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File A 1040ez Online

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File A 1040ez Online

File a 1040ez online 7. File a 1040ez online   Filing Information Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: What, When, and Where To FileResident Aliens Nonresident Aliens Amended Returns and Claims for Refund Other Forms You May Have To File PenaltiesCivil Penalties Criminal Penalties Introduction This chapter provides the basic filing information that you may need. File a 1040ez online Topics - This chapter discusses: Forms aliens must file, When and where to file, Penalties, and Amended returns and claims for refund. File a 1040ez online Useful Items - You may want to see: Forms (and Instructions) 1040 U. File a 1040ez online S. File a 1040ez online Individual Income Tax Return 1040A U. File a 1040ez online S. File a 1040ez online Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1040NR U. File a 1040ez online S. File a 1040ez online Nonresident Alien Income Tax Return 1040NR-EZ U. File a 1040ez online S. File a 1040ez online Income Tax Return for Certain Nonresident Aliens With No Dependents See chapter 12 for information about getting these forms. File a 1040ez online What, When, and Where To File What return you must file as well as when and where you file that return, depends on your status at the end of the tax year as a resident or a nonresident alien. File a 1040ez online Resident Aliens Resident aliens should file Form 1040EZ, 1040A, or 1040 at the address shown in the instructions for that form. File a 1040ez online The due date for filing the return and paying any tax due is April 15 of the year following the year for which you are filing a return (but see the Tip, later). File a 1040ez online Under U. File a 1040ez online S. File a 1040ez online immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status. File a 1040ez online Extensions of time to file. File a 1040ez online   You are allowed an automatic extension to June 15 to file if your main place of business and the home you live in are outside the United States and Puerto Rico on April 15. File a 1040ez online You can get an extension of time to October 15 to file your return if you get an extension by April 15 (June 15 if you qualify for the June 15 extension). File a 1040ez online Use Form 4868 to get the extension to October 15. File a 1040ez online In addition to this 6-month extension, taxpayers who are out of the country (as defined in the Form 4868 instructions) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). File a 1040ez online To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. File a 1040ez online Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address:  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. File a 1040ez online   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350 (for U. File a 1040ez online S. File a 1040ez online citizens and resident aliens abroad who expect to qualify for special tax treatment). File a 1040ez online    If the due date for filing falls on a Saturday, Sunday, or legal holiday, the due date is the next day which is not a Saturday, Sunday, or legal holiday. File a 1040ez online You may be able to file your return electronically. File a 1040ez online See IRS e-file in your form instructions. File a 1040ez online Nonresident Aliens Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ. File a 1040ez online If you are any of the following, you must file a return. File a 1040ez online A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during 2013. File a 1040ez online (But see Exceptions , later. File a 1040ez online ) You must file even if: Your income did not come from a trade or business conducted in the United States, You have no income from U. File a 1040ez online S. File a 1040ez online sources, or Your income is exempt from income tax. File a 1040ez online A nonresident alien individual not engaged in a trade or business in the United States with U. File a 1040ez online S. File a 1040ez online income on which the tax liability was not satisfied by the withholding of tax at the source. File a 1040ez online A representative or agent responsible for filing the return of an individual described in (1) or (2). File a 1040ez online A fiduciary for a nonresident alien estate or trust. File a 1040ez online You must also file if you want to: Claim a refund of overwithheld or overpaid tax, or Claim the benefit of any deductions or credits. File a 1040ez online For example, if you have no U. File a 1040ez online S. File a 1040ez online business activities but have income from real property that you choose to treat as effectively connected income (discussed in chapter 4), you must timely file a true and accurate return to take any allowable deductions against that income. File a 1040ez online For information on what is timely, see When to file for deductions and credits under When To File, later. File a 1040ez online Exceptions. File a 1040ez online   You do not need to file Form 1040NR or Form 1040NR-EZ if you meet either of the following conditions. File a 1040ez online Your only U. File a 1040ez online S. File a 1040ez online trade or business was the performance of personal services, and Your wages were less than $3,900, and You have no other need to file a return to claim a refund of overwithheld taxes, to satisfy additional withholding at source, or to claim income exempt or partly exempt by treaty. File a 1040ez online You were a nonresident alien student, teacher, or trainee who was temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa and you have no income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc. File a 1040ez online Even if you have left the United States and filed a Form 1040-C, U. File a 1040ez online S. File a 1040ez online Departing Alien Income Tax Return, on departure, you still must file an annual U. File a 1040ez online S. File a 1040ez online income tax return. File a 1040ez online If you are married and both you and your spouse are required to file, you must each file a separate return. File a 1040ez online Form 1040NR-EZ You can use Form 1040NR-EZ if all of the following conditions are met. File a 1040ez online You do not claim any dependents. File a 1040ez online You cannot be claimed as a dependent on someone else's U. File a 1040ez online S. File a 1040ez online tax return. File a 1040ez online If you were married, you do not claim an exemption for your spouse. File a 1040ez online Your taxable income is less than $100,000. File a 1040ez online The only itemized deduction you can claim is for state and local income taxes. File a 1040ez online Note. File a 1040ez online Residents of India who were students or business apprentices may be able to take the standard deduction instead of the itemized deduction for state and local income taxes. File a 1040ez online See chapter 5. File a 1040ez online Your only U. File a 1040ez online S. File a 1040ez online source income is from wages, salaries, tips, taxable refunds of state and local income taxes, scholarship or fellowship grants, and nontaxable interest or dividends. File a 1040ez online (If you had taxable interest or dividend income, you cannot use this form. File a 1040ez online ) You are not claiming any adjustments to income other than the student loan interest deduction or scholarship and fellowship grants excluded. File a 1040ez online You are not claiming any tax credits. File a 1040ez online This is not an “expatriation return. File a 1040ez online ” See Expatriation Tax in chapter 4. File a 1040ez online The only taxes you owe are: The income tax from the Tax Table. File a 1040ez online The social security and Medicare tax from Form 4137 or Form 8919. File a 1040ez online You are not claiming a credit for excess social security and tier 1 RRTA tax withheld. File a 1040ez online You are not filing Form 8959, to figure the amount of Additional Medicare Tax you owe and/or the amount of Additional Medicare Tax withheld by your employer, if any. File a 1040ez online If you do not meet all of the above conditions, you must file Form 1040NR. File a 1040ez online When To File If you are an employee and you receive wages subject to U. File a 1040ez online S. File a 1040ez online income tax withholding, you will generally file by the 15th day of the 4th month after your tax year