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W 2 Show State Income Tax Withheld

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W 2 Show State Income Tax Withheld

W 2 show state income tax withheld 8. W 2 show state income tax withheld   Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesDetermining Gain or Loss Like-Kind Exchanges Transfer to Spouse Ordinary or Capital Gain or LossCapital Assets Noncapital Assets Hedging (Commodity Futures) Livestock Converted Wetland and Highly Erodible Cropland Timber Sale of a Farm Foreclosure or Repossession Abandonment Introduction This chapter explains how to figure, and report on your tax return, your gain or loss on the disposition of your property or debt and whether such gain or loss is ordinary or capital. W 2 show state income tax withheld Ordinary gain is taxed at the same rates as wages and interest income while capital gain is generally taxed at lower rates. W 2 show state income tax withheld Dispositions discussed in this chapter include sales, exchanges, foreclosures, repossessions, canceled debts, hedging transactions, and elections to treat cutting of timber as a sale or exchange. W 2 show state income tax withheld Topics - This chapter discusses: Sales and exchanges Ordinary or capital gain or loss Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8949 Sales and Other Dispositions of Capital Assets See chapter 16 for information about getting publications and forms. W 2 show state income tax withheld Sales and Exchanges If you sell, exchange, or otherwise dispose of your property, you usually have a gain or a loss. W 2 show state income tax withheld This section explains certain rules for determining whether any gain you have is taxable, and whether any loss you have is deductible. W 2 show state income tax withheld A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. W 2 show state income tax withheld An exchange is a transfer of property for other property or services. W 2 show state income tax withheld Determining Gain or Loss You usually realize a gain or loss when you sell or exchange property. W 2 show state income tax withheld If the amount you realize from a sale or exchange of property is more than its adjusted basis, you will have a gain. W 2 show state income tax withheld If the adjusted basis of the property is more than the amount you realize, you will have a loss. W 2 show state income tax withheld Basis and adjusted basis. W 2 show state income tax withheld   The basis of property you buy is usually its cost. W 2 show state income tax withheld The adjusted basis of property is basis plus certain additions and minus certain deductions. W 2 show state income tax withheld See chapter 6 for more information about basis and adjusted basis. W 2 show state income tax withheld Amount realized. W 2 show state income tax withheld   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (FMV) (defined in chapter 6) of all property or services you receive. W 2 show state income tax withheld The amount you realize also includes any of your liabilities assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. W 2 show state income tax withheld   If the liabilities relate to an exchange of multiple properties, see Multiple Property Exchanges in chapter 1 of Publication 544. W 2 show state income tax withheld Amount recognized. W 2 show state income tax withheld   Your gain or loss realized from a sale or exchange of certain property is usually a recognized gain or loss for tax purposes. W 2 show state income tax withheld A recognized gain is a gain you must include in gross income and report on your income tax return. W 2 show state income tax withheld A recognized loss is a loss you deduct from gross income. W 2 show state income tax withheld However, your gain or loss realized from the exchange of certain property may not be recognized for tax purposes. W 2 show state income tax withheld See Like-Kind Exchanges next. W 2 show state income tax withheld Also, a loss from the disposition of property held for personal use is not deductible. W 2 show state income tax withheld Like-Kind Exchanges Certain exchanges of property are not taxable. W 2 show state income tax withheld This means any gain from the exchange is not recognized, and any loss cannot be deducted. W 2 show state income tax withheld Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. W 2 show state income tax withheld The exchange of property for the same kind of property is the most common type of nontaxable exchange. W 2 show state income tax withheld To qualify for treatment as a like-kind exchange, the property traded and the property received must be both of the following. W 2 show state income tax withheld Qualifying property. W 2 show state income tax withheld Like-kind property. W 2 show state income tax withheld These two requirements are discussed later. W 2 show state income tax withheld Multiple-party transactions. W 2 show state income tax withheld   The like-kind exchange rules also apply to property exchanges that involve three and four-party transactions. W 2 show state income tax withheld Any part of these multiple-party transactions can qualify as a like-kind exchange if it meets all the requirements described in this section. W 2 show state income tax withheld Receipt of title from third party. W 2 show state income tax withheld   If you receive property in a like-kind exchange and the other party who transfers the property to you does not give you the title, but a third party does, you can still treat this transaction as a like-kind exchange if it meets all the requirements. W 2 show state income tax withheld Basis of property received. W 2 show state income tax withheld   If you receive property in a like-kind exchange, the basis of the property will be the same as the basis of the property you gave up. W 2 show state income tax withheld See chapter 6 for more information. W 2 show state income tax withheld Money paid. W 2 show state income tax withheld   If, in addition to giving up like-kind property, you pay money in a like-kind exchange, you still have no recognized gain or loss. W 2 show state income tax withheld The basis of the property received is the basis of the property given up, increased by the money paid. W 2 show state income tax withheld Example. W 2 show state income tax withheld You traded an old tractor with an adjusted basis of $15,000 for a new one. W 2 show state income tax withheld The new tractor costs $300,000. W 2 show state income tax withheld You were allowed $80,000 for the old tractor and paid $220,000 cash. W 2 show state income tax withheld You have no recognized gain or loss on the transaction regardless of the adjusted basis of your old tractor and the basis of the new tractor is $235,000, the adjusted basis of the old tractor plus the cash paid ($15,000 + $220,000). W 2 show state income tax withheld If you had sold the old tractor to a third party for $80,000 and bought a new one, you would have a recognized gain or loss on the sale of your old tractor equal to the difference between the amount realized and the adjusted basis of the old tractor. W 2 show state income tax withheld In this case, the taxable gain would be $65,000 ($80,000 − $15,000) and the basis of the new tractor would be $300,000. W 2 show state income tax withheld Reporting the exchange. W 2 show state income tax withheld   Report the exchange of like-kind property, even though no gain or loss is recognized, on Form 8824, Like-Kind Exchanges. W 2 show state income tax withheld The Instructions for Form 8824 explain how to report the details of the exchange. W 2 show state income tax withheld   If you have any recognized gain because you received money or unlike property, report it on Schedule D (Form 1040) or Form 4797, whichever applies. W 2 show state income tax withheld You may also have to report the recognized gain as ordinary income because of depreciation recapture on Form 4797. W 2 show state income tax withheld See chapter 9 for more information. W 2 show state income tax withheld Qualifying property. W 2 show state income tax withheld   In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business. W 2 show state income tax withheld Machinery, buildings, land, trucks, breeding livestock, rental houses, and certain mutual ditch, reservoir, or irrigation company stock are examples of property that may qualify. W 2 show state income tax withheld Nonqualifying property. W 2 show state income tax withheld   The rules for like-kind exchanges do not apply to exchanges of the following property. W 2 show state income tax withheld Property you use for personal purposes, such as your home and family car. W 2 show state income tax withheld Stock in trade or other property held primarily for sale, such as crops and produce. W 2 show state income tax withheld Stocks, bonds, or notes. W 2 show state income tax withheld However, see Qualifying property above. W 2 show state income tax withheld Other securities or evidences of indebtedness, such as accounts receivable. W 2 show state income tax withheld Partnership interests. W 2 show state income tax withheld However, you may have a nontaxable exchange under other rules. W 2 show state income tax withheld See Other Nontaxable Exchanges in chapter 1 of Publication 544. W 2 show state income tax withheld Like-kind property. W 2 show state income tax withheld   To qualify as a nontaxable exchange, the properties exchanged must be of like kind. W 2 show state income tax withheld Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. W 2 show state income tax withheld Generally, real property exchanged for real property qualifies as an exchange of like-kind property. W 2 show state income tax withheld For example, an exchange of city property for farm property or improved property for unimproved property is a like-kind exchange. W 2 show state income tax withheld   An exchange of a tractor for a new tractor is an exchange of like-kind property, and so is an exchange of timber land for crop acreage. W 2 show state income tax withheld An exchange of a tractor for acreage, however, is not an exchange of like-kind