Tax preparation forms Does My Return Have To Be On Paper? IRS e-file (electronic filing) is the fastest, easiest, and most convenient way to file your income tax return electronically. Tax preparation forms IRS e-file offers accurate, safe, and fast alternatives to filing on paper. Tax preparation forms IRS computers quickly and automatically check for errors or other missing information. Tax preparation forms Even returns with a foreign address can be e-filed! How to e-file. Tax preparation forms   There are three ways you can e-file. Tax preparation forms Use your personal computer. Tax preparation forms Use a volunteer. Tax preparation forms Many programs offering free tax help can e-file your return. Tax preparation forms Use a tax professional. Tax preparation forms Most tax professionals can e-file your return. Tax preparation forms These methods are explained in detail in the instructions for your tax return. Tax preparation forms Where To File If any of the following situations apply to you, do not file your return with the service center listed for your home state. Tax preparation forms You claim the foreign earned income exclusion. Tax preparation forms You claim the foreign housing exclusion or deduction. Tax preparation forms You live in a foreign country. Tax preparation forms Instead, use one of the following special addresses. Tax preparation forms If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 USA If you are enclosing a check or money order, file your return with: Internal Revenue Service Center P. Tax preparation forms O. Tax preparation forms Box 1303 Charlotte, NC 28201-1303 USA If you do not know where your legal residence is and you do not have a principal place of business in the United States, you can file with the appropriate address listed above. Tax preparation forms However, you should not file with the addresses listed above if you are a bona fide resident of the U. Tax preparation forms S. Tax preparation forms Virgin Islands, Guam, or the Commonwealth of the Northern Mariana Islands during your entire tax year. Tax preparation forms Resident of U. Tax preparation forms S. Tax preparation forms Virgin Islands (USVI). Tax preparation forms   If you are a bona fide resident of the USVI during your entire tax year, you generally are not required to file a U. Tax preparation forms S. Tax preparation forms return. Tax preparation forms However, you must file a return with the USVI. Tax preparation forms    Send your return to the:     Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Tax preparation forms Thomas, Virgin Islands 00802 Non-USVI resident with USVI income. Tax preparation forms   If you are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien and you have income from sources in the USVI or income effectively connected with the conduct of a trade or business in the USVI, and you are not a bona fide resident of the USVI during your entire tax year, you must file identical tax returns with the United States and the USVI. Tax preparation forms File the original return with the United States and file a signed copy of the U. Tax preparation forms S. Tax preparation forms return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue. Tax preparation forms   You must complete Form 8689, Allocation of Individual Income Tax to the U. Tax preparation forms S. Tax preparation forms Virgin Islands, and attach a copy to both your U. Tax preparation forms S. Tax preparation forms return and your USVI return. Tax preparation forms You should file your U. Tax preparation forms S. Tax preparation forms return with the address listed under Where To File. Tax preparation forms   See Publication 570, Tax Guide for Individuals With Income From U. Tax preparation forms S. Tax preparation forms Possessions, for information about filing Virgin Islands returns. Tax preparation forms Resident of Guam. Tax preparation forms   If you are a bona fide resident of Guam during your entire tax year, you should file a return with Guam. Tax preparation forms    Send your return to the:     Department of Revenue and Taxation Government of Guam P. Tax preparation forms O. Tax preparation forms Box 23607 GMF, GU 96921   However, if you have income from sources within Guam and you are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien, but not a bona fide resident of Guam during the entire tax year, you should file a return with the United States. Tax preparation forms Send your return to the address listed under Where To File. Tax preparation forms   See Publication 570 for information about filing Guam returns. Tax preparation forms Resident of the Commonwealth of the Northern Mariana Islands. Tax preparation forms   If you are a bona fide resident of the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you should file a return with the Northern Mariana Islands. Tax preparation forms    Send your return to the:      Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Tax preparation forms O. Tax preparation forms Box 5234, CHRB Saipan, MP 96950   However, if you have income from sources within the CNMI and you are a U. Tax preparation forms S. Tax preparation forms citizen or resident alien, but not a bona fide resident of the CNMI during the entire tax year, you should file a return with the United States. Tax preparation forms Send your return to the address listed under Where To File. Tax preparation forms   See Publication 570 for information about filing Northern Mariana Islands returns. Tax preparation forms Nonresident Alien Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Tax preparation forms S. Tax preparation forms citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U. Tax preparation forms S. Tax preparation forms resident. Tax preparation forms This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year. Tax preparation forms If you make this choice, the following two rules apply. Tax preparation forms You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect. Tax preparation forms You must file a joint income tax return for the year you make the choice. Tax preparation forms This means that neither of you can claim under any tax treaty not to be a U. Tax preparation forms S. Tax preparation forms resident for a tax year for which the choice is in effect. Tax preparation forms You can file joint or separate returns in years after the year in which you make the choice. Tax preparation forms Example 1. Tax preparation forms Pat Smith, a U. Tax preparation forms S. Tax preparation forms citizen, is married to Norman, a nonresident alien. Tax preparation forms Pat and Norman make the choice to treat Norman as a resident alien by attaching a statement to their joint return. Tax preparation forms Pat and Norman must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. Tax preparation forms Although Pat and Norman must file a joint return for the year they make the choice, they can file either joint or separate returns for later years. Tax preparation forms Example 2. Tax preparation forms When Bob and Sharon Williams got married, both were nonresident aliens. Tax preparation forms In June of last year, Bob became a resident alien and remained a resident for the rest of the year. Tax preparation forms Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return for last year. Tax preparation forms Bob and Sharon must report their worldwide income for last year and all later years unless the choice is ended or suspended. Tax preparation forms Bob and Sharon must file a joint return for last year, but they can file either joint or separate returns for later years. Tax preparation forms If you do not choose to treat your nonresident alien spouse as a U. Tax preparation forms S. Tax preparation forms resident, you may be able to use head of household filing status. Tax preparation forms To use this status, you must pay more than half the cost of maintaining a household for certain dependents or relatives other than your nonresident alien spouse. Tax preparation forms For more information, see Publication 501. Tax preparation forms Social Security Number (SSN) If you choose to treat your nonresident alien spouse as a U. Tax preparation forms S. Tax preparation forms resident, your spouse must have either an SSN or an individual taxpayer identification number (ITIN). Tax preparation forms To get an SSN for a nonresident alien spouse, apply at an office of the U. Tax preparation forms S. Tax preparation forms Social Security Administration (SSA) or U. Tax preparation forms S. Tax preparation forms consulate. Tax preparation