ends. File a 1040ez online For the 2013 calendar year, file your return by April 15, 2014. File a 1040ez online If you are not an employee who receives wages subject to U. File a 1040ez online S. File a 1040ez online income tax withholding, you must file by the 15th day of the 6th month after your tax year ends. File a 1040ez online For the 2013 calendar year, file your return by June 16, 2014 (because June 15 is a Sunday. File a 1040ez online ) Extensions of time to file. File a 1040ez online   If you cannot file your return by the due date, file Form 4868 or use one of the electronic filing options explained in the Form 4868 instructions. File a 1040ez online For the 2013 calendar year, this will extend the due date to October 15, 2014 (December 15, 2014, if the regular due date of your return is June 16, 2014). File a 1040ez online You must file the extension by the regular due date of your return. File a 1040ez online   In addition to the 6-month extension to October 15, taxpayers whose main place of business is outside the United States and Puerto Rico and who live outside those jurisdictions can request a discretionary 2-month extension of time to file their returns (to December 15 for calendar year taxpayers). File a 1040ez online To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. File a 1040ez online Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215   You will not receive any notification from the IRS unless your request is denied for being untimely. File a 1040ez online When to file for deductions and credits. File a 1040ez online   To get the benefit of any allowable deductions or credits, you must timely file a true and accurate return. File a 1040ez online For this purpose, a return is timely if it is filed within 16 months of the due date just discussed. File a 1040ez online However, if you did not file a 2012 tax return and 2013 is not the first year for which you are required to file one, your 2013 return is timely for this purpose if it is filed by the earlier of: The date that is 16 months after the due date for filing your 2013 return, or The date the IRS notifies you that your 2013 return has not been filed and that you cannot claim certain deductions and credits. File a 1040ez online The allowance of the following credits is not affected by this time requirement. File a 1040ez online Credit for withheld taxes. File a 1040ez online Credit for excise tax on certain uses of gasoline and special fuels. File a 1040ez online Credit for tax paid by a mutual fund (or other regulated investment company) or a real estate investment trust on undistributed long-term capital gains. File a 1040ez online Protective return. File a 1040ez online   If your activities in the United States were limited and you do not believe that you had any gross income effectively connected with a U. File a 1040ez online S. File a 1040ez online trade or business during the year, you can file a protective return (Form 1040NR) by the deadline explained above. File a 1040ez online By filing a protective return, you protect your right to receive the benefit of deductions and credits in the event it is later determined that some or all of your income is effectively connected. File a 1040ez online You are not required to report any effectively connected income or any deductions on the protective return, but you must give the reason the return is being filed. File a 1040ez online   If you believe some of your activities resulted in effectively connected income, file your return reporting that income and related deductions by the regular due date. File a 1040ez online To protect your right to claim deductions or credits resulting from other activities, attach a statement to that return explaining that you wish to protect your right to claim deductions and credits if it is later determined that the other activities produced effectively connected income. File a 1040ez online   You can follow the same procedure if you believe you have no U. File a 1040ez online S. File a 1040ez online tax liability because of a U. File a 1040ez online S. File a 1040ez online tax treaty. File a 1040ez online Be sure to also complete item L on page 5 of Form 1040NR. File a 1040ez online Waiver of filing deadline. File a 1040ez online   The IRS may waive the filing deadline if you establish that, based on the facts and circumstances, you acted reasonably and in good faith in failing to file a U. File a 1040ez online S. File a 1040ez online income tax return (including a protective return) and you cooperate with the IRS in determining your U. File a 1040ez online S. File a 1040ez online income tax liability for the tax year for which you did not file a return. File a 1040ez online Where To File If you are not enclosing a payment, file Form 1040NR-EZ and Form 1040NR at the following address. File a 1040ez online  Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 If enclosing a payment, mail your return to:  Internal Revenue Service  P. File a 1040ez online O. File a 1040ez online Box 1303 Charlotte, NC 28201-1303 Aliens from the U. File a 1040ez online S. File a 1040ez online Virgin Islands. File a 1040ez online    If you are a bona fide resident of the U. File a 1040ez online S. File a 1040ez online Virgin Islands during your entire tax year and work temporarily in the United States, you must pay your income taxes to the U. File a 1040ez online S. File a 1040ez online Virgin Islands and file your income tax returns at the following address. File a 1040ez online Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. File a 1040ez online Thomas, VI 00802   Report all income from U. File a 1040ez online S. File a 1040ez online sources, as well as income from other sources, on your return. File a 1040ez online For information on filing U. File a 1040ez online S. File a 1040ez online Virgin Islands returns, contact the U. File a 1040ez online S. File a 1040ez online Virgin Islands Bureau of Internal Revenue. File a 1040ez online   Chapter 8 discusses withholding from U. File a 1040ez online S. File a 1040ez online wages of U. File a 1040ez online S. File a 1040ez online Virgin Islanders. File a 1040ez online Aliens from Guam or the Commonwealth of the Northern Mariana Islands. File a 1040ez online   If you are a bona fide resident of Guam or the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you must file your return with, and pay any tax due to, Guam or the CNMI. File a 1040ez online Report all income, including income from U. File a 1040ez online S. File a 1040ez online sources, on your return. File a 1040ez online It is not necessary to file a separate U. File a 1040ez online S. File a 1040ez online income tax return. File a 1040ez online    Bona fide residents of Guam should file their Guam returns at the following address. File a 1040ez online   Department of Revenue and Taxation Government of Guam P. File a 1040ez online O. File a 1040ez online Box 23607 GMF, GU 96921    Bona fide residents of the CNMI should file their CNMI income tax returns at the following address. File a 1040ez online   Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. File a 1040ez online O. File a 1040ez online Box 5234 CHRB Saipan, MP 96950   If you are not a bona fide resident of Guam or the CNMI, see Pub. File a 1040ez online 570, Tax Guide for Individuals With Income From U. File a 1040ez online S. File a 1040ez online Possessions, for information on where to file your return. File a 1040ez online Amended Returns and Claims for Refund If you find changes in your income, deductions, or credits after you mail your return, file Form 1040X, Amended U. File a 1040ez online S. File a 1040ez online Individual Income Tax Return. File a 1040ez online Also use Form 1040X if you should have filed Form 1040, 1040A, or 1040EZ instead of Form 1040NR or 1040NR-EZ, or vice versa. File a 1040ez online If you amend Form 1040NR or Form 1040NR-EZ or file the correct return, attach the corrected return (Form 1040, Form 1040NR, etc. File a 1040ez online ) to Form 1040X. File a 1040ez online Print “Amended” across the top. File a 1040ez online Ordinarily, an amended return claiming a refund must be filed within 3 years from the date your return was filed or within 2 years from the time the tax was paid, whichever is later. File a 1040ez online A return filed before the final due date is considered to have been filed on the due