property. W 2 show state income tax withheld The exchange of livestock of one sex for livestock of the other sex is not a like-kind exchange. W 2 show state income tax withheld For example, the exchange of a bull for a cow is not a like-kind exchange. W 2 show state income tax withheld An exchange of the assets of a business for the assets of a similar business cannot be treated as an exchange of one property for another property. W 2 show state income tax withheld    Note. W 2 show state income tax withheld Whether you engaged in a like-kind exchange depends on an analysis of each asset involved in the exchange. W 2 show state income tax withheld Personal property. W 2 show state income tax withheld   Depreciable tangible personal property can be either like kind or like class to qualify for nontaxable exchange treatment. W 2 show state income tax withheld Like-class properties are depreciable tangible personal properties within the same General Asset Class or Product Class. W 2 show state income tax withheld Property classified in any General Asset Class may not be classified within a Product Class. W 2 show state income tax withheld Assets that are not in the same class will qualify as like-kind property if they are of the same nature or character. W 2 show state income tax withheld General Asset Classes. W 2 show state income tax withheld   General Asset Classes describe the types of property frequently used in many businesses. W 2 show state income tax withheld They include, but are not limited to, the following property. W 2 show state income tax withheld Office furniture, fixtures, and equipment (asset class 00. W 2 show state income tax withheld 11). W 2 show state income tax withheld Information systems, such as computers and peripheral equipment (asset class 00. W 2 show state income tax withheld 12). W 2 show state income tax withheld Data handling equipment except computers (asset class 00. W 2 show state income tax withheld 13). W 2 show state income tax withheld Automobiles and taxis (asset class 00. W 2 show state income tax withheld 22). W 2 show state income tax withheld Light general purpose trucks (asset class 00. W 2 show state income tax withheld 241). W 2 show state income tax withheld Heavy general purpose trucks (asset class 00. W 2 show state income tax withheld 242). W 2 show state income tax withheld Tractor units for use over-the-road (asset class 00. W 2 show state income tax withheld 26). W 2 show state income tax withheld Trailers and trailer-mounted containers (asset class 00. W 2 show state income tax withheld 27). W 2 show state income tax withheld Industrial steam and electric generation and/or distribution systems (asset class 00. W 2 show state income tax withheld 4). W 2 show state income tax withheld Product Classes. W 2 show state income tax withheld   Product Classes include property listed in a 6-digit product class in sectors 31 through 33 of the North American Industry Classification System (NAICS) of the Executive Office of the President, Office of Management and Budget, United States, (NAICS Manual). W 2 show state income tax withheld The latest version of the manual can be accessed at www. W 2 show state income tax withheld census. W 2 show state income tax withheld gov/eos/www/naics/. W 2 show state income tax withheld Copies of the printed manual may be purchased from the National Technical Information Service (NTIS) at  www. W 2 show state income tax withheld ntis. W 2 show state income tax withheld gov/products/naics. W 2 show state income tax withheld aspx or by calling 1-800-553-NTIS (1-800-553-6847) or (703) 605-6000. W 2 show state income tax withheld A CD-ROM version with search and retrieval software is also available from NTIS. W 2 show state income tax withheld    NAICS class 333111, Farm Machinery and Equipment Manufacturing, includes most machinery and equipment used in a farming business. W 2 show state income tax withheld Partially nontaxable exchange. W 2 show state income tax withheld   If, in addition to like-kind property, you receive money or unlike property in an exchange on which you realize gain, you have a partially nontaxable exchange. W 2 show state income tax withheld You are taxed on the gain you realize, but only to the extent of the money and the FMV of the unlike property you receive. W 2 show state income tax withheld A loss is not deductible. W 2 show state income tax withheld Example 1. W 2 show state income tax withheld You trade farmland that cost $30,000 for $10,000 cash and other land to be used in farming with a FMV of $50,000. W 2 show state income tax withheld You have a realized gain of $30,000 ($50,000 FMV of new land + $10,000 cash − $30,000 basis of old farmland = $30,000 realized gain). W 2 show state income tax withheld However, only $10,000, the cash received, is recognized (included in income). W 2 show state income tax withheld Example 2. W 2 show state income tax withheld Assume the same facts as in Example 1, except that, instead of money, you received a tractor with a FMV of $10,000. W 2 show state income tax withheld Your recognized gain is still limited to $10,000, the value of the tractor (the unlike property). W 2 show state income tax withheld Example 3. W 2 show state income tax withheld Assume in Example 1 that the FMV of the land you received was only $15,000. W 2 show state income tax withheld Your $5,000 loss is not recognized. W 2 show state income tax withheld Unlike property given up. W 2 show state income tax withheld   If, in addition to like-kind property, you give up unlike property, you must recognize gain or loss on the unlike property you give up. W 2 show state income tax withheld The gain or loss is the difference between the FMV of the unlike property and the adjusted basis of the unlike property. W 2 show state income tax withheld Like-kind exchanges between related persons. W 2 show state income tax withheld   Special rules apply to like-kind exchanges between related persons. W 2 show state income tax withheld These rules affect both direct and indirect exchanges. W 2 show state income tax withheld Under these rules, if either person disposes of the property within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. W 2 show state income tax withheld The gain or loss on the original exchange must be recognized as of the date of the later disposition. W 2 show state income tax withheld The 2-year holding period begins on the date of the last transfer of property that was part of the like-kind exchange. W 2 show state income tax withheld Related persons. W 2 show state income tax withheld   Under these rules, related persons include, for example, you and a member of your family (spouse, brother, sister, parent, child, etc. W 2 show state income tax withheld ), you and a corporation in which you have more than 50% ownership, you and a partnership in which you directly or indirectly own more than a 50% interest of the capital or profits, and two partnerships in which you directly or indirectly own more than 50% of the capital interests or profits. W 2 show state income tax withheld   For the complete list of related persons, see Related persons in chapter 2 of Publication 544. W 2 show state income tax withheld Example. W 2 show state income tax withheld You used a grey pickup truck in your farming business. W 2 show state income tax withheld Your sister used a red pickup truck in her landscaping business. W 2 show state income tax withheld In December 2012, you exchanged your grey pickup truck, plus $200, for your sister's red pickup truck. W 2 show state income tax withheld At that time, the FMV of the grey pickup truck was $7,000 and its adjusted basis was $6,000. W 2 show state income tax withheld The FMV of the red pickup truck was $7,200 and its adjusted basis was $1,000. W 2 show state income tax withheld You realized a gain of $1,000 (the $7,200 FMV of the red pickup truck, minus the grey pickup truck's $6,000 adjusted basis, minus the $200 you paid). W 2 show state income tax withheld Your sister realized a gain of $6,200 (the $7,000 FMV of the grey pickup truck plus the $200 you paid, minus the $1,000 adjusted basis of the red pickup truck). W 2 show state income tax withheld However, because this was a like-kind exchange, you recognized no gain. W 2 show state income tax withheld Your basis in the red pickup truck was $6,200 (the $6,000 adjusted basis of the grey pickup truck plus the $200 you paid). W 2 show state income tax withheld She recognized gain only to the extent of the money she received, $200. W 2 show state income tax withheld Her basis in the grey pickup truck was $1,000 (the $1,000 adjusted basis of the red pickup truck minus the $200 received, plus the $200 gain recognized). W 2 show state income tax withheld In 2013, you sold the red pickup truck to a third party for $7,000. W 2 show state income tax withheld Because you sold it within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. W 2 show state income tax withheld On your tax return for 2013, you must report your $1,000 gain on the 2012 exchange. W 2 show state income tax withheld You also report a loss on the sale as $200 (the adjusted basis of the red pickup truck, $7,200 (its $6,200 basis plus the $1,000 gain recognized), minus the $7,000 realized from the sale). W 2 show state income tax withheld In addition, your sister must report on her tax return for 2013 the $6,000 balance of her gain on the 2012 exchange. W 2 show state income tax withheld Her adjusted basis in the grey pickup truck is increased to $7,000 (its $1,000 basis plus the $6,000 gain recognized). W 2 show state income tax withheld Exceptions to the rules for related persons. W 2 show state income tax withheld   The following property dispositions are excluded from these rules. W 2 show state income tax withheld Dispositions due to the death of either related person. W 2 show state income tax withheld Involuntary conversions. W 2 show state income tax withheld Dispositions where it is established to the satisfaction of the IRS that neither the exchange nor the disposition has, as a main purpose, the avoidance of federal income tax. W 2 