forms You must complete Form SS-5, Application for a Social Security Card, available at www. Tax preparation forms socialsecurity. Tax preparation forms gov or by calling 1-800-772-1213. Tax preparation forms You must also provide original or certified copies of documents to verify that spouse's age, identity, and citizenship. Tax preparation forms If the nonresident alien spouse is not eligible to get an SSN, he or she can file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS to apply for an ITIN. Tax preparation forms How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Tax preparation forms It should contain the following: A declaration that one spouse was a nonresident alien and the other spouse a U. Tax preparation forms S. Tax preparation forms citizen or resident alien on the last day of your tax year and that you choose to be treated as U. Tax preparation forms S. Tax preparation forms residents for the entire tax year, and The name, address, and social security number (or individual taxpayer identification number) of each spouse. Tax preparation forms (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Tax preparation forms ) You generally make this choice when you file your joint return. Tax preparation forms However, you also can make the choice by filing a joint amended return on Form 1040X. Tax preparation forms Attach Form 1040, 1040A, or 1040EZ and print “Amended” across the top of the amended return. Tax preparation forms If you make the choice with an amended return, you and your spouse also must amend any returns that you may have filed after the year for which you made the choice. Tax preparation forms You generally must file the amended joint return within 3 years from the date you filed your original U. Tax preparation forms S. Tax preparation forms income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Tax preparation forms Table 1–1. Tax preparation forms Ending the Choice To Treat Nonresident Alien Spouse as a Resident Revocation   Either spouse can revoke the choice for any tax year. Tax preparation forms   • The revocation must be made by the due date for filing the tax return for that tax year. Tax preparation forms   • The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Tax preparation forms The statement revoking the choice must include the following:     • The name, address, and social security number (or taxpayer identification number) of each spouse. Tax preparation forms     • The name and address of any person who is revoking the choice for a deceased spouse. Tax preparation forms     • A list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Tax preparation forms   • If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where the last joint return was filed. Tax preparation forms Death   The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died. Tax preparation forms   • If the surviving spouse is a U. Tax preparation forms S. Tax preparation forms citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Tax preparation forms   • If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Tax preparation forms Divorce or  Legal separation   A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs. Tax preparation forms Inadequate records   The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Tax preparation forms Suspending the Choice The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U. Tax preparation forms S. Tax preparation forms citizen or resident alien at any time during the later tax year. Tax preparation forms Example. Tax preparation forms Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Tax preparation forms They chose to treat Judy as a resident alien and filed a joint 2010 income tax return. Tax preparation forms On January 10, 2012, Dick became a nonresident alien. Tax preparation forms Judy had remained a nonresident alien. Tax preparation forms Because Dick was a resident alien during part of 2012, Dick and Judy can file joint or separate returns for that year. Tax preparation forms Neither Dick nor Judy was a resident alien at any time during 2013 and their choice is suspended for that year. Tax preparation forms For 2013, both are treated as nonresident aliens. Tax preparation forms If Dick becomes a resident alien again in 2014, their choice is no longer suspended and both are treated as resident aliens. Tax preparation forms Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier) or ended in one of the ways shown in Table 1-1. Tax preparation forms If the choice is ended for any of the reasons listed in Table 1-1, neither spouse can make a choice in any later tax year. Tax preparation forms Estimated Tax The requirements for determining who must pay estimated tax are the same for a U. Tax preparation forms S. Tax preparation forms citizen or resident abroad as for a taxpayer in the United States. Tax preparation forms For current instructions on making estimated tax payments, see Form 1040-ES. Tax preparation forms If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Tax preparation forms Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Tax preparation forms (The return must cover all 12 months. Tax preparation forms ) If less than two-thirds of your gross income for 2013 and 2014 is from farming or fishing and your adjusted gross income for 2013 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). Tax preparation forms See Publication 505 for more information. Tax preparation forms The first installment of estimated tax is due on April 15, 2014. Tax preparation forms Foreign earned income exclusion. Tax preparation forms   When figuring your estimated gross income, subtract amounts you expect to exclude under the foreign earned income exclusion and the foreign housing exclusion. Tax preparation forms In addition, you can reduce your income by your estimated foreign housing deduction. Tax preparation forms However, you must estimate tax on your nonexcluded income using the tax rates that will apply had you not excluded the income. Tax preparation forms If the actual amount of the exclusion or deduction is less than you estimate, you may have to pay a penalty for underpayment of estimated tax. Tax preparation forms   For more information about figuring your estimated tax, see Publication 505. Tax preparation forms Other Forms You May Have To File FinCEN Form 114 (replaces Form TD F 90-22. Tax preparation forms 1). Tax preparation forms   Beginning October 1, 2013, Form 114, Report of Foreign Bank and Financial Accounts (FBAR), must be filed instead of Form TD F 90-22. Tax preparation forms 1. Tax preparation forms Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). Tax preparation forms See the filing instructions at www. Tax preparation forms bsaefiling. Tax preparation forms fincen. Tax preparation forms treas. Tax preparation forms gov/main. Tax preparation forms html. Tax preparation forms   You must file Form 114 if you had any financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country. Tax preparation forms You do not need to file the report if the assets are with a U. Tax preparation forms S. Tax preparation forms military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Tax preparation forms   More information about the filing of Form 114 can be found in the instructions for the form. Tax preparation forms FinCEN Form 105. Tax preparation forms   You must file Form 105, Report of International Transportation of Currency or Monetary Instruments, if you physically transport, mail, ship, or cause to be physically transported, mailed, or shipped into or out of the United States, currency or other monetary instruments totaling more than $10,000 at one time. Tax preparation forms Certain recipients of currency or monetary instruments also must file Form 105. Tax preparation forms   More information about the filing of Form 105 can be found in the instructions on the back of the form. Tax preparation forms Form 8938. Tax preparation forms   You must file Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount (the “reporting threshold ”). Tax preparation forms The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Tax preparation forms Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Tax preparation forms S. Tax preparation forms person. Tax preparation forms   You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Tax preparation forms   More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. Tax preparation forms Prev  Up  Next   Home   More Online Publications
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2014 Refunds Ahead of Last Year