date. File a 1040ez online Other Forms You May Have To File You may be required to file information returns to report certain foreign income or assets, or monetary transactions. File a 1040ez online FinCen Form 105 FinCEN Form 105 (formerly Customs Form 4790), Report of International Transportation of Currency or Monetary Instruments, must be filed by each person who physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped, currency or other monetary instruments in a total amount of more than $10,000 at one time from the United States to any place outside the United States, or into the United States from any place outside the United States. File a 1040ez online The filing requirement also applies to each person who receives in the United States currency or monetary instruments totaling more than $10,000 at one time from any place outside of the United States. File a 1040ez online The term “monetary instruments” means the following: Coin and currency of the United States or of any other country, Travelers' checks in any form, Investment securities or stock in bearer form or otherwise in such form that title to them passes upon delivery, Negotiable instruments (including checks, promissory notes, and money orders) in bearer form, endorsed without restriction, made out to a fictitious payee, or otherwise in such form that title to them passes upon delivery, and Checks, promissory notes, and money orders which are signed but on which the name of the payee has been omitted. File a 1040ez online However, the term does not include: Checks or money orders made payable to the order of a named person which have not been endorsed or which contain restrictive endorsements, Warehouse receipts, or Bills of lading. File a 1040ez online A transfer of funds through normal banking procedures (wire transfer) that does not involve the physical transportation of currency or monetary instruments is not required to be reported on FinCEN Form 105. File a 1040ez online Filing requirements. File a 1040ez online   FinCEN Form 105 filing requirements follow. File a 1040ez online Recipients. File a 1040ez online   Each person who receives currency or other monetary instruments in the United States must file FinCEN Form 105 within 15 days after receipt, with the Customs officer in charge at any port of entry or departure, or by mail at the following address. File a 1040ez online Commissioner of Customs  Attention: Currency Transportation Reports Washington, DC 20229 Shippers or mailers. File a 1040ez online   If the currency or other monetary instrument does not accompany the person entering or departing the United States, FinCEN Form 105 can be filed by mail at the above address on or before the date of entry, departure, mailing, or shipping. File a 1040ez online Travelers. File a 1040ez online   Travelers must file FinCEN Form 105 with the Customs officer in charge at any Customs port of entry or departure, when entering or departing the United States. File a 1040ez online Penalties. File a 1040ez online   Civil and criminal penalties are provided for failing to file a report, filing a report containing material omissions or misstatements, or filing a false or fraudulent report. File a 1040ez online Also, the entire amount of the currency or monetary instrument may be subject to seizure and forfeiture. File a 1040ez online More information. File a 1040ez online   More information regarding the filing of FinCEN Form 105 can be found in the instructions on the back of the form. File a 1040ez online Form 8938 You may have to file Form 8938, Statement of Specified Foreign Financial Assets, to report the ownership of specified foreign financial asset(s) if you are one of the following individuals. File a 1040ez online A resident alien of the United States for any part of the tax year. File a 1040ez online A resident alien of the United States who elects to be treated as a resident of a foreign country under the provisions of a U. File a 1040ez online S. File a 1040ez online income tax treaty. File a 1040ez online See Effect of Tax Treaties in chapter 1. File a 1040ez online A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return. File a 1040ez online See chapter 1 for information about this election. File a 1040ez online A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico. File a 1040ez online See Publication 570, Tax Guide for Individuals With Income From U. File a 1040ez online S. File a 1040ez online Possessions, for a definition of bona fide resident. File a 1040ez online You must file Form 8938 if the total value of those assets exceeds an applicable threshold (the “reporting threshold”). File a 1040ez online The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. File a 1040ez online Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. File a 1040ez online S. File a 1040ez online person. File a 1040ez online You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. File a 1040ez online More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. File a 1040ez online Penalties The law provides penalties for failure to file returns or pay taxes as required. File a 1040ez online Civil Penalties If you do not file your return and pay your tax by the due date, you may have to pay a penalty. File a 1040ez online You may also have to pay a penalty if you substantially understate your tax, file a frivolous tax submission, or fail to supply your taxpayer identification number. File a 1040ez online If you provide fraudulent information on your return, you may have to pay a civil fraud penalty. File a 1040ez online Filing late. File a 1040ez online   If you do not file your return by the due date (including extensions), you may have to pay a failure-to-file penalty. File a 1040ez online The penalty is based on the tax not paid by the due date (without regard to extensions). File a 1040ez online The penalty is usually 5% for each month or part of a month that a return is late, but not more than 25%. File a 1040ez online Fraud. File a 1040ez online   If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%. File a 1040ez online Return over 60 days late. File a 1040ez online   If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. File a 1040ez online Exception. File a 1040ez online   You will not have to pay the penalty if you show that you failed to file on time because of reasonable cause and not because of willful neglect. File a 1040ez online Paying tax late. File a 1040ez online   You will have to pay a failure-to-pay penalty of ½ of 1% (. File a 1040ez online 50%) of your unpaid taxes for each month, or part of a month, after the due date that the tax is not paid. File a 1040ez online This penalty does not apply during the automatic 6-month extension of time to file period, if you paid at least 90% of your actual tax liability on or before the due date of your return and pay the balance when you file the return. File a 1040ez online   The monthly rate of the failure-to-pay penalty is half the usual rate (. File a 1040ez online 25% instead of . File a 1040ez online 50%) if an installment agreement is in effect for that month. File a 1040ez online You must have filed your return by the due date (including extensions) to qualify for this reduced penalty. File a 1040ez online   If a notice of intent to levy is issued, the rate will increase to 1% at the start of the first month beginning at least 10 days after the day that the notice is issued. File a 1040ez online If a notice and demand for immediate payment is issued, the rate will increase to 1% at the start of the first month beginning after the day that the notice and demand is issued. File a 1040ez online   This penalty cannot be more than 25% of your unpaid tax. File a 1040ez online You will not have to pay the penalty if you can show that you had a good reason for not paying your tax on time. File a 1040ez online Combined penalties. File a 1040ez online   If both the failure-to-file penalty and the failure-to-pay penalty (discussed earlier) apply in any month, the 5% (or 15%) failure-to-file penalty is reduced by the failure-to-pay penalty. File a 1040ez online However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax. File a 1040ez online Accuracy-related penalty. File a 1040ez online   You may have to pay an accuracy-related penalty if you underpay your tax because: You show negligence or disregard of rules or