show state income tax withheld Multiple property exchanges. W 2 show state income tax withheld   Under the like-kind exchange rules, you must generally make a property-by-property comparison to figure your recognized gain and the basis of the property you receive in the exchange. W 2 show state income tax withheld However, for exchanges of multiple properties, you do not make a property-by-property comparison if you do either of the following. W 2 show state income tax withheld Transfer and receive properties in two or more exchange groups. W 2 show state income tax withheld Transfer or receive more than one property within a single exchange group. W 2 show state income tax withheld   For more information, see Multiple Property Exchanges in chapter 1 of Publication 544. W 2 show state income tax withheld Deferred exchange. W 2 show state income tax withheld   A deferred exchange for like-kind property may qualify for nonrecognition of gain or loss. W 2 show state income tax withheld A deferred exchange is an exchange in which you transfer property you use in business or hold for investment and later receive like-kind property you will use in business or hold for investment. W 2 show state income tax withheld The property you receive is replacement property. W 2 show state income tax withheld The transaction must be an exchange of property for property rather than a transfer of property for money used to buy replacement property. W 2 show state income tax withheld In addition, the replacement property will not be treated as like-kind property unless certain identification and receipt requirements are met. W 2 show state income tax withheld   For more information see Deferred Exchanges in chapter 1 of Publication 544. W 2 show state income tax withheld Transfer to Spouse No gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or a former spouse if incident to divorce. W 2 show state income tax withheld This rule does not apply if the recipient is a nonresident alien. W 2 show state income tax withheld Nor does this rule apply to a transfer in trust to the extent the liabilities assumed and the liabilities on the property are more than the property's adjusted basis. W 2 show state income tax withheld Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is not considered a sale or exchange. W 2 show state income tax withheld The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. W 2 show state income tax withheld This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its FMV at the time of transfer or any consideration paid by the recipient. W 2 show state income tax withheld This rule applies for determining loss as well as gain. W 2 show state income tax withheld Any gain recognized on a transfer in trust increases the basis. W 2 show state income tax withheld For more information on transfers of property incident to divorce, see Property Settlements in Publication 504, Divorced or Separated Individuals. W 2 show state income tax withheld Ordinary or Capital Gain or Loss Generally, you will have a capital gain or loss if you sell or exchange a capital asset (defined below). W 2 show state income tax withheld You may also have a capital gain if your section 1231 transactions result in a net gain. W 2 show state income tax withheld See Section 1231 Gains and Losses in  chapter 9. W 2 show state income tax withheld To figure your net capital gain or loss, you must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). W 2 show state income tax withheld Your net capital gains may be taxed at a lower tax rate than ordinary income. W 2 show state income tax withheld See Capital Gains Tax Rates , later. W 2 show state income tax withheld Your deduction for a net capital loss may be limited. W 2 show state income tax withheld See Treatment of Capital Losses , later. W 2 show state income tax withheld Capital Assets Almost everything you own and use for personal purposes or investment is a capital asset. W 2 show state income tax withheld The following items are examples of capital assets. W 2 show state income tax withheld A home owned and occupied by you and your family. W 2 show state income tax withheld Household furnishings. W 2 show state income tax withheld A car used for pleasure. W 2 show state income tax withheld If your car is used both for pleasure and for farm business, it is partly a capital asset and partly a noncapital asset, defined later. W 2 show state income tax withheld Stocks and bonds. W 2 show state income tax withheld However, there are special rules for gains on qualified small business stock. W 2 show state income tax withheld For more information on this subject, see Gains on Qualified Small Business Stock and Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. W 2 show state income tax withheld Personal-use property. W 2 show state income tax withheld   Gain from a sale or exchange of personal-use property is a capital gain and is taxable. W 2 show state income tax withheld Loss from the sale or exchange of personal-use property is not deductible. W 2 show state income tax withheld You can deduct a loss relating to personal-use property only if it results from a casualty or theft. W 2 show state income tax withheld For information on casualties and thefts, see chapter 11. W 2 show state income tax withheld Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. W 2 show state income tax withheld The time you own an asset before disposing of it is the holding period. W 2 show state income tax withheld If you hold a capital asset 1 year or less, the gain or loss resulting from its disposition is short term. W 2 show state income tax withheld Report it in Part I of Schedule D (Form 1040). W 2 show state income tax withheld If you hold a capital asset longer than 1 year, the gain or loss resulting from its disposition is long term. W 2 show state income tax withheld Report it in Part II of Schedule D (Form 1040). W 2 show state income tax withheld Holding period. W 2 show state income tax withheld   To figure if you held property longer than 1 year, start counting on the day after the day you acquired the property. W 2 show state income tax withheld The day you disposed of the property is part of your holding period. W 2 show state income tax withheld Example. W 2 show state income tax withheld If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. W 2 show state income tax withheld If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. W 2 show state income tax withheld Inherited property. W 2 show state income tax withheld   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. W 2 show state income tax withheld This rule does not apply to livestock used in a farm business. W 2 show state income tax withheld See Holding period under Livestock , later. W 2 show state income tax withheld Nonbusiness bad debt. W 2 show state income tax withheld   A nonbusiness bad debt is a short-term capital loss, deductible in the year the debt becomes worthless. W 2 show state income tax withheld See chapter 4 of Publication 550. W 2 show state income tax withheld Nontaxable exchange. W 2 show state income tax withheld   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. W 2 show state income tax withheld That is, it begins on the same day as your holding period for the old property. W 2 show state income tax withheld Gift. W 2 show state income tax withheld   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. W 2 show state income tax withheld Real property. W 2 show state income tax withheld   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, on the day after you took possession of it and assumed the burdens and privileges of ownership. W 2 show state income tax withheld   However, taking possession of real property under an option agreement is not enough to start the holding period. W 2 show state income tax withheld The holding period cannot start until there is an actual contract of sale. W 2 show state income tax withheld The holding period of the seller cannot end before that time. W 2 show state income tax withheld Figuring Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. W 2 show state income tax withheld Net short-term capital gain or loss. W 2 show state income tax withheld   Combine your short-term capital gains and losses. W 2 show state income tax withheld Do this by adding all of your short-term capital gains. W 2 show state income tax withheld Then add all of your short-term capital losses. W 2 show state income tax withheld Subtract the lesser total from the greater. W 2 show state income tax withheld The difference is your net short-term capital gain or loss. W 2 show state income tax withheld Net long-term capital gain or loss. W 2 show state income tax withheld   Follow the same steps to combine your long-term capital gains and losses. W 2 show state income tax withheld The result is your net long-term capital gain or loss. W 2 show state income tax withheld Net gain. W 2 show state income tax withheld   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. W 2 show state income tax withheld However, part of your gain (but not more than your net capital gain) may be taxed at a lower rate than the rate of tax on your ordinary income. W 2 show state income tax withheld See Capital Gains Tax Rates , later. W 2 show state income tax withheld Net loss. W 2 show state income tax withheld   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. W 2 show state income tax withheld But there are limits on how much loss you can deduct and when you can deduct it. W 2 show state income tax withheld See Treatment of Capital Losses next. W 2 show state income tax withheld Treatment of Capital Losses If your capital losses are more than your capital gains, you must claim the difference even if you do not have ordinary income to offset it. W 2 show state income tax withheld For taxpayers other than corporations, the yearly limit on the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). W 2 show state income tax withheld If your other income is low, you may not be able to use the full $3,000. W 2 show state income tax withheld The part of the $3,000 you cannot use becomes part of your