 

IR-2014-23, March 6, 2014

WASHINGTON — By the end of February, more than 48 million tax refunds had been issued the IRS today announced – an increase of 5.6 percent compared to the same time last year. As of Feb. 28, the average refund this year is $3,034, up 3 percent compared to the average refund amount for the same time last year. Almost 88 percent of refunds to date have been directly deposited into the accounts of taxpayers, saving them time and a trip to the bank.

The number of returns filed electronically is up slightly from the same time last year however, the number of taxpayers filing from home computers is up 7.5 percent.

At the end of the fourth week of the filing season, the IRS had received almost 40 percent of the returns it expects to receive during 2014.

 

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2014 FILING SEASON STATISTICS

Cumulative statistics comparing 3/01/13 and 2/28/14

Individual Income Tax Returns:

2013

2014

% Change

Total Receipts

58,044,000

58,883,000

1.4

Total Processed

51,778,000

57,410,000

10.9

 

 

 

 

E-filing Receipts:

 

 

 

TOTAL           

53,612,000

54,942,000

2.5

Tax Professionals

30,466,000

30,053,000

-1.4

Self-prepared

23,146,000

24,889,000

7.5

 

 

 

 

Web Usage:

 

 

 

Visits to IRS.gov

180,140,998

165,204,642

-8.3

 

 

 

 

Total Refunds:

 

 

 

Number

45,862,000

48,429,000

5.6

Amount

$135.025

Billion

$146.918

Billion

8.8

Average refund

$2,944

$3,034

3.0

 

 

 

 

Direct Deposit Refunds:

 

 

 

Number

41,137,000

42,380,000

3.0

Amount

$126.032

Billion

$131.203

Billion

4.1

Average refund

$3,054

$3,096

1.1

 