regulations, You substantially understate your income tax, You claim tax benefits for a transaction that lacks economic substance, or You fail to disclose a foreign financial asset. File a 1040ez online The penalty is equal to 20% of the underpayment. File a 1040ez online The penalty is 40% of any portion of the underpayment that is attributable to an undisclosed noneconomic substance transaction or an undisclosed foreign financial asset transaction. File a 1040ez online The penalty will not be figured on any part of an underpayment on which the fraud penalty (discussed later) is charged. File a 1040ez online Negligence or disregard. File a 1040ez online   The term “negligence” includes a failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. File a 1040ez online Negligence also includes failure to keep adequate books and records. File a 1040ez online You will not have to pay a negligence penalty if you have a reasonable basis for a position you took. File a 1040ez online   The term “disregard” includes any careless, reckless, or intentional disregard. File a 1040ez online Adequate disclosure. File a 1040ez online   You can avoid the penalty for disregard of rules or regulations if you adequately disclose on your return a position that has at least a reasonable basis. File a 1040ez online See Disclosure statement , later. File a 1040ez online   This exception will not apply to an item that is attributable to a tax shelter. File a 1040ez online In addition, it will not apply if you fail to keep adequate books and records, or substantiate items properly. File a 1040ez online Substantial understatement of income tax. File a 1040ez online   You understate your tax if the tax shown on your return is less than the correct tax. File a 1040ez online The understatement is substantial if it is more than the larger of 10% of the correct tax or $5,000. File a 1040ez online However, the amount of the understatement is reduced to the extent the understatement is due to: Substantial authority, or Adequate disclosure and a reasonable basis. File a 1040ez online   If an item on your return is attributable to a tax shelter, there is no reduction for an adequate disclosure. File a 1040ez online However, there is a reduction for a position with substantial authority, but only if you reasonably believed that your tax treatment was more likely than not the proper treatment. File a 1040ez online Substantial authority. File a 1040ez online   Whether there is or was substantial authority for the tax treatment of an item depends on the facts and circumstances. File a 1040ez online Consideration will be given to court opinions, Treasury regulations, revenue rulings, revenue procedures, and notices and announcements issued by the IRS and published in the Internal Revenue Bulletin that involve the same or similar circumstances as yours. File a 1040ez online Disclosure statement. File a 1040ez online   To adequately disclose the relevant facts about your tax treatment of an item, use Form 8275, Disclosure Statement. File a 1040ez online You must also have a reasonable basis for treating the item the way you did. File a 1040ez online   In cases of substantial understatement only, items that meet the requirements of Revenue Procedure 2012-51, 2012-51 IRB 719 (or later update) are considered adequately disclosed on your return without filing Form 8275. File a 1040ez online   Use Form 8275-R, Regulation Disclosure Statement, to disclose items or positions contrary to regulations. File a 1040ez online Transaction lacking economic substance. File a 1040ez online   For more information on economic substance, see section 7701(o). File a 1040ez online Foreign financial asset. File a 1040ez online   For more information on undisclosed foreign financial assets, see section 6662(j) or the Instructions for Form 8938. File a 1040ez online Reasonable cause. File a 1040ez online   You will not have to pay a penalty if you show a good reason (reasonable cause) for the way you treated an item. File a 1040ez online You must also show that you acted in good faith. File a 1040ez online This does not apply to a transaction that lacks economic substance. File a 1040ez online Filing erroneous claim for refund or credit. File a 1040ez online   You may have to pay a penalty if you file an erroneous claim for refund or credit. File a 1040ez online The penalty is equal to 20% of the disallowed amount of the claim, unless you can show a reasonable basis for the way you treated an item. File a 1040ez online However, any disallowed amount due to a transaction that lacks economic substance will not be treated as having a reasonable basis. File a 1040ez online The penalty will not be figured on any part of the disallowed amount of the claim that relates to the earned income credit or on which the accuracy-related or fraud penalties are charged. File a 1040ez online Frivolous tax submission. File a 1040ez online   You may have to pay a penalty of $5,000 if you file a frivolous tax return or other frivolous submissions. File a 1040ez online A frivolous tax return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. File a 1040ez online For more information on frivolous returns, frivolous submissions, and a list of positions that are identified as frivolous, see Notice 2010-33, 2010-17 IRB 609 available at www. File a 1040ez online irs. File a 1040ez online gov/irb/2010-17_irb/ar13. File a 1040ez online html. File a 1040ez online   You will have to pay the penalty if you filed this kind of return or submission based on a frivolous position or a desire to delay or interfere with the administration of federal tax laws. File a 1040ez online This includes altering or striking out the preprinted language above the space provided for your signature. File a 1040ez online   This penalty is added to any other penalty provided by law. File a 1040ez online Fraud. File a 1040ez online   If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax. File a 1040ez online Failure to supply taxpayer identification number. File a 1040ez online   If you do not include your social security number (SSN) or individual taxpayer identification number (ITIN) or the SSN or ITIN of another person where required on a return, statement, or other document, you will be subject to a penalty of $50 for each failure. File a 1040ez online You will also be subject to a penalty of $50 if you do not give your SSN or ITIN to another person when it is required on a return, statement, or other document. File a 1040ez online   For example, if you have a bank account that earns interest, you must give your SSN or ITIN to the bank. File a 1040ez online The number must be shown on the Form 1099-INT or other statement the bank sends you. File a 1040ez online If you do not give the bank your SSN or ITIN, you will be subject to the $50 penalty. File a 1040ez online (You also may be subject to “backup” withholding of income tax. File a 1040ez online )   You will not have to pay the penalty if you are able to show that the failure was due to reasonable cause and not willful neglect. File a 1040ez online Criminal Penalties You may be subject to criminal prosecution (brought to trial) for actions such as: Tax evasion, Willful failure to file a return, supply information, or pay any tax due, Fraud and false statements, or Preparing and filing a fraudulent return. File a 1040ez online Prev  Up  Next   Home   More Online Publications
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The File A 1040ez Online