capital loss carryover (discussed next). W 2 show state income tax withheld Capital loss carryover. W 2 show state income tax withheld   Generally, you have a capital loss carryover if either of the following situations applies to you. W 2 show state income tax withheld Your net loss on Schedule D (Form 1040), is more than the yearly limit. W 2 show state income tax withheld Your taxable income without your deduction for exemptions is less than zero. W 2 show state income tax withheld If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carry over to 2014. W 2 show state income tax withheld    To figure your capital loss carryover from 2013 to 2014, you will need a copy of your 2013 Form 1040 and Schedule D (Form 1040). W 2 show state income tax withheld Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. W 2 show state income tax withheld These lower rates are called the maximum capital gains rates. W 2 show state income tax withheld The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. W 2 show state income tax withheld See Schedule D (Form 1040) and the Instructions for Schedule D (Form 1040). W 2 show state income tax withheld Also see Publication 550. W 2 show state income tax withheld Noncapital Assets Noncapital assets include property such as inventory and depreciable property used in a trade or business. W 2 show state income tax withheld A list of properties that are not capital assets is provided in the Instructions for Schedule D (Form 1040). W 2 show state income tax withheld Property held for sale in the ordinary course of your farm business. W 2 show state income tax withheld   Property you hold mainly for sale to customers, such as livestock, poultry, livestock products, and crops, is a noncapital asset. W 2 show state income tax withheld Gain or loss from sales or other dispositions of this property is reported on Schedule F (Form 1040) (not on Schedule D (Form 1040) or Form 4797). W 2 show state income tax withheld The treatment of this property is discussed in chapter 3. W 2 show state income tax withheld Land and depreciable properties. W 2 show state income tax withheld   Land and depreciable property you use in farming are not capital assets. W 2 show state income tax withheld Noncapital assets also include livestock held for draft, breeding, dairy, or sporting purposes. W 2 show state income tax withheld However, your gains and losses from sales and exchanges of your farmland and depreciable properties must be considered together with certain other transactions to determine whether the gains and losses are treated as capital or ordinary gains and losses. W 2 show state income tax withheld The sales of these business assets are reported on Form 4797. W 2 show state income tax withheld See chapter 9 for more information. W 2 show state income tax withheld Hedging (Commodity Futures) Hedging transactions are transactions that you enter into in the normal course of business primarily to manage the risk of interest rate or price changes, or currency fluctuations, with respect to borrowings, ordinary property, or ordinary obligations. W 2 show state income tax withheld Ordinary property or obligations are those that cannot produce capital gain or loss if sold or exchanged. W 2 show state income tax withheld A commodity futures contract is a standardized, exchange-traded contract for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. W 2 show state income tax withheld The holder of an option on a futures contract has the right (but not the obligation) for a specified period of time to enter into a futures contract to buy or sell at a particular price. W 2 show state income tax withheld A forward contract is generally similar to a futures contract except that the terms are not standardized and the contract is not exchange traded. W 2 show state income tax withheld Businesses may enter into commodity futures contracts or forward contracts and may acquire options on commodity futures contracts as either of the following. W 2 show state income tax withheld Hedging transactions. W 2 show state income tax withheld Transactions that are not hedging transactions. W 2 show state income tax withheld Futures transactions with exchange-traded commodity futures contracts that are not hedging transactions, generally, result in capital gain or loss and are subject to the mark-to-market rules discussed in Publication 550. W 2 show state income tax withheld There is a limit on the amount of capital losses you can deduct each year. W 2 show state income tax withheld Hedging transactions are not subject to the mark-to-market rules. W 2 show state income tax withheld If, as a farmer-producer, to protect yourself from the risk of unfavorable price fluctuations, you enter into commodity forward contracts, futures contracts, or options on futures contracts and the contracts cover an amount of the commodity within your range of production, the transactions are generally considered hedging transactions. W 2 show state income tax withheld They can take place at any time you have the commodity under production, have it on hand for sale, or reasonably expect to have it on hand. W 2 show state income tax withheld The gain or loss on the termination of these hedges is generally ordinary gain or loss. W 2 show state income tax withheld Farmers who file their income tax returns on the cash method report any profit or loss on the hedging transaction on Schedule F, line 8. W 2 show state income tax withheld Gains or losses from hedging transactions that hedge supplies of a type regularly used or consumed in the ordinary course of your trade or business may be ordinary gains or losses. W 2 show state income tax withheld Examples include fuel and feed. W 2 show state income tax withheld If you have numerous transactions in the commodity futures market during the year, you must be able to show which transactions are hedging transactions. W 2 show state income tax withheld Clearly identify a hedging transaction on your books and records before the end of the day you entered into the transaction. W 2 show state income tax withheld It may be helpful to have separate brokerage accounts for your hedging and speculation transactions. W 2 show state income tax withheld Retain the identification of each hedging transaction with your books and records. W 2 show state income tax withheld Also, identify the item(s) or aggregate risk that is being hedged in your records. W 2 show state income tax withheld Although the identification of the hedging transaction must be made before the end of the day it was entered into, you have 35 days after entering into the transaction to identify the hedged item(s) or risk. W 2 show state income tax withheld For more information on the tax treatment of futures and options contracts, see Commodity Futures and Section 1256 Contracts Marked to Market in Publication 550. W 2 show state income tax withheld Accounting methods for hedging transactions. W 2 show state income tax withheld   The accounting method you use for a hedging transaction must clearly reflect income. W 2 show state income tax withheld This means that your accounting method must reasonably match the timing of income, deduction, gain, or loss from a hedging transaction with the timing of income, deduction, gain, or loss from the item or items being hedged. W 2 show state income tax withheld There are requirements and limits on the method you can use for certain hedging transactions. W 2 show state income tax withheld See Regulations section 1. W 2 show state income tax withheld 446-4(e) for those requirements and limits. W 2 show state income tax withheld   Hedging transactions must be accounted for under the rules stated above unless the transaction is subject to mark-to-market accounting under section 475 or you use an accounting method other than the following methods. W 2 show state income tax withheld Cash method. W 2 show state income tax withheld Farm-price method. W 2 show state income tax withheld Unit-livestock-price method. W 2 show state income tax withheld   Once you adopt a method, you must apply it consistently and must have IRS approval before changing it. W 2 show state income tax withheld   Your books and records must describe the accounting method used for each type of hedging transaction. W 2 show state income tax withheld They must also contain any additional identification necessary to verify the application of the accounting method you used for the transaction. W 2 show state income tax withheld You must make the additional identification no more than 35 days after entering into the hedging transaction. W 2 show state income tax withheld Example of a hedging transaction. W 2 show state income tax withheld   You file your income tax returns on the cash method. W 2 show state income tax withheld On July 2 you anticipate a yield of 50,000 bushels of corn this year. W 2 show state income tax withheld The December futures price is $5. W 2 show state income tax withheld 75 a bushel, but there are indications that by harvest time the price will drop. W 2 show state income tax withheld To protect yourself against a drop in the price, you enter into the following hedging transaction. W 2 show state income tax withheld You sell ten December futures contracts of 5,000 bushels each for a total of 50,000 bushels of corn at $5. W 2 show state income tax withheld 75 a bushel. W 2 show state income tax withheld   The price did not drop as anticipated but rose to $6 a bushel. W 2 show state income tax withheld In November, you sell your crop at a local elevator for $6 a bushel. W 2 show state income tax withheld You also close out your futures position by buying ten December contracts for $6 a bushel. W 2 show state income tax withheld You paid a broker's commission of $1,400 ($70 per contract) for the complete in and out position in the futures market. W 2 show state income tax withheld   The result is that the price of corn rose 25 cents a bushel and the actual selling price is $6 a bushel. W 2 show state income tax withheld Your loss on the hedge is 25 cents a bushel. W 2 show state income tax withheld In effect, the net selling