Page Last Reviewed or Updated: 06-Mar-2014

The Tax Preparation Forms

Tax preparation forms 5. Tax preparation forms   Excise Taxes Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Prohibited Tax Shelter TransactionsEntity Level Tax Excess Benefit TransactionsTax on Disqualified Persons Tax on Organization Managers Excess Benefit Transaction Excess Business Holdings Taxable Distributions of Sponsoring Organizations Exception. Tax preparation forms A donor advised fund does not include: Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Excise Taxes on Private Foundations Excise Taxes on Black Lung Benefit Trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements Introduction An excise tax may be imposed on certain tax-exempt organizations. Tax preparation forms Topics - This chapter discusses: Prohibited tax shelter transactions Excess benefit transactions Excess business holdings Taxable distributions of sponsoring organizations Taxes on prohibited benefits distributed from donor advised funds Excise taxes on private foundations Excise taxes on 501(c)(21) black lung benefit trusts Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements of Hospitals Useful Items - You may want to see: Forms (and Instructions) 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code See chapter 6 for more information about getting Form 4720. Tax preparation forms Prohibited Tax Shelter Transactions Section 4965 imposes an excise tax on: Certain tax-exempt entities that are party to prohibited tax shelter transactions, and Any entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows or has reason to know that the transaction is a prohibited tax shelter transaction. Tax preparation forms  Additionally, section 6033 provides new disclosure requirements on a tax-exempt entity that is a party to a prohibited tax shelter transaction. Tax preparation forms Tax-exempt entities. Tax preparation forms   Tax-exempt entities that are subject to section 4965 include: Entities described in section 501(c), including but not limited to the following common types of entities: Instrumentalities of the United States described in section 501(c)(1); Churches, hospitals, museums, schools, scientific research organizations, and other charities described in section 501(c)(3); Civic leagues, social welfare organizations, and local associations of employees described in section 501(c)(4); Labor, agricultural, or horticultural organizations described in section 501(c)(5); Business leagues, chambers of commerce, trade associations, and other organizations described in section 501(c)(6); Voluntary employees' beneficiary associations (VEBAs) described in section 501(c)(9); Credit unions described in section 501(c)(14); Insurance companies described in section 501(c)(15); and Veterans' organizations described in section 501(c)(19). Tax preparation forms Religious or apostolic associations or corporations described in section 501(d). Tax preparation forms Entities described in section 170(c), including states, possessions of the United States, the District of Columbia, political subdivisions of states and political subdivisions of possessions of the United States (but not including the United States). Tax preparation forms Indian tribal governments within the meaning of section 7701(a)(40). Tax preparation forms Entity manager. Tax preparation forms    An entity manager is any person with authority or responsibility similar to that exercised by an officer, director, or trustee, and, for any act, the person that has authority or responsibility with respect to the prohibited transaction. Tax preparation forms Prohibited tax shelter transaction. Tax preparation forms   A prohibited tax shelter transaction is any listed transaction, within the meaning of section 6707A(c)(2), and any prohibited reportable transactions. Tax preparation forms A prohibited reportable transaction is a confidential transaction within the meaning of Regulations section 1. Tax preparation forms 6011-4(b)(3), and a transaction with contractual protection within the meaning of Regulations section 1. Tax preparation forms 6011-4(b)(4). Tax preparation forms See the Instructions for Form 8886 for more information on listed transactions and prohibited reportable transactions. Tax preparation forms Subsequently listed transaction. Tax preparation forms   Any transaction to which the tax-exempt entity is a party and is later determined to be a listed transaction after the entity has become a party to it, is a subsequently listed transaction. Tax preparation forms Entity Level Tax Section 4965(a)(1) imposes an entity level excise tax on any tax-exempt entity described in 1, 2, 3, or 4 above that becomes a party to a prohibited tax shelter transaction or is a party to a subsequently listed transaction (defined earlier). Tax preparation forms The excise tax imposed on a tax-exempt entity applies to tax years in which the entity becomes a party to the prohibited tax shelter transaction and any subsequent tax years. Tax preparation forms The amount of the excise tax depends on whether the tax-exempt entity knew or had reason to know that the transaction was a prohibited tax shelter transaction at the time it became a party to the transaction. Tax preparation forms To figure and report the excise tax imposed on a tax-exempt entity for being a party to a prohibited tax shelter transaction, file Form 4720. Tax preparation forms For more information about this excise tax, including information about how it is figured, see the Instructions for Form 4720. Tax preparation forms Manager Level Tax Section 4965(a)(2) imposes an excise tax on any tax-exempt entity manager who approves or otherwise causes the entity to be a party to a prohibited tax shelter transaction and knows (or has reason to know) that the transaction is a prohibited tax shelter transaction. Tax preparation forms The excise tax, in the amount of $20,000, is assessed for each approval or other act causing the organization to be a party to the prohibited tax shelter transaction. Tax preparation forms To report this tax, file Form 4720. Tax preparation forms Excess Benefit Transactions Excise tax on excess benefit transactions. Tax preparation forms   A disqualified person who benefits from an excess benefit transaction, such as compensation, fringe benefits, or contract payments from certain section 501(c)(3), 501(c)(4), or 501(c)(29) organizations, must correct the transaction and may have to pay an excise tax under section 4958. Tax preparation forms A manager of the organization may also have to pay an excise tax under section 4958. Tax preparation forms These taxes are reported on Form 4720. Tax preparation forms   The excise taxes are imposed if an applicable tax-exempt organization provides an excess benefit to a disqualified person and that benefit exceeds the value of the benefit received in exchange. Tax preparation forms   There are three taxes under section 4958. Tax preparation forms Disqualified persons are liable for the first two taxes and certain organization managers are liable for the third tax. Tax preparation forms    Taxes imposed on excess benefit transactions do not apply to a transaction under a written contract that was binding on September 13, 1995, and at all times thereafter before the transaction occurred. Tax preparation forms Tax on Disqualified Persons An excise tax equal to 25% of the excess benefit is imposed on each excess benefit transaction between an applicable tax-exempt organization and a disqualified person. Tax preparation forms The disqualified person who benefited from the transaction is liable for the tax. Tax preparation forms See definition of Disqualified person, later at Disqualified person. Tax preparation forms Additional tax on the disqualified person. Tax preparation forms   If the 25% tax is imposed and the excess benefit transaction is not corrected within the taxable period, an additional excise tax equal to 200% of the excess benefit is imposed on any disqualified person involved. Tax preparation forms   If a disqualified person makes a payment of less than the full correction amount, the 200% tax is imposed only on the unpaid portion of the correction amount. Tax preparation forms If more than one disqualified person received an excess benefit from an excess benefit transaction, all such disqualified persons are jointly and severally liable for the taxes. Tax preparation forms   To avoid the 200% tax, a disqualified person must correct the excess benefit transaction during the taxable period. Tax preparation forms The 200% tax is abated (refunded if collected) if the excess benefit transaction is corrected within a 90-day correction period beginning on the date a statutory notice of deficiency is issued. Tax preparation forms Taxable period. Tax preparation forms   The taxable period means the period beginning with the date on which the excess benefit transaction occurs and ending on the earlier of: The date a notice of deficiency was mailed to the disqualified person for the initial tax on the excess benefit transaction, or The date on which the initial tax on the excess benefit transaction for the disqualified person is assessed. Tax preparation forms Tax on Organization Managers If tax is imposed on a disqualified person for any excess benefit transaction, an excise tax equal to 10% of the excess