File a 1040ez online 3. File a 1040ez online   Unrelated Trade or Business Table of Contents Selling of products of exempt functions. File a 1040ez online Dual use of assets or facilities. File a 1040ez online Exploitation of exempt functions. File a 1040ez online ExamplesExceptions. File a 1040ez online Excluded Trade or Business ActivitiesQualified sponsorship payment. File a 1040ez online Advertising. File a 1040ez online Exception for contingent payments. File a 1040ez online Exception for periodicals. File a 1040ez online Exception for conventions and trade shows. File a 1040ez online Legal definition. File a 1040ez online Legal where played. File a 1040ez online No for-profit games where played. File a 1040ez online Unrelated business income. File a 1040ez online   Unrelated business income is the income from a trade or business regularly conducted by an exempt organization and not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. File a 1040ez online   Certain trade or business activities are not treated as an unrelated trade or business. File a 1040ez online See Excluded Trade or Business Activities, later. File a 1040ez online Trade or business. File a 1040ez online   The term “trade or business” generally includes any activity conducted for the production of income from selling goods or performing services. File a 1040ez online An activity does not lose its identity as a trade or business merely because it is conducted within a larger group of similar activities that may or may not be related to the exempt purposes of the organization. File a 1040ez online   For example, the regular sale of pharmaceutical supplies to the general public by a hospital pharmacy does not lose its identity as a trade or business, even though the pharmacy also furnishes supplies to the hospital and patients of the hospital in accordance with its exempt purpose. File a 1040ez online Similarly, soliciting, selling, and publishing commercial advertising is a trade or business even though the advertising is published in an exempt organization's periodical that contains editorial matter related to the organization's exempt purpose. File a 1040ez online Regularly conducted. File a 1040ez online   Business activities of an exempt organization ordinarily are considered regularly conducted if they show a frequency and continuity, and are pursued in a manner similar to comparable commercial activities of nonexempt organizations. File a 1040ez online   For example, a hospital auxiliary's operation of a sandwich stand for 2 weeks at a state fair would not be the regular conduct of a trade or business. File a 1040ez online The stand would not compete with similar facilities that a nonexempt organization would ordinarily operate year-round. File a 1040ez online However, operating a commercial parking lot every Saturday, year-round, would be the regular conduct of a trade or business. File a 1040ez online Not substantially related. File a 1040ez online    A business activity is not substantially related to an organization's exempt purpose if it does not contribute importantly to accomplishing that purpose (other than through the production of funds). File a 1040ez online Whether an activity contributes importantly depends in each case on the facts involved. File a 1040ez online   In determining whether activities contribute importantly to the accomplishment of an exempt purpose, the size and extent of the activities involved must be considered in relation to the nature and extent of the exempt function that they intend to serve. File a 1040ez online For example, to the extent an activity is conducted on a scale larger than is reasonably necessary to perform an exempt purpose, it does not contribute importantly to the accomplishment of the exempt purpose. File a 1040ez online The part of the activity that is more than needed to accomplish the exempt purpose is an unrelated trade or business. File a 1040ez online   Also in determining whether activities contribute importantly to the accomplishment of an exempt purpose, the following principles apply. File a 1040ez online Selling of products of exempt functions. File a 1040ez online   Ordinarily, selling products that result from the performance of exempt functions is not an unrelated trade or business if the product is sold in substantially the same state it is in when the exempt functions are completed. File a 1040ez online Thus, for an exempt organization engaged in rehabilitating handicapped persons (its exempt function), selling articles made by these persons as part of their rehabilitation training is not an unrelated trade or business. File a 1040ez online   However, if a completed product resulting from an exempt function is used or exploited in further business activity beyond what is reasonably appropriate or necessary to dispose of it as is, the activity is an unrelated trade or business. File a 1040ez online For example, if an exempt organization maintains an experimental dairy herd for scientific purposes, the sale of milk and cream produced in the ordinary course of operation of the project is not an unrelated trade or business. File a 1040ez online But if the organization uses the milk and cream in the further manufacture of food items such as ice cream, pastries, etc. File a 1040ez online , the sale of these products is an unrelated trade or business unless the manufacturing activities themselves contribute importantly to the accomplishment of an exempt purpose of the organization. File a 1040ez online Dual use of assets or facilities. File a 1040ez online   If an asset or facility necessary to the conduct of exempt functions is also used in commercial activities, its use for exempt functions does not, by itself, make the commercial activities a related trade or business. File a 1040ez online The test, as discussed earlier, is whether the activities contribute importantly to the accomplishment of exempt purposes. File a 1040ez online   For example, a museum has a theater auditorium designed for showing educational films in connection with its program of public education in the arts and sciences. File a 1040ez online The theater is a principal feature of the museum and operates continuously while the museum is open to the public. File a 1040ez online If the organization also operates the theater as a motion picture theater for the public when the museum is closed, the activity is an unrelated trade or business. File a 1040ez online   For information on allocating expenses for the dual use of assets or facilities, see Deductions in chapter 4. File a 1040ez online Exploitation of exempt functions. File a 1040ez online   Exempt activities sometimes create goodwill or other intangibles that can be exploited in a commercial way. File a 1040ez online When an organization exploits such an intangible in commercial activities, the fact that the income depends in part upon an exempt function of the organization does not make the commercial activities a related trade or business. File a 1040ez online Unless the commercial exploitation contributes importantly to the accomplishment of the exempt purpose, the commercial activities are an unrelated trade or business. File a 1040ez online   For the treatment of expenses attributable to the exploitation of exempt activities, see Deductions in chapter 4. File a 1040ez online Examples The following are examples of activities that were determined to be (or not to be) unrelated trades or businesses using the definitions and principles just discussed. File a 1040ez online Sales commissions. File a 1040ez online   An agricultural organization, whose exempt purposes are to promote better conditions for cattle breeders and to improve the breed generally, engages in an unrelated trade or business when it regularly sells cattle for its members on a commission basis. File a 1040ez online Artists' facilities. File a 1040ez online   An organization whose exempt purpose is to stimulate and foster public interest in the fine arts by promoting art exhibits, sponsoring cultural events, and furnishing information about fine arts leases studio apartments to artist tenants and operates a dining hall primarily for these tenants. File a 1040ez online These two activities do not contribute importantly to accomplishing the organization's exempt purpose. File a 1040ez online Therefore, they are unrelated trades or businesses. File a 1040ez online Membership list sales. File a 1040ez online   An exempt educational organization regularly sells membership mailing lists to business firms. File a 1040ez online This activity does not contribute importantly to the accomplishment of the organization's exempt purpose and therefore is an unrelated trade or business. File a 1040ez online Also see Exchange or rental of member lists under Excluded Trade or Business Activities, later. File a 1040ez online Hospital facilities. File a 1040ez online   An exempt hospital leases its adjacent office building and furnishes certain office services to a hospital-based medical group for a fee. File a 1040ez online The group provides all diagnostic and therapeutic procedures to the hospital's patients and operates the hospital's emergency room on a 24-hour basis. File a 1040ez online The leasing activity is