price of your corn is $5. W 2 show state income tax withheld 75 a bushel. W 2 show state income tax withheld   Report the results of your futures transactions and your sale of corn separately on Schedule F. W 2 show state income tax withheld See the instructions for the 2013 Schedule F (Form 1040). W 2 show state income tax withheld   The loss on your futures transactions is $13,900, figured as follows. W 2 show state income tax withheld July 2 - Sold December corn futures (50,000 bu. W 2 show state income tax withheld @$5. W 2 show state income tax withheld 75) $287,500 November 6 - Bought December corn futures (50,000 bu. W 2 show state income tax withheld @$6 plus $1,400 broker's commission) 301,400 Futures loss ($13,900) This loss is reported as a negative figure on Schedule F, Part I, line 8, as other income. W 2 show state income tax withheld   The proceeds from your corn sale at the local elevator are $300,000 (50,000 bu. W 2 show state income tax withheld × $6). W 2 show state income tax withheld Report it on Schedule F, Part I, line 2, as income from sales of products you raised. W 2 show state income tax withheld   Assume you were right and the price went down 25 cents a bushel. W 2 show state income tax withheld In effect, you would still net $5. W 2 show state income tax withheld 75 a bushel, figured as follows. W 2 show state income tax withheld Sold cash corn, per bushel $5. W 2 show state income tax withheld 50 Gain on hedge, per bushel . W 2 show state income tax withheld 25 Net price, per bushel $5. W 2 show state income tax withheld 75       The gain on your futures transactions would have been $11,100, figured as follows. W 2 show state income tax withheld July 2 - Sold December corn futures (50,000 bu. W 2 show state income tax withheld @$5. W 2 show state income tax withheld 75) $287,500 November 6 - Bought December corn futures (50,000 bu. W 2 show state income tax withheld @$5. W 2 show state income tax withheld 50 plus $1,400 broker's commission) 276,400 Futures gain $11,100 The $11,100 is reported on Schedule F, Part I, line 8, as other income. W 2 show state income tax withheld   The proceeds from the sale of your corn at the local elevator, $275,000, are reported on Schedule F, Part I, line 2, as income from sales of products you raised. W 2 show state income tax withheld Livestock This part discusses the sale or exchange of livestock used in your farm business. W 2 show state income tax withheld Gain or loss from the sale or exchange of this livestock may qualify as a section 1231 gain or loss. W 2 show state income tax withheld However, any part of the gain that is ordinary income from the recapture of depreciation is not included as section 1231 gain. W 2 show state income tax withheld See chapter 9 for more information on section 1231 gains and losses and the recapture of depreciation under section 1245. W 2 show state income tax withheld The rules discussed here do not apply to the sale of livestock held primarily for sale to customers. W 2 show state income tax withheld The sale of this livestock is reported on Schedule F. W 2 show state income tax withheld See chapter 3. W 2 show state income tax withheld Also, special rules apply to sales or exchanges caused by weather-related conditions. W 2 show state income tax withheld See chapter 3. W 2 show state income tax withheld Holding period. W 2 show state income tax withheld   The sale or exchange of livestock used in your farm business (defined below) qualifies as a section 1231 transaction if you held the livestock for 12 months or more (24 months or more for horses and cattle). W 2 show state income tax withheld Livestock. W 2 show state income tax withheld   For section 1231 transactions, livestock includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. W 2 show state income tax withheld Also, for section 1231 transactions, livestock does not include chickens, turkeys, pigeons, geese, emus, ostriches, rheas, or other birds, fish, frogs, reptiles, etc. W 2 show state income tax withheld Livestock used in farm business. W 2 show state income tax withheld   If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. W 2 show state income tax withheld The purpose for which an animal is held ordinarily is determined by a farmer's actual use of the animal. W 2 show state income tax withheld An animal is not held for draft, breeding, dairy, or sporting purposes merely because it is suitable for that purpose, or because it is held for sale to other persons for use by them for that purpose. W 2 show state income tax withheld However, a draft, breeding, or sporting purpose may be present if an animal is disposed of within a reasonable time after it is prevented from its intended use or made undesirable as a result of an accident, disease, drought, or unfitness of the animal. W 2 show state income tax withheld Example 1. W 2 show state income tax withheld You discover an animal that you intend to use for breeding purposes is sterile. W 2 show state income tax withheld You dispose of it within a reasonable time. W 2 show state income tax withheld This animal was held for breeding purposes. W 2 show state income tax withheld Example 2. W 2 show state income tax withheld You retire and sell your entire herd, including young animals that you would have used for breeding or dairy purposes had you remained in business. W 2 show state income tax withheld These young animals were held for breeding or dairy purposes. W 2 show state income tax withheld Also, if you sell young animals to reduce your breeding or dairy herd because of drought, these animals are treated as having been held for breeding or dairy purposes. W 2 show state income tax withheld See Sales Caused by Weather-Related Conditions in chapter 3. W 2 show state income tax withheld Example 3. W 2 show state income tax withheld You are in the business of raising hogs for slaughter. W 2 show state income tax withheld Customarily, before selling your sows, you obtain a single litter of pigs that you will raise for sale. W 2 show state income tax withheld You sell the brood sows after obtaining the litter. W 2 show state income tax withheld Even though you hold these brood sows for ultimate sale to customers in the ordinary course of your business, they are considered to be held for breeding purposes. W 2 show state income tax withheld Example 4. W 2 show state income tax withheld You are in the business of raising registered cattle for sale to others for use as breeding cattle. W 2 show state income tax withheld The business practice is to breed the cattle before sale to establish their fitness as registered breeding cattle. W 2 show state income tax withheld Your use of the young cattle for breeding purposes is ordinary and necessary for selling them as registered breeding cattle. W 2 show state income tax withheld Such use does not demonstrate that you are holding the cattle for breeding purposes. W 2 show state income tax withheld However, those cattle you held as additions or replacements to your own breeding herd to produce calves are considered to be held for breeding purposes, even though they may not actually have produced calves. W 2 show state income tax withheld The same applies to hog and sheep breeders. W 2 show state income tax withheld Example 5. W 2 show state income tax withheld You breed, raise, and train horses for racing purposes. W 2 show state income tax withheld Every year you cull horses from your racing stable. W 2 show state income tax withheld In 2013, you decided that to prevent your racing stable from getting too large to be effectively operated, you must cull six horses that had been raced at public tracks in 2012. W 2 show state income tax withheld These horses are all considered held for sporting purposes. W 2 show state income tax withheld Figuring gain or loss on the cash method. W 2 show state income tax withheld   Farmers or ranchers who use the cash method of accounting figure their gain or loss on the sale of livestock used in their farming business as follows. W 2 show state income tax withheld Raised livestock. W 2 show state income tax withheld   Gain on the sale of raised livestock is generally the gross sales price reduced by any expenses of the sale. W 2 show state income tax withheld Expenses of sale include sales commissions, freight or hauling from farm to commission company, and other similar expenses. W 2 show state income tax withheld The basis of the animal sold is zero if the costs of raising it were deducted during the years the animal was being raised. W 2 show state income tax withheld However, see Uniform Capitalization Rules in chapter 6. W 2 show state income tax withheld Purchased livestock. W 2 show state income tax withheld   The gross sales price minus your adjusted basis and any expenses of sale is the gain or loss. W 2 show state income tax withheld Example. W 2 show state income tax withheld A farmer sold a breeding cow on January 8, 2013, for $1,250. W 2 show state income tax withheld Expenses of the sale were $125. W 2 show state income tax withheld The cow was bought July 2, 2009, for $1,300. W 2 show state income tax withheld Depreciation (not less than the amount allowable) was $867. W 2 show state income tax withheld Gross sales price $1,250 Cost (basis) $1,300   Minus: Depreciation deduction 867   Unrecovered cost (adjusted basis) $ 433   Expense of sale 125 558 Gain realized $ 692 Converted Wetland and Highly Erodible Cropland Special rules apply to dispositions of land converted to farming use after March 1, 1986. W 2 show state income tax withheld Any gain realized on the disposition of converted wetland or highly erodible cropland is treated as ordinary income. W 2 show state income tax withheld Any loss on the disposition of such property is treated as a long-term capital loss. W 2 show state income tax withheld Converted wetland. W 2 show state income tax withheld   This is generally land that was drained or filled to make the production of agricultural commodities possible. W 2 show state income tax withheld It includes converted wetland held by the person who originally converted it or held by any other person