benefit is imposed on an organization manager who knowingly participated in an excess benefit transaction, unless such participation was not willful and was due to reasonable cause. Tax preparation forms This tax cannot exceed $20,000 ($10,000 for transactions entered in a tax year beginning before August 18, 2006), for each transaction. Tax preparation forms There is also joint and several liability for this tax. Tax preparation forms A person can be liable for both the tax paid by the disqualified person and the organization manager tax for a particular excess benefit transaction. Tax preparation forms Organization Manager. Tax preparation forms   An organization manager is any officer, director, or trustee of an applicable tax-exempt organization, or any individual having powers or responsibilities similar to officers, directors, or trustees of the organization, regardless of title. Tax preparation forms An organization manager is not considered to have participated in an excess benefit transaction where the manager has opposed the transaction in a manner consistent with the fulfillment of the manager's responsibilities to the organization. Tax preparation forms For example, a director who votes against giving an excess benefit would ordinarily not be subject to the 10% tax. Tax preparation forms A person participates in a transaction knowingly if the person: Has actual knowledge of sufficient facts so that, based solely upon those facts, such transaction would be an excess benefit transaction; Is aware that such a transaction under these circumstances may violate the provisions of federal tax law governing excess benefit transactions; and Negligently fails to make reasonable attempts to ascertain whether the transaction is an excess benefit transaction, or the manager is in fact aware that it is such a transaction. Tax preparation forms Knowing does not mean having reason to know. Tax preparation forms The organization manager ordinarily will not be considered knowing if, after full disclosure of the factual situation to an appropriate professional, the organization manager relied on the professional's reasoned written opinion on matters within the professional's expertise or if the manager relied on the fact that the requirements for the rebuttable presumption of reasonableness have been satisfied. Tax preparation forms Participation by an organization manager is willful if it is voluntary, conscious, and intentional. Tax preparation forms An organization manager's participation is due to reasonable cause if the manager has exercised responsibility on behalf of the organization with ordinary business care and prudence. Tax preparation forms Excess Benefit Transaction An excess benefit transaction is a transaction in which an economic benefit is provided by an applicable tax-exempt organization, directly or indirectly, to or for the use of any disqualified person, and the value of the economic benefit provided by the organization exceeds the value of the consideration (including the performance of services) received for providing such benefit. Tax preparation forms The excess benefit transaction rules apply to all transactions with disqualified persons, regardless of whether the amount of the benefit provided is determined in whole or in part by the revenues of one or more activities of the organization. Tax preparation forms To determine whether an excess benefit transaction has occurred, all consideration and benefits exchanged between a disqualified person and the applicable tax-exempt organization, and all entities it controls, are taken into account. Tax preparation forms For purposes of determining the value of economic benefits, the value of property, including the right to use property, is the fair market value. Tax preparation forms Fair market value is the price at which property, or the right to use property, would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts. Tax preparation forms Donor advised fund transactions occurring after August 17, 2006. Tax preparation forms   For a donor advised fund, an excess benefit transaction includes a grant, loan, compensation, or other similar payment from the fund to a: Donor or donor advisor, Family member of a donor, or donor advisor, 35% controlled entity of a donor, or donor advisor, or 35% controlled entity of a family member of a donor, or donor advisor. Tax preparation forms   The excess benefit in this transaction is the amount of the grant, loan, compensation, or other similar payment. Tax preparation forms For additional information, see the Instructions for Form 4720. Tax preparation forms Supporting organization transactions occurring after July 25, 2006. Tax preparation forms   For any supporting organization, defined in section 509(a)(3), an excess benefit transaction includes grants, loans, compensation, or other similar payment provided by the supporting organization to a: Substantial contributor, Family member of a substantial contributor, 35% controlled entity of a substantial contributor, or 35% controlled entity of a family member of a substantial contributor. Tax preparation forms   Additionally, an excess benefit transaction includes any loans provided by the supporting organization to a disqualified person (other than an organization described in section 509(a)(1), (2), or (4)). Tax preparation forms   The excess benefit for substantial contributors and parties related to those contributors includes the amount of the grant, loan, compensation, or other similar payment. Tax preparation forms For additional information, see the Instructions for Form 4720. Tax preparation forms   Excess benefit transaction rules generally do not apply to transactions between a supporting organization and its supported organization described in section 501(c)(4), (5), or (6) in furtherance of charitable purposes. Tax preparation forms Date of Occurrence An excess benefit transaction occurs on the date the disqualified person receives the economic benefit from the organization for federal income tax purposes. Tax preparation forms However, when a single contractual arrangement provides for a series of compensation or other payments to or for the use of a disqualified person during the disqualified person's tax year, any excess benefit transaction with respect to these payments occurs on the last day of the taxpayer's tax year. Tax preparation forms In the case of benefits provided to a qualified pension, profit-sharing, or stock bonus plan, the transaction occurs on the date the benefit is vested. Tax preparation forms In the case of the transfer of property subject to a substantial risk of forfeiture, or in the case of rights to future compensation or property, the transaction occurs on the date the property, or the rights to future compensation or property, is not subject to a substantial risk of forfeiture. Tax preparation forms Where the disqualified person elects to include an amount in gross income in the tax year of transfer under section 83(b), the excess benefit transaction occurs on the date the disqualified person receives the economic benefit for federal income tax purposes. Tax preparation forms Correcting the excess benefit. Tax preparation forms   An excess benefit transaction is corrected by undoing the excess benefit to the extent possible, and by taking any additional measures necessary to place the organization in a financial position not worse than what it would have been if the disqualified person were dealing under the highest fiduciary standards. Tax preparation forms   A disqualified person corrects an excess benefit by making a payment in cash or cash equivalents, excluding payment by a promissory note, equal to the correction amount to the applicable tax-exempt organization. Tax preparation forms The correction amount equals the excess benefit plus the interest on the excess benefit. Tax preparation forms The interest rate can be no lower than the applicable federal rate, compounded annually, for the month the transaction occurred. Tax preparation forms   A disqualified person can, with the agreement of the applicable tax-exempt organization, make a payment by returning the specific property previously transferred in the excess transaction. Tax preparation forms In this case, the disqualified person is treated as making a payment equal to the lesser of: The fair market value of the property on the date the property is returned to the organization, or The fair market value of the property on the date the excess benefit transaction occurred. Tax preparation forms   If the payment resulting from the return of property is less than the correction amount, the disqualified person must make an additional cash payment to the organization equal to the difference. Tax preparation forms   If the payment resulting from the return of the property exceeds the correction amount described above, the organization can make a cash payment to the disqualified person equal to the difference. Tax preparation forms Exception. Tax preparation forms   For a correction of an excess benefit transaction (discussed earlier), no amount repaid in a manner prescribed by the Secretary can be held in a donor advised fund. Tax preparation forms Applicable Tax-Exempt Organization An applicable tax-exempt organization is a section 501(c)(3), 501(c)(4), or 501(c)(29) organization that is tax-exempt