substantially related to the hospital's exempt purpose and is not an unrelated trade or business. File a 1040ez online   The hospital also operates a gift shop patronized by patients, visitors making purchases for patients, and employees; a cafeteria and coffee shop primarily for employees and medical staff; and a parking lot for patients and visitors only. File a 1040ez online These activities are also substantially related to the hospital's exempt purpose and do not constitute unrelated trades or businesses. File a 1040ez online Book publishing. File a 1040ez online   An exempt organization engages primarily in activities that further its exempt purposes. File a 1040ez online It also owns the publication rights to a book that does not relate to any of its exempt purposes. File a 1040ez online The organization exploits the book in a commercial manner by arranging for printing, distribution, publicity, and advertising in connection with the sale of the book. File a 1040ez online These activities constitute a trade or business regularly conducted. File a 1040ez online Because exploiting the book is unrelated to the organization's exempt purposes (except for the use of the book's profits), the income is unrelated business income. File a 1040ez online   However, if the organization transfers publication rights to a commercial publisher in return for royalties, the royalty income received will not be unrelated business income. File a 1040ez online See Royalties under Exclusions in chapter 4. File a 1040ez online School handicraft shop. File a 1040ez online   An exempt vocational school operates a handicraft shop that sells articles made by students in their regular courses of instruction. File a 1040ez online The students are paid a percentage of the sales price. File a 1040ez online In addition, the shop sells products made by local residents who make articles at home according to the shop's specifications. File a 1040ez online The shop manager periodically inspects the articles during their manufacture to ensure that they meet desired standards of style and quality. File a 1040ez online Although many local participants are former students of the school, any qualified person may participate in the program. File a 1040ez online The sale of articles made by students does not constitute an unrelated trade or business, but the sale of products made by local residents is an unrelated trade or business and is subject to unrelated business income tax. File a 1040ez online School facilities. File a 1040ez online   An exempt school has tennis courts and dressing rooms that it uses during the regular school year in its educational program. File a 1040ez online During the summer, the school operates a tennis club open to the general public. File a 1040ez online Employees of the school run the club, including collecting membership fees and scheduling court time. File a 1040ez online   Another exempt school leases the same type of facilities to an unrelated individual who runs a tennis club for the summer. File a 1040ez online The lease is for a fixed fee that does not depend on the income or profits derived from the leased property. File a 1040ez online   In both situations, the exempt purpose is the advancement of education. File a 1040ez online Furnishing tennis facilities in the manner described does not further that exempt purpose. File a 1040ez online These activities are unrelated trades or businesses. File a 1040ez online However, in the second situation the income derived from the leasing of the property is excluded from unrelated business taxable income as rent from real property. File a 1040ez online See Rents under Exclusions in chapter 4. File a 1040ez online Services provided with lease. File a 1040ez online   An exempt university leases its football stadium during several months of the year to a professional football team for a fixed fee. File a 1040ez online Under the lease agreement, the university furnishes heat, light, and water and is responsible for all ground maintenance. File a 1040ez online It also provides dressing room, linen, and stadium security services for the professional team. File a 1040ez online   Leasing of the stadium is an unrelated trade or business. File a 1040ez online In addition, the substantial services furnished for the convenience of the lessee go beyond those usually provided with the rental of space for occupancy only. File a 1040ez online Therefore, the income from this lease is rent from real property and unrelated business taxable income. File a 1040ez online Broadcasting rights. File a 1040ez online   An exempt collegiate athletic conference conducts an annual competitive athletic game between its conference champion and another collegiate team. File a 1040ez online Income is derived from admission charges and the sale of exclusive broadcasting rights to a national radio and television network. File a 1040ez online An athletic program is considered an integral part of the educational process of a university. File a 1040ez online   The educational purposes served by intercollegiate athletics are identical whether conducted directly by individual universities or by their regional athletic conference. File a 1040ez online Also, the educational purposes served by exhibiting a game before an audience that is physically present and exhibiting the game on television or radio before a much larger audience are substantially similar. File a 1040ez online Therefore, the sale of the broadcasting rights contributes importantly to the accomplishment of the organization's exempt purpose and is not an unrelated trade or business. File a 1040ez online   In a similar situation, an exempt organization was created as a national governing body for amateur athletes to foster interest in amateur sports and to encourage widespread public participation. File a 1040ez online The organization receives income each year from the sale of exclusive broadcasting rights to an independent producer, who contracts with a commercial network to broadcast many of the athletic events sponsored, supervised, and regulated by the organization. File a 1040ez online   The broadcasting of these events promotes the various amateur sports, fosters widespread public interest in the benefits of the organization's nationwide amateur program, and encourages public participation. File a 1040ez online The sale of the rights and the broadcasting of the events contribute importantly to the organization's exempt purpose. File a 1040ez online Therefore, the sale of the exclusive broadcasting rights is not an unrelated trade or business. File a 1040ez online Yearbook advertising. File a 1040ez online   An exempt organization receives income from the sale of advertising in its annual yearbook. File a 1040ez online The organization hires an independent commercial firm, under a contract covering a full calendar year, to conduct an intensive advertising solicitation campaign in the organization's name. File a 1040ez online This firm is paid a percentage of the gross advertising receipts for selling the advertising, collecting from advertisers, and printing the yearbook. File a 1040ez online This advertising activity is an unrelated trade or business. File a 1040ez online Pet boarding and grooming services. File a 1040ez online   An exempt organization, organized and operated for the prevention of cruelty to animals, receives unrelated business income from providing pet boarding and grooming services for the general public. File a 1040ez online These activities do not contribute importantly to its purpose of preventing cruelty to animals. File a 1040ez online Museum eating facilities. File a 1040ez online   An exempt art museum operates a dining room, a cafeteria, and a snack bar for use by the museum staff, employees, and visitors. File a 1040ez online Eating facilities in the museum help to attract visitors and allow them to spend more time viewing the museum's exhibits without having to seek outside restaurants at mealtime. File a 1040ez online The eating facilities also allow the museum staff and employees to remain in the museum throughout the day. File a 1040ez online Thus, the museum's operation of the eating facilities contributes importantly to the accomplishment of its exempt purposes and is not unrelated trade or business. File a 1040ez online Halfway house workshop. File a 1040ez