who used the converted wetland at any time after conversion for farming. W 2 show state income tax withheld   A wetland (before conversion) is land that meets all the following conditions. W 2 show state income tax withheld It is mostly soil that, in its undrained condition, is saturated, flooded, or ponded long enough during a growing season to develop an oxygen-deficient state that supports the growth and regeneration of plants growing in water. W 2 show state income tax withheld It is saturated by surface or groundwater at a frequency and duration sufficient to support mostly plants that are adapted for life in saturated soil. W 2 show state income tax withheld It supports, under normal circumstances, mostly plants that grow in saturated soil. W 2 show state income tax withheld Highly erodible cropland. W 2 show state income tax withheld   This is cropland subject to erosion that you used at any time for farming purposes other than grazing animals. W 2 show state income tax withheld Generally, highly erodible cropland is land currently classified by the Department of Agriculture as Class IV, VI, VII, or VIII under its classification system. W 2 show state income tax withheld Highly erodible cropland also includes land that would have an excessive average annual erosion rate in relation to the soil loss tolerance level, as determined by the Department of Agriculture. W 2 show state income tax withheld Successor. W 2 show state income tax withheld   Converted wetland or highly erodible cropland is also land held by any person whose basis in the land is figured by reference to the adjusted basis of a person in whose hands the property was converted wetland or highly erodible cropland. W 2 show state income tax withheld Timber Standing timber you held as investment property is a capital asset. W 2 show state income tax withheld Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. W 2 show state income tax withheld If you held the timber primarily for sale to customers, it is not a capital asset. W 2 show state income tax withheld Gain or loss on its sale is ordinary business income or loss. W 2 show state income tax withheld It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). W 2 show state income tax withheld See the Instructions for Schedule F (Form 1040). W 2 show state income tax withheld Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. W 2 show state income tax withheld Amounts realized from these sales, and the expenses incurred in cutting, hauling, etc. W 2 show state income tax withheld , are ordinary farm income and expenses reported on Schedule F. W 2 show state income tax withheld Different rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange or you enter into a cutting contract, discussed below. W 2 show state income tax withheld Timber considered cut. W 2 show state income tax withheld   Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. W 2 show state income tax withheld This is true whether the timber is cut under contract or whether you cut it yourself. W 2 show state income tax withheld Christmas trees. W 2 show state income tax withheld   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. W 2 show state income tax withheld They qualify for both rules discussed below. W 2 show state income tax withheld Election to treat cutting as a sale or exchange. W 2 show state income tax withheld   Under the general rule, the cutting of timber results in no gain or loss. W 2 show state income tax withheld It is not until a sale or exchange occurs that gain or loss is realized. W 2 show state income tax withheld But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year it is cut. W 2 show state income tax withheld Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. W 2 show state income tax withheld Any later sale results in ordinary business income or loss. W 2 show state income tax withheld See the example below. W 2 show state income tax withheld   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or use in your trade or business. W 2 show state income tax withheld Making the election. W 2 show state income tax withheld   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of your gain or loss. W 2 show state income tax withheld You do not have to make the election in the first year you cut the timber. W 2 show state income tax withheld You can make it in any year to which the election would apply. W 2 show state income tax withheld If the timber is partnership property, the election is made on the partnership return. W 2 show state income tax withheld This election cannot be made on an amended return. W 2 show state income tax withheld   Once you have made the election, it remains in effect for all later years unless you revoke it. W 2 show state income tax withheld Election under section 631(a) may be revoked. W 2 show state income tax withheld   If you previously elected for any tax year ending before October 23, 2004, to treat the cutting of timber as a sale or exchange under section 631(a), you may revoke this election without the consent of the IRS for any tax year ending after October 22, 2004. W 2 show state income tax withheld The prior election (and revocation) is disregarded for purposes of making a subsequent election. W 2 show state income tax withheld See Form T (Timber), Forest Activities Schedule, for more information. W 2 show state income tax withheld Gain or loss. W 2 show state income tax withheld   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its FMV on the first day of your tax year in which it is cut. W 2 show state income tax withheld   Your adjusted basis for depletion of cut timber is based on the number of units (board feet, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. W 2 show state income tax withheld Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 and Regulations section 1. W 2 show state income tax withheld 611-3. W 2 show state income tax withheld   Depletion of timber is discussed in chapter 7. W 2 show state income tax withheld Example. W 2 show state income tax withheld   In April 2013, you owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. W 2 show state income tax withheld It had an adjusted basis for depletion of $40 per MBF. W 2 show state income tax withheld You are a calendar year taxpayer. W 2 show state income tax withheld On January 1, 2013, the timber had a FMV of $350 per MBF. W 2 show state income tax withheld It was cut in April for sale. W 2 show state income tax withheld On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. W 2 show state income tax withheld You report the difference between the FMV and your adjusted basis for depletion as a gain. W 2 show state income tax withheld This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as a capital gain or as ordinary gain. W 2 show state income tax withheld You figure your gain as follows. W 2 show state income tax withheld FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000   The FMV becomes your basis in the cut timber, and a later sale of the cut timber, including any by-product or tree tops, will result in ordinary business income or loss. W 2 show state income tax withheld Outright sales of timber. W 2 show state income tax withheld   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined later). W 2 show state income tax withheld However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see Date of disposal below). W 2 show state income tax withheld Cutting contract. W 2 show state income tax withheld   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. W 2 show state income tax withheld You are the owner of the timber. W 2 show state income tax withheld You held the timber longer than 1 year before its disposal. W 2 show state income tax withheld You kept an economic interest in the timber. W 2 show state income tax withheld   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. W 2 show state income tax withheld   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. W 2 show state income tax withheld Include this amount on Form 4797 along with your other section 1231 gains or losses. W 2 show state income tax withheld Date of disposal. W 2 show state income tax withheld   The date of disposal is the date the timber is cut. W 2 show state income tax withheld However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. W 2 show state income tax withheld   This election applies only to figure the holding period of the timber. W 2 show state income tax withheld It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). W 2 show state income tax withheld   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. W 2 show state income tax withheld The statement must identify the advance payments subject to the election and the contract under which they were made. W 2 show state income tax withheld   If you timely filed your return for the year you received payment without making the election, you can still make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). W 2 show state income tax withheld Attach the statement to the amended return and write “Filed pursuant to section 301. W 2 show state income tax withheld 9100-2” at the top of the statement. W 2 show state income tax withheld File the amended return at the same address the original return was filed. W 2 show state income tax withheld Owner. W 2 show state income tax withheld   An owner is any person who owns an interest in the timber, including a sublessor and the holder of a contract to cut the timber. W 2 show state income tax withheld You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. W 2 show state income tax withheld Tree stumps. W 2 show state income tax withheld   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. W 2 show state income tax withheld Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. W 2 show state income tax withheld However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. W 2 show state income tax withheld Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. W 2 show state income tax withheld   See Form T (Timber) and its separate instructions for more information about dispositions of timber. W 2 show state income tax