under section 501(a), or was such an organization at any time during a 5-year period ending on the day of the excess benefit transaction. Tax preparation forms An applicable tax-exempt organization does not include: A private foundation as defined in section 509(a), A governmental entity that is: Exempt from (or not subject to) taxation without regard to section 501(a), or Not required to file an annual return, or A foreign organization, recognized by the IRS or by treaty, that receives substantially all of its support (other than gross investment income) from sources outside the United States. Tax preparation forms An organization is not treated as a section 501(c)(3), 501(c)(4), or 501(c)(29) organization for any period covered by a final determination that the organization was not tax-exempt under section 501(a), but only if the determination was not based on private inurement or one or more excess benefit transactions. Tax preparation forms Disqualified Person A disqualified person is: Any person (at any time during the 5-year period ending on the date of the transaction) in a position to exercise substantial influence over the affairs of the organization, A family member of an individual described in 1, and A 35% controlled entity. Tax preparation forms For donor advised funds, sponsoring organizations, and certain supporting organizations occurring after August 17, 2006. Tax preparation forms   The following persons will be considered disqualified persons along with certain family members and 35% controlled entities associated with them. Tax preparation forms Donors of donor advised funds, Investment advisors of sponsoring organizations, and Disqualified persons of a section 509(a)(3) supporting organization that supports the applicable tax-exempt organization. Tax preparation forms For certain supporting organization transactions occurring after July 25, 2006. Tax preparation forms   Substantial contributors to supporting organizations will also be considered disqualified persons with respect to the supporting organizations, along with their family members and 35% controlled entities. Tax preparation forms Investment advisor. Tax preparation forms   Investment advisor means for any sponsoring organization, any person compensated by such organization (but not an employee of such organization) for managing the investment of, or providing investment advice for, assets maintained in donor advised funds owned by such sponsoring organization. Tax preparation forms Substantial contributor. Tax preparation forms   In general, a substantial contributor means any person who contributed or bequeathed an aggregate of more than $5,000 to the organization, if that amount is more than 2% of the total contributions and bequests received by the end of the organization's tax year in which the contribution or bequest is received. Tax preparation forms A substantial contributor includes the grantor of a trust. Tax preparation forms Family members. Tax preparation forms   Family members of a disqualified person include a disqualified person's spouse, brothers or sisters (whether by whole or half-blood), spouses of brothers or sisters (whether by whole or half-blood), ancestors, children (including a legally adopted child), grandchildren, great grandchildren, and spouses of children, grandchildren, and great grandchildren (whether by whole or half-blood). Tax preparation forms 35% controlled entity. Tax preparation forms   A 35% controlled entity is: A corporation in which disqualified persons own more than 35% of the total combined voting power, A partnership in which such persons own more than 35% of the profits interest, or A trust or estate in which such persons own more than 35% of the beneficial interest. Tax preparation forms   In determining the holdings of a business enterprise, any stock or other interest owned directly or indirectly shall apply. Tax preparation forms Persons having substantial influence. Tax preparation forms   Among those who are in a position to exercise substantial influence over the affairs of the organization are, for example, voting members of the governing body, and persons holding the power of: Presidents, chief executives, or chief operating officers. Tax preparation forms Treasurers and chief financial officers. Tax preparation forms Persons with a material financial interest in a provider-sponsored organization. Tax preparation forms Persons not considered to have substantial influence. Tax preparation forms   Persons who are not considered to be in a position to exercise substantial influence over the affairs of an organization include: An employee who receives benefits that total less than the highly compensated amount in section 414(q)(1)(B)(i) and who does not hold the executive or voting powers mentioned earlier in the discussion on Disqualified Person, is not a family member of a disqualified person, and is not a substantial contributor, Tax-exempt organizations described in section 501(c)(3), and Section 501(c)(4) organizations with respect to transactions engaged in with other section 501(c)(4) organizations. Tax preparation forms Facts and circumstances. Tax preparation forms   The determination of whether a person has substantial influence over the affairs of an organization is based on all the facts and circumstances. Tax preparation forms Facts and circumstances that tend to show a person has substantial influence over the affairs of an organization include, but are not limited to, the following. Tax preparation forms The person founded the organization. Tax preparation forms The person is a substantial contributor to the organization under the section 507(d)(2)(A) definition, only taking into account contributions to the organization for the past 5 years. Tax preparation forms The person's compensation is primarily based on revenues derived from activities of the organization that the person controls. Tax preparation forms The person has or shares authority to control or determine a substantial portion of the organization's capital expenditures, operating budget, or compensation for employees. Tax preparation forms The person manages a discrete segment or activity of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. Tax preparation forms The person owns a controlling interest (measured by either vote or value) in a corporation, partnership, or trust that is a disqualified person. Tax preparation forms The person is a nonstock organization controlled directly or indirectly by one or more disqualified persons. Tax preparation forms   Facts and circumstances tending to show that a person does not have substantial influence over the affairs of an organization include, but are not limited to, the following. Tax preparation forms The person has taken a bona fide vow of poverty as an employee or agent of a religious organization or on its behalf. Tax preparation forms The person is an independent contractor whose sole relationship to the organization is providing professional advice (without having decision-making authority) with respect to transactions from which the independent contractor will not economically benefit either directly or indirectly aside from customary fees received for the professional advice rendered. Tax preparation forms Any preferential treatment the person receives based on the size of the person's donation is also offered to others making comparable widely solicited donations. Tax preparation forms The direct supervisor of the person is not a disqualified person. Tax preparation forms The person does not participate in any management decisions affecting the organization as a whole or a discrete segment of the organization that represents a substantial portion of the activities, assets, income, or expenses of the organization, as compared to the organization as a whole. Tax preparation forms   In the case of multiple organizations affiliated by common control or governing documents, the determination of whether a person does or does not have substantial influence is made separately for each applicable tax-exempt organization. Tax preparation forms A person may be a disqualified person with respect to transactions with more than one organization. Tax preparation forms Reasonable Compensation. Tax preparation forms    Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. Tax preparation forms The section 162 standard will apply in determining the reasonableness of compensation. Tax preparation forms The fact that a bonus or revenue-sharing arrangement is subject to a cap is a relevant factor in determining reasonableness of compensation. Tax preparation forms   To determine the reasonableness of compensation, all items of compensation provided by an applicable tax-exempt organization in exchange for performance of services are taken into account in determining the value of compensation (except for economic benefits that are disregarded under the discussion Disregarded benefits , later). Tax preparation forms Items of compensation include: All forms of cash and noncash compensation, including salary, fees, bonuses, severance payments, and deferred noncash compensation, The payment of liability insurance premiums for, or the payment or reimbursement by the organization of penalties, taxes, or certain expenses under section 4958, unless excludable from income as a de minimis fringe