online   A halfway house organized to provide room, board, therapy, and counseling for persons discharged from alcoholic treatment centers also operates a furniture shop to provide full-time employment for its residents. File a 1040ez online The profits are applied to the operating costs of the halfway house. File a 1040ez online The income from this venture is not unrelated trade or business income because the furniture shop contributes importantly to the organization's purpose of aiding its residents' transition from treatment to a normal and productive life. File a 1040ez online Travel tour programs. File a 1040ez online   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 for which tax exemption was granted to the organization. File a 1040ez online Example 1. File a 1040ez online A tax-exempt university alumni association provides a travel tour program for its members and their families. File a 1040ez online The organization works with various travel agencies and schedules approximately ten tours a year to various places around the world. File a 1040ez online It mails out promotional material and accepts reservations for fees paid by the travel agencies on a per-person basis. File a 1040ez online The organization provides an employee for each tour as a tour leader. File a 1040ez online There is no formal educational program conducted with these tours, and they do not differ from regular commercially operated tours. File a 1040ez online By providing travel tours to its members, the organization is engaging in a regularly conducted trade or business. File a 1040ez online Even if the tours it offers support the university, financially and otherwise, and encourage alumni to do the same, they do not contribute importantly to the organization's exempt purpose of promoting education. File a 1040ez online Therefore, the sale of the travel tours is an unrelated trade or business. File a 1040ez online Example 2. File a 1040ez online A tax-exempt organization formed for the purpose of educating individuals about the geography and the culture of the United States provides study tours to national parks and other locations within the United States. File a 1040ez online These tours are conducted by teachers and others certified by the state board of education. File a 1040ez online The tours are primarily designed for students enrolled in degree programs at state educational institutions but are open to all who agree to participate in the required study program associated with the tour taken. File a 1040ez online A tour's study program consists of instruction on subjects related to the location being visited on the tour. File a 1040ez online Each tour group brings along a library of material related to the subjects being studied on the tour. File a 1040ez online During the tour, 5 or 6 hours per day are devoted to organized study, preparation of reports, lectures, instruction, and recitation by the students. File a 1040ez online Examinations are given at the end of each tour. File a 1040ez online The state board of education awards academic credit for tour participation. File a 1040ez online Because these tours are substantially related to the organization's exempt purpose, they are not an unrelated trade or business. File a 1040ez online Insurance programs. File a 1040ez online   An organization that acts as a group insurance policyholder for its members and collects a fee for performing administrative services is normally carrying on an unrelated trade or business. File a 1040ez online Exceptions. File a 1040ez online   Organizations whose exempt activities may include the provision of insurance benefits, such as fraternal beneficiary societies, voluntary employees beneficiary associations, and labor organizations, are generally exceptions to this rule. File a 1040ez online Magazine publishing. File a 1040ez online   An association of credit unions with tax-exempt status as a business league publishes a consumer-oriented magazine four times a year and makes it available to member credit unions for purchase. File a 1040ez online   By selling a magazine to its members as a promotional device, the organization furnishes its members with a regular commercial service they can use in their own operations. File a 1040ez online This service does not promote the improvement of business conditions of one or more lines of business, which is the exempt purpose of a business league. File a 1040ez online   Since the activity does not contribute importantly to the organization's exempt function, it is an unrelated trade or business. File a 1040ez online Directory of members. File a 1040ez online   A business league publishes an annual directory that contains a list of all its members, their addresses, and their area of expertise. File a 1040ez online Each member has the same amount of space in the directory, and its format does not emphasize the relative importance or reputation of any member. File a 1040ez online The directory contains no commercial advertisement and is sold only to the organization's members. File a 1040ez online   The directory facilitates communication among the members and encourages the exchange of ideas and expertise. File a 1040ez online Because the directory lists the members in a similar noncommercial format without advertising and is not distributed to the public, its sale does not confer private commercial benefits on the members. File a 1040ez online The sale of the directory does contribute importantly to the organization's exempt purpose and is not an unrelated trade or business. File a 1040ez online This directory differs from the publication discussed next because of its noncommercial characteristics. File a 1040ez online Sales of advertising space. File a 1040ez online   A national association of law enforcement officials publishes a monthly journal that contains articles and other editorial material of professional interest to its members. File a 1040ez online The journal is distributed without charge, mainly to the organization's members. File a 1040ez online   The organization sells advertising space in the journal either for conventional advertising or to merely identify the purchaser without a commercial message. File a 1040ez online Some of the noncommercial advertising identifies the purchaser in a separate space, and some consists of listings of 60 or more purchasers per page. File a 1040ez online A business firm identified in a separate space is further identified in an Index of Advertisers. File a 1040ez online   The organization solicits advertising by personal contacts. File a 1040ez online Advertising from large firms is solicited by contacting their chief executive officer or community relations officer rather than their advertising manager. File a 1040ez online The organization also solicits advertising in form letters appealing for corporate and personal contributions. File a 1040ez online   An exempt organization's sale of advertising placed for the purchaser's commercial benefit is a commercial activity. File a 1040ez online Goodwill derived by the purchaser from being identified as a patron of the organization is usually considered a form of commercial benefit. File a 1040ez online Therefore, advertising in an exempt organization's publication is generally presumed to be placed for the purchaser's commercial benefit, even if it has no commercial message. File a 1040ez online However, this presumption is not conclusive if the purchaser's patronage would be difficult to justify commercially in view of the facts and circumstances. File a 1040ez online In that case, other factors should also be considered in determining whether a commercial benefit can be expected. File a 1040ez online Those other factors include: The normal manner in which the publication is circulated; The territorial scope of the circulation; The extent to which its readers, promoters, or the like could reasonably be expected to further, either directly or indirectly, the commercial interest of the advertisers; The eligibility of the publishing organization to receive tax-deductible contributions; and The commercial or noncommercial methods used to solicit the advertisers. File a 1040ez online   In this situation, the purchaser of a separate advertising space without a commercial message can nevertheless expect a commercial benefit from the goodwill derived from