withheld Sale of a Farm The sale of your farm will usually involve the sale of both nonbusiness property (your home) and business property (the land and buildings used in the farm operation and perhaps machinery and livestock). W 2 show state income tax withheld If you have a gain from the sale, you may be allowed to exclude the gain on your home. W 2 show state income tax withheld For more information, see Publication 523, Selling Your Home. W 2 show state income tax withheld The gain on the sale of your business property is taxable. W 2 show state income tax withheld A loss on the sale of your business property to an unrelated person is deducted as an ordinary loss. W 2 show state income tax withheld Your taxable gain or loss on the sale of property used in your farm business is taxed under the rules for section 1231 transactions. W 2 show state income tax withheld See chapter 9. W 2 show state income tax withheld Losses from personal-use property, other than casualty or theft losses, are not deductible. W 2 show state income tax withheld If you receive payments for your farm in installments, your gain is taxed over the period of years the payments are received, unless you elect not to use the installment method of reporting the gain. W 2 show state income tax withheld See chapter 10 for information about installment sales. W 2 show state income tax withheld When you sell your farm, the gain or loss on each asset is figured separately. W 2 show state income tax withheld The tax treatment of gain or loss on the sale of each asset is determined by the classification of the asset. W 2 show state income tax withheld Each of the assets sold must be classified as one of the following. W 2 show state income tax withheld Capital asset held 1 year or less. W 2 show state income tax withheld Capital asset held longer than 1 year. W 2 show state income tax withheld Property (including real estate) used in your business and held 1 year or less (including draft, breeding, dairy, and sporting animals held less than the holding periods discussed earlier under Livestock ). W 2 show state income tax withheld Property (including real estate) used in your business and held longer than 1 year (including only draft, breeding, dairy, and sporting animals held for the holding periods discussed earlier). W 2 show state income tax withheld Property held primarily for sale or which is of the kind that would be included in inventory if on hand at the end of your tax year. W 2 show state income tax withheld Allocation of consideration paid for a farm. W 2 show state income tax withheld   The sale of a farm for a lump sum is considered a sale of each individual asset rather than a single asset. W 2 show state income tax withheld The residual method is required only if the group of assets sold constitutes a trade or business. W 2 show state income tax withheld This method determines gain or loss from the transfer of each asset. W 2 show state income tax withheld It also determines the buyer's basis in the business assets. W 2 show state income tax withheld For more information, see Sale of a Business in chapter 2 of Publication 544. W 2 show state income tax withheld Property used in farm operation. W 2 show state income tax withheld   The rules for excluding the gain on the sale of your home, described later under Sale of your home , do not apply to the property used for your farming business. W 2 show state income tax withheld Recognized gains and losses on business property must be reported on your return for the year of the sale. W 2 show state income tax withheld If the property was held longer than 1 year, it may qualify for section 1231 treatment (see chapter 9). W 2 show state income tax withheld Example. W 2 show state income tax withheld You sell your farm, including your main home, which you have owned since December 2001. W 2 show state income tax withheld You realize gain on the sale as follows. W 2 show state income tax withheld   Farm   Farm   With Home Without   Home Only Home Selling price $382,000 $158,000 $224,000 Cost (or other basis) 240,000 110,000 130,000 Gain $142,000 $48,000 $94,000 You must report the $94,000 gain from the sale of the property used in your farm business. W 2 show state income tax withheld All or a part of that gain may have to be reported as ordinary income from the recapture of depreciation or soil and water conservation expenses. W 2 show state income tax withheld Treat the balance as section 1231 gain. W 2 show state income tax withheld The $48,000 gain from the sale of your home is not taxable as long as you meet the requirements explained later under Sale of your home . W 2 show state income tax withheld Partial sale. W 2 show state income tax withheld   If you sell only part of your farm, you must report any recognized gain or loss on the sale of that part on your tax return for the year of the sale. W 2 show state income tax withheld You cannot wait until you have sold enough of the farm to recover its entire cost before reporting gain or loss. W 2 show state income tax withheld For a detailed discussion on installment sales, see Publication 544. W 2 show state income tax withheld Adjusted basis of the part sold. W 2 show state income tax withheld   This is the properly allocated part of your original cost or other basis of the entire farm plus or minus necessary adjustments for improvements, depreciation, etc. W 2 show state income tax withheld , on the part sold. W 2 show state income tax withheld If your home is on the farm, you must properly adjust the basis to exclude those costs from your farm asset costs, as discussed below under Sale of your home . W 2 show state income tax withheld Example. W 2 show state income tax withheld You bought a 600-acre farm for $700,000. W 2 show state income tax withheld The farm included land and buildings. W 2 show state income tax withheld The purchase contract designated $600,000 of the purchase price to the land. W 2 show state income tax withheld You later sold 60 acres of land on which you had installed a fence. W 2 show state income tax withheld Your adjusted basis for the part of your farm sold is $60,000 (1/10 of $600,000), plus any unrecovered cost (cost not depreciated) of the fence on the 60 acres at the time of sale. W 2 show state income tax withheld Use this amount to determine your gain or loss on the sale of the 60 acres. W 2 show state income tax withheld Assessed values for local property taxes. W 2 show state income tax withheld   If you paid a flat sum for the entire farm and no other facts are available for properly allocating your original cost or other basis between the land and the buildings, you can use the assessed values for local property taxes for the year of purchase to allocate the costs. W 2 show state income tax withheld Example. W 2 show state income tax withheld Assume that in the preceding example there was no breakdown of the $700,000 purchase price between land and buildings. W 2 show state income tax withheld However, in the year of purchase, local taxes on the entire property were based on assessed valuations of $420,000 for land and $140,000 for improvements, or a total of $560,000. W 2 show state income tax withheld The assessed valuation of the land is 3/4 (75%) of the total assessed valuation. W 2 show state income tax withheld Multiply the $700,000 total purchase price by 75% to figure basis of $525,000 for the 600 acres of land. W 2 show state income tax withheld The unadjusted basis of the 60 acres you sold would then be $52,500 (1/10 of $525,000). W 2 show state income tax withheld Sale of your home. W 2 show state income tax withheld   Your home is a capital asset and not property used in the trade or business of farming. W 2 show state income tax withheld If you sell a farm that includes a house you and your family occupy, you must determine the part of the selling price and the part of the cost or other basis allocable to your home. W 2 show state income tax withheld Your home includes the immediate surroundings and outbuildings relating to it that are not used for business purposes. W 2 show state income tax withheld   If you use part of your home for business, you must make an appropriate adjustment to the basis for depreciation allowed or allowable. W 2 show state income tax withheld For more information on basis, see chapter 6. W 2 show state income tax withheld More information. W 2 show state income tax withheld   For more information on selling your home, see Publication 523. W 2 show state income tax withheld Gain from condemnation. W 2 show state income tax withheld   If you have a gain from a condemnation or sale under threat of condemnation, you may use the preceding rules for excluding the gain, rather than the rules discussed under Postponing Gain in chapter 11. W 2 show state income tax withheld However, any gain that cannot be excluded (because it is more than the limit) may be postponed under the rules discussed under Postponing Gain in chapter 11. W 2 show state income tax withheld Foreclosure or Repossession If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. W 2 show state income tax withheld The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. W 2 show state income tax withheld This is true even if you voluntarily return the property to the lender. W 2 show state income tax withheld You may also realize ordinary income from cancellation of debt if the loan balance is more than the FMV of the property. W 2 show state income tax withheld Buyer's (borrower's) gain or loss. W 2 show state income tax withheld   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. W 2 show state income tax withheld The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. W 2 show state income tax withheld See Determining Gain or Loss , earlier. W 2 show state income tax withheld Worksheet 8-1. W 2 show state income tax withheld Worksheet for Foreclosures andRepossessions Part 1. W 2 show state income tax withheld Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. W 2 show state income tax withheld Complete this part only if you were personally liable for the debt. W 2 show state income tax