benefit under section 132(a)(4), All other compensatory benefits, whether or not included in gross income for income tax purposes, Taxable and nontaxable fringe benefits, except fringe benefits described in section 132, and Foregone interest on loans. Tax preparation forms    Intent to treat benefits as compensation. Tax preparation forms An economic benefit is not treated as consideration for the performance of services unless the organization providing the benefit clearly indicates its intent to treat the benefit as compensation when the benefit is paid. Tax preparation forms   An applicable tax-exempt organization (or entity that it controls) is treated as clearly indicating its intent to provide an economic benefit as compensation for services only if the organization provides written substantiation that is contemporaneous with the transfer of the economic benefits under consideration. Tax preparation forms Ways to provide contemporaneous written substantiation of its intent to provide an economic benefit as compensation include: The organization produces a signed written employment contract, The organization reports the benefit as compensation on an original Form W-2, Form 1099, or Form 990, or on an amended form filed before starting an IRS examination, or The disqualified person reports the benefit as income on the person's original Form 1040, or on an amended form filed before starting an IRS examination. Tax preparation forms Exception. Tax preparation forms   If the economic benefit is excluded from the disqualified person's gross income for income tax purposes, the applicable tax-exempt organization is not required to indicate its intent to provide an economic benefit as compensation for services. Tax preparation forms Rebuttable presumption that a transaction is not an excess benefit transaction. Tax preparation forms   Payments under a compensation arrangement are presumed to be reasonable and the transfer of property (or right to use property) is presumed to be at fair market value, if the following three conditions are met. Tax preparation forms The transaction is approved in advance by an authorized body of the organization (or an entity it controls) which is composed of individuals who do not have a conflict of interest concerning the transaction. Tax preparation forms Before making its determination, the authorized body obtained and relied upon appropriate data as to comparability. Tax preparation forms (There is a special safe harbor for small organizations. Tax preparation forms If the organization has gross receipts of less than $1 million, appropriate comparability data includes data on compensation paid by three comparable organizations in the same or similar communities for similar services. Tax preparation forms ) The authorized body adequately documents the basis for its determination concurrently with making that determination. Tax preparation forms The documentation should include: The terms of the approved transaction and the date approved, The members of the authorized body who were present during debate on the transaction that was approved and those who voted on it, The comparability data obtained and relied upon by the authorized body and how the data was obtained, Any actions by a member of the authorized body having conflict of interest, and Documentation of the basis of the determination before the later of the next meeting of the authorized body or 60 days after the final actions of the authorized body are taken, and approval of records as reasonable, accurate, and complete within a reasonable time thereafter. Tax preparation forms Disregarded benefits. Tax preparation forms   The following economic benefits are disregarded for section 4958 purposes. Tax preparation forms Nontaxable fringe benefits that are excluded from income under section 132. Tax preparation forms Benefits provided to a volunteer for the organization if the benefit is provided to the general public in exchange for a membership fee or contribution of $75 or less. Tax preparation forms Benefits provided to a member of an organization due to the payment of a membership fee or to a donor as a result of a deductible contribution, if a significant number of disqualified persons make similar payments or contributions and are offered a similar economic benefit. Tax preparation forms Benefits provided to a person solely as a member of a charitable class that the applicable tax-exempt organization intends to benefit as part of the accomplishment of its exempt purpose. Tax preparation forms A transfer of an economic benefit to or for the use of a governmental unit, as defined in section 170(c)(1), if exclusively for public purposes. Tax preparation forms Special Exception for Initial Contracts      Section 4958 does not apply to any fixed payment made to a person under an initial contract. Tax preparation forms   A fixed payment is an amount of cash or other property specified in the contract, or determined by a fixed formula that is specified in the contract, which is to be paid or transferred in exchange for the provision of specified services or property. Tax preparation forms   A fixed formula can, generally, incorporate an amount that depends upon future specified events or contingencies, as long as no one has discretion when calculating the amount of a payment or deciding whether to make a payment (such as a bonus). Tax preparation forms   An initial contract is a binding written contract between an applicable tax-exempt organization and a person who was not a disqualified person immediately before entering into the contract. Tax preparation forms   A binding written contract, providing it can be terminated or canceled by the applicable tax-exempt organization without the other party's consent (except as a result of substantial nonperformance) and without substantial penalty, is treated as a new contract, as of the earliest date any termination or cancellation would be effective. Tax preparation forms Also, if the parties make a material change to a contract, which includes an extension or renewal of the contract (except for an extension or renewal resulting from the exercise of an option by the disqualified person), or a more than incidental change to the amount payable under the contract, it is treated as a new contract as of the effective date of the material change. Tax preparation forms More information. Tax preparation forms   For more information, see the Instructions to Forms 990 and 4720. Tax preparation forms Excess Business Holdings Private foundations are generally not permitted to hold more than a 20% interest in an unrelated business enterprise. Tax preparation forms They may be subject to an excise tax on the amount of any excess business holdings. Tax preparation forms For purposes of section 4943, for tax years beginning after August 17, 2006, donor advised funds and certain supporting organizations are considered private foundations. Tax preparation forms Donor advised fund. Tax preparation forms   In general, a donor advised fund is a fund or account separately identified by reference to contributions of a donor or donors that is owned and controlled by a sponsoring organization and for which the donor has or expects to have advisory privileges concerning the distribution or investment of the funds. Tax preparation forms Supporting organizations. Tax preparation forms   Only certain supporting organizations are subject to the excess business holdings tax under section 4943. Tax preparation forms These include (1) Type III supporting organizations that are not functionally integrated and (2) Type II supporting organizations that accept any gift or contribution from a person who by himself or in connection with a related party controls the supported organization that the Type II supporting organization supports. Tax preparation forms Taxes. Tax preparation forms   A private foundation that has excess holdings in a business enterprise may become liable for an excise tax based on the amount of holdings. Tax preparation forms The initial tax is 10% (5% for tax years beginning before August 18, 2006) of the value of the excess holdings and is imposed on the last day of each tax year that ends during the taxable period. Tax preparation forms The excess holdings are determined on the day during the tax year when they were the largest. Tax preparation forms   A foundation that fails to correct the excess business holdings becomes liable for an additional tax of 200% of the remaining excess business holdings as of the earlier of tax assessment or mailing of a notice of deficiency. Tax preparation forms   For more information on the tax on excess business holdings, see the Instructions for Form 4720. Tax preparation forms Taxable Distributions of Sponsoring Organizations An excise tax is imposed on a sponsoring organization for each taxable distribution it makes from a donor advised fund. Tax preparation forms An excise tax is also imposed on any fund manager of the sponsoring organization who agreed to the making of a distribution, knowing that it is a taxable distribution. Tax preparation forms Taxable distribution. Tax preparation forms   A taxable distribution is any distribution from a donor advised fund to any natural person or to any other person if: The distribution is for any purpose other than one specified in section 