withheld Otherwise, go to Part 2. W 2 show state income tax withheld   1. W 2 show state income tax withheld Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable after the transfer of property   2. W 2 show state income tax withheld Enter the Fair Market Value of the transferred property   3. W 2 show state income tax withheld Ordinary income from cancellation of debt upon foreclosure or repossession. W 2 show state income tax withheld * Subtract line 2 from line 1. W 2 show state income tax withheld If zero or less, enter -0-   Part 2. W 2 show state income tax withheld Figure your gain or loss from foreclosure or repossession. W 2 show state income tax withheld   4. W 2 show state income tax withheld If you completed Part 1, enter the smaller of line 1 or line 2. W 2 show state income tax withheld If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property   5. W 2 show state income tax withheld Enter any proceeds you received from the foreclosure sale   6. W 2 show state income tax withheld Add lines 4 and 5   7. W 2 show state income tax withheld Enter the adjusted basis of the transferred property   8. W 2 show state income tax withheld Gain or loss from foreclosure or repossession. W 2 show state income tax withheld Subtract line 7  from line 6   * The income may not be taxable. W 2 show state income tax withheld See Cancellation of debt . W 2 show state income tax withheld    You can use Worksheet 8-1 to figure your gain or loss from a foreclosure or repossession. W 2 show state income tax withheld Amount realized on a nonrecourse debt. W 2 show state income tax withheld   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full amount of the debt canceled by the transfer. W 2 show state income tax withheld The full canceled debt is included in the amount realized even if the fair market value of the property is less than the canceled debt. W 2 show state income tax withheld Example 1. W 2 show state income tax withheld Ann paid $200,000 for land used in her farming business. W 2 show state income tax withheld She paid $15,000 down and borrowed the remaining $185,000 from a bank. W 2 show state income tax withheld Ann is not personally liable for the loan (nonrecourse debt), but pledges the land as security. W 2 show state income tax withheld The bank foreclosed on the loan 2 years after Ann stopped making payments. W 2 show state income tax withheld When the bank foreclosed, the balance due on the loan was $180,000 and the FMV of the land was $170,000. W 2 show state income tax withheld The amount Ann realized on the foreclosure was $180,000, the debt canceled by the foreclosure. W 2 show state income tax withheld She figures her gain or loss on Form 4797, Part I, by comparing the amount realized ($180,000) with her adjusted basis ($200,000). W 2 show state income tax withheld She has a $20,000 deductible loss. W 2 show state income tax withheld Example 2. W 2 show state income tax withheld Assume the same facts as in Example 1 except the FMV of the land was $210,000. W 2 show state income tax withheld The result is the same. W 2 show state income tax withheld The amount Ann realized on the foreclosure is $180,000, the debt canceled by the foreclosure. W 2 show state income tax withheld Because her adjusted basis is $200,000, she has a deductible loss of $20,000, which she reports on Form 4797, Part I. W 2 show state income tax withheld Amount realized on a recourse debt. W 2 show state income tax withheld   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. W 2 show state income tax withheld   You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. W 2 show state income tax withheld The amount realized does not include the canceled debt that is your income from cancellation of debt. W 2 show state income tax withheld See Cancellation of debt , later. W 2 show state income tax withheld Example 3. W 2 show state income tax withheld Assume the same facts as in Example 1 above except Ann is personally liable for the loan (recourse debt). W 2 show state income tax withheld In this case, the amount she realizes is $170,000. W 2 show state income tax withheld This is the canceled debt ($180,000) up to the FMV of the land ($170,000). W 2 show state income tax withheld Ann figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($200,000). W 2 show state income tax withheld She has a $30,000 deductible loss, which she figures on Form 4797, Part I. W 2 show state income tax withheld She is also treated as receiving ordinary income from cancellation of debt. W 2 show state income tax withheld That income is $10,000 ($180,000 − $170,000). W 2 show state income tax withheld This is the part of the canceled debt not included in the amount realized. W 2 show state income tax withheld She reports this as other income on Schedule F, line 8. W 2 show state income tax withheld Seller's (lender's) gain or loss on repossession. W 2 show state income tax withheld   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. W 2 show state income tax withheld For more information, see Repossession in Publication 537, Installment Sales. W 2 show state income tax withheld Cancellation of debt. W 2 show state income tax withheld   If property that is repossessed or foreclosed upon secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the FMV of the property. W 2 show state income tax withheld This income is separate from any gain or loss realized from the foreclosure or repossession. W 2 show state income tax withheld Report the income from cancellation of a business debt on Schedule F, line 8. W 2 show state income tax withheld Report the income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. W 2 show state income tax withheld    You can use Worksheet 8-1 to figure your income from cancellation of debt. W 2 show state income tax withheld   However, income from cancellation of debt is not taxed if any of the following apply. W 2 show state income tax withheld The cancellation is intended as a gift. W 2 show state income tax withheld The debt is qualified farm debt (see chapter 3). W 2 show state income tax withheld The debt is qualified real property business debt (see chapter 5 of Publication 334). W 2 show state income tax withheld You are insolvent or bankrupt (see  chapter 3). W 2 show state income tax withheld The debt is qualified principal residence indebtedness (see chapter 3). W 2 show state income tax withheld   Use Form 982 to report the income exclusion. W 2 show state income tax withheld Abandonment The abandonment of property is a disposition of property. W 2 show state income tax withheld You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership, but without passing it on to anyone else. W 2 show state income tax withheld Business or investment property. W 2 show state income tax withheld   Loss from abandonment of business or investment property is deductible as a loss. W 2 show state income tax withheld Loss from abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. W 2 show state income tax withheld If your adjusted basis is more than the amount you realize (if any), then you have a loss. W 2 show state income tax withheld If the amount you realize (if any) is more than your adjusted basis, then you have a gain. W 2 show state income tax withheld This rule also applies to leasehold improvements the lessor made for the lessee. W 2 show state income tax withheld However, if the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed earlier under Foreclosure or Repossession . W 2 show state income tax withheld   If the abandoned property is secured by debt, special rules apply. W 2 show state income tax withheld The tax consequences of abandonment of property that secures a debt depend on whether you are personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). W 2 show state income tax withheld For more information, see chapter 3 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). W 2 show state income tax withheld The abandonment loss is deducted in the tax year in which the loss is sustained. W 2 show state income tax withheld Report the loss on Form 4797, Part II, line 10. W 2 show state income tax withheld Personal-use property. W 2 show state income tax withheld   You cannot deduct any loss from abandonment of your home or other property held for personal use. W 2 show state income tax withheld Canceled debt. W 2 show state income tax withheld   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. W 2 show state income tax withheld This income is separate from any loss realized from abandonment of the property. W 2 show state income tax withheld Report income from cancellation of a debt related to a business or rental activity as business or rental income. W 2 show state income tax withheld Report income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. W 2 show state income tax withheld   However, income from cancellation of debt is not taxed in certain circumstances. W 2 show state income tax withheld See Cancellation of debt earlier under Foreclosure or Repossession . W 2 show state income tax withheld Forms 1099-A and 1099-C. W 2 show state income tax withheld   A lender who acquires an interest in your property in a foreclosure, repossession, or abandonment should send you Form 1099-A showing the information you need to figure your loss from the foreclosure, repossession, or abandonment. W 2 show state income tax withheld However, if the lender cancels part of your debt and the lender must file Form 1099-C, the lender may include the information about the foreclosure, repossession, or abandonment on that form instead of Form 1099-A. W 2 show state income tax withheld The lender must file Form 1099-C and send you a copy if the canceled debt is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. W 2 show state income tax withheld For foreclosures, repossessions, abandonments of property, and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. W 2 show state income tax withheld Prev  Up  Next   Home   More Online Publications
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The W 2 Show State Income Tax Withheld

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