170(c)(2)(B), or The sponsoring organization maintaining the donor advised fund does not exercise expenditure responsibility with respect to the distribution in accordance with section 4945(h). Tax preparation forms    However, a taxable distribution does not include a distribution from a donor advised fund to: Any organization described in section 170(b)(1)(A) (other than a disqualified supporting organization), The sponsoring organization of the donor advised fund, or Any other donor advised fund. Tax preparation forms The tax on taxable distributions applies to distributions occurring in tax years beginning after August 17, 2006. Tax preparation forms Sponsoring organization. Tax preparation forms   A sponsoring organization is a section 170(c) organization that is neither a government organization (as referred to in section 170(c)(1) and (2)(A)) nor a private foundation. Tax preparation forms Donor advised fund. Tax preparation forms    A donor advised fund is a fund or account: Which is separately identified by reference to contributions of a donor or donors, Which is owned and controlled by a sponsoring organization, and For which the donor (or any person appointed or designated by the donor) has or expects to have advisory privileges concerning the distribution or investment of the funds held in the donor advised funds or accounts because of the donor's status as a donor. Tax preparation forms Exception. Tax preparation forms A donor advised fund does not include:    A fund or account that makes distributions only to a single identified organization or governmental entity, or Any fund or account for a person described in 3 above that gives advice about which individuals receive grants for travel, study, or similar purposes, if the following three requirements are met: The person's advisory privileges are performed exclusively by such person in their capacity as a committee member of which all the committee members are appointed by the sponsoring organization, No combination of persons with advisory privileges, described in 3 above, or persons related to those in 3 above directly or indirectly control the committee, and All grants from the fund or account are awarded on an objective and nondiscriminatory basis according to a procedure approved in advance by the board of directors of the sponsoring organization. Tax preparation forms The procedure must be designed to ensure that all grants meet the requirements of section 4945(g)(1), (2), or (3). Tax preparation forms Disqualified supporting organization. Tax preparation forms   A disqualified supporting organization includes (1) a Type III supporting organization that is not functionally integrated and (2) any supporting organization where the donor or donor advisor (and any related parties) directly or indirectly controls a supported organization of the supporting organization. Tax preparation forms Tax on sponsoring organization. Tax preparation forms   A tax of 20% of the amount of each taxable distribution is imposed on the sponsoring organization. Tax preparation forms Tax on fund manager. Tax preparation forms   If a tax is imposed on a taxable distribution of the sponsoring organization, a tax of 5% of the distribution will be imposed on any fund manager who agreed to the distribution knowing that it was a taxable distribution. Tax preparation forms Any fund manager who took part in the distribution and is liable for the tax must pay the tax. Tax preparation forms The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. Tax preparation forms If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. Tax preparation forms   For more information on the tax on taxable distributions of sponsoring organizations, see the Instructions for Form 4720. Tax preparation forms Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Prohibited benefit. Tax preparation forms   If any donor, donor advisor, or related party advises the sponsoring organization about making a distribution which results in a donor, donor advisor, or related party receiving (either directly or indirectly) a more than incidental benefit, then such benefit is a prohibited benefit. Tax preparation forms The tax on prohibited benefits applies to distributions occurring in tax years beginning after August 17, 2006. Tax preparation forms Donor advisor. Tax preparation forms   A donor advisor is any person appointed or designated by a donor to advise a sponsoring organization on the distribution or investment of amounts held in the donor's fund or account. Tax preparation forms Related party. Tax preparation forms   A related party includes any family member or 35% controlled entity. Tax preparation forms See the definition of those terms under Disqualified Person , earlier. Tax preparation forms Tax on donor, donor advisor, or related person. Tax preparation forms    A tax of 125% of the benefit resulting from the distribution is imposed on both the party who advised as to the distribution (which might be a donor, donor advisor, or related party) and the party who received such benefit (which might be a donor, donor advisor, or related party). Tax preparation forms The advisor and the party who received the benefit are jointly and severally liable for the tax. Tax preparation forms Tax on fund managers. Tax preparation forms   If a tax is imposed on a prohibited benefit received by a donor, donor advisor, or related person, a tax of 10% of the amount of the prohibited benefit is imposed on any fund manager who agreed to the distribution knowing that it would confer a prohibited benefit. Tax preparation forms Any fund manager who took part in the distribution and is liable for the tax must pay the tax. Tax preparation forms The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. Tax preparation forms If more than one fund manager is liable for tax on a taxable distribution, all such managers are jointly and severally liable for the tax. Tax preparation forms Exception. Tax preparation forms   If a person engaged in an excess benefit transaction and received a prohibited benefit for the same transaction, the person is taxed under section 4958, and no tax is imposed under section 4967 for a prohibited benefit. Tax preparation forms   For more information on taxes on prohibited benefits distributed from donor advised funds, see the Instructions for Form 4720. Tax preparation forms Excise Taxes on Private Foundations There is an excise tax on the net investment income of most domestic private foundations. Tax preparation forms Capital gains from appreciation are included in the tax base on private foundation net investment income. Tax preparation forms This tax must be reported on Form 990-PF and must be paid annually at the time for filing that return or in quarterly estimated tax payments if the total tax for the year (section 4940 tax minus credits) is $500 or more. Tax preparation forms Form 990-W is used to calculate the estimated tax. Tax preparation forms In addition, there are several other rules that apply to excise taxes on private foundations. Tax preparation forms These include: Restrictions on self-dealing between private foundations and their substantial contributors and other disqualified persons, Requirements that the foundation annually distribute income for charitable purposes, Limits on their holdings in any business enterprise (see Excess Business Holdings, earlier), Provisions that investments must not jeopardize the carrying out of exempt purposes, and Provisions to assure that expenditures further the organization's exempt purposes. Tax preparation forms Violations of these provisions give rise to taxes and penalties against the private foundation and, in some cases, its managers, its substantial contributors, and certain related persons. Tax preparation forms For more information on the excise taxes imposed on private foundations, see the Instructions for Form 4720 and the Instructions for Form 990-PF. Tax preparation forms Excise Taxes on Black Lung Benefit Trusts A black lung benefit trust that makes any expenditures, payments, or investments other than those described in chapter 4 under 501(c)(21) - Black Lung Benefit Trusts must pay a tax equal to 10% of the amount of such expenditures. Tax preparation forms If there are any acts of self-dealing between the trust and a disqualified person, a tax equal to 10% of the amount involved is imposed on the disqualified person. Tax preparation forms Both of these excise taxes are reported on Schedule A (Form 990-BL). Tax preparation forms See the Form 990-BL instructions for more information on these taxes and what has to be filed, even if the trust is excepted from filing. Tax preparation forms Excise Tax on Failure to Meet the Community Health Needs Assessment Requirements For tax years beginning after March 23, 2012, new section 4959 imposes an excise tax on hospital organizations which fail to meet certain section 501(r) requirements for each of their hospital facilities. Tax preparation forms These entities must meet section 501(r)(3) requirements at all times during their tax year. Tax preparation forms Section 501(r)(3) requirements pertain to a hospital organization preparing a community health needs assessment (CHNA). Tax preparation forms See Schedule H, Hospitals (Form 990), for details. Tax preparation forms Prev  Up  Next   Home   More Online Publications