being identified in that manner as a patron of the organization. File a 1040ez online However, the purchaser of a listing cannot expect more than an inconsequential benefit. File a 1040ez online Therefore, the sale of separate spaces, but not the listings, is an unrelated trade or business. File a 1040ez online Publishing legal notices. File a 1040ez online   A bar association publishes a legal journal containing opinions of the county court, articles of professional interest to lawyers, advertisements for products and services used by the legal profession, and legal notices. File a 1040ez online The legal notices are published to satisfy state laws requiring publication of notices in connection with legal proceedings, such as the administration of estates and actions to quiet title to real property. File a 1040ez online The state designated the bar association's journal as the place to publish the required notices. File a 1040ez online   The publication of ordinary commercial advertising does not advance the exempt purposes of the association even when published in a periodical that contains material related to exempt purposes. File a 1040ez online Although the advertising is directed specifically to members of the legal profession, it is still commercial in nature and does not contribute importantly to the exempt purposes of the association. File a 1040ez online Therefore, the advertising income is unrelated trade or business income. File a 1040ez online   On the other hand, the publication of legal notices is distinguishable from ordinary commercial advertising in that its purpose is to inform the general public of significant legal events rather than to stimulate demand for the products or services of an advertiser. File a 1040ez online This promotes the common interests of the legal profession and contributes importantly to the association's exempt purposes. File a 1040ez online Therefore, the publishing of legal notices does not constitute an unrelated trade or business. File a 1040ez online Museum greeting card sales. File a 1040ez online    An art museum that exhibits modern art sells greeting cards that display printed reproductions of selected works from other art collections. File a 1040ez online Each card is imprinted with the name of the artist, the title or subject matter of the work, the date or period of its creation, if known, and the museum's name. File a 1040ez online The cards contain appropriate greetings and are personalized on request. File a 1040ez online   The organization sells the cards in the shop it operates in the museum and sells them at quantity discounts to retail stores. File a 1040ez online It also sells them by mail order through a catalog that is advertised in magazines and other publications throughout the year. File a 1040ez online As a result, a large number of cards are sold at a significant profit. File a 1040ez online   The museum is exempt as an educational organization on the basis of its ownership, maintenance, and exhibition for public viewing of works of art. File a 1040ez online The sale of greeting cards with printed reproductions of artworks contributes importantly to the achievement of the museum's exempt educational purposes by enhancing public awareness, interest, and appreciation of art. File a 1040ez online The cards may encourage more people to visit the museum itself to share in its educational programs. File a 1040ez online The fact that the cards are promoted and sold in a commercial manner at a profit and in competition with commercial greeting card publishers does not alter the fact that the activity is related to the museum's exempt purpose. File a 1040ez online Therefore, these sales activities are not an unrelated trade or business. File a 1040ez online Museum shop. File a 1040ez online   An art museum maintained and operated for the exhibition of American folk art operates a shop in the museum that sells: Reproductions of works in the museum's own collection and reproductions of artistic works from the collections of other art museums (prints suitable for framing, postcards, greeting cards, and slides); Metal, wood, and ceramic copies of American folk art objects from its own collection and similar copies of art objects from other collections of artworks; Instructional literature and scientific books and souvenir items concerning the history and development of art and, in particular, of American folk art; and Scientific books and souvenir items of the city in which the museum is located. File a 1040ez online   The shop also rents originals or reproductions of paintings contained in its collection. File a 1040ez online All of its reproductions are imprinted with the name of the artist, the title or subject matter of the work from which it is reproduced, and the museum's name. File a 1040ez online   Each line of merchandise must be considered separately to determine if sales are related to the exempt purpose. File a 1040ez online   The sale and rental of reproductions and copies of works from the museum's own collection and reproductions of artistic works not owned by the museum contribute importantly to the achievement of the museum's exempt educational purpose by making works of art familiar to a broader segment of the public, thereby enhancing the public's understanding and appreciation of art. File a 1040ez online The same is true for the sale of literature relating to art. File a 1040ez online Therefore, these sales activities are not an unrelated trade or business. File a 1040ez online   On the other hand, the sale of scientific books and souvenir items of the city where the museum is located has no causal relationship to art or to artistic endeavor and, therefore, does not contribute importantly to the accomplishment of the museum's exempt educational purposes. File a 1040ez online The fact that selling some of these items could, under different circumstances, be held related to the exempt educational purpose of some other exempt educational organization does not change this conclusion. File a 1040ez online Additionally, the sale of these items does not lose its identity as a trade or business merely because the museum also sells articles which do contribute importantly to the accomplishment of its exempt function. File a 1040ez online Therefore, these sales are an unrelated trade or business. File a 1040ez online Business league's parking and bus services. File a 1040ez online   A business league, whose purpose is to retain and stimulate trade in a downtown area that has inadequate parking facilities, operates a fringe parking lot and shuttle bus service. File a 1040ez online It also operates, as an insubstantial part of its activities, a park and shop plan. File a 1040ez online   The fringe parking lot and shuttle bus service operate in a manner that does not favor any individual or group of downtown merchants. File a 1040ez online The merchants cannot offer free or discount parking or bus fares to their customers. File a 1040ez online   The park and shop plan allows customers of particular merchants to park free at certain parking lots in the area. File a 1040ez online Merchants participating in this plan buy parking stamps, which they distribute to their customers to use to pay for parking. File a 1040ez online   Operating the fringe parking lot and shuttle bus service provides easy and convenient access to the downtown area and, therefore, stimulates and improves business conditions in the downtown area generally. File a 1040ez online That activity contributes importantly to the organization's accomplishing its exempt purpose and is not an unrelated trade or business. File a 1040ez online   The park and shop plan encourages customers to use a limited number of participating member merchants in order to obtain free parking. File a 1040ez online This provides a particular service to individual members of the organization and does not further its exempt purpose. File a 1040ez online Therefore, operating the park and shop plan is an unrelated trade or business. File a 1040ez online Youth residence. File a 1040ez online   An exempt organization, whose purpose is to provide for the welfare of young people, rents rooms primarily to people under age 25. File a 1040ez online The residence units are operated on, and as a part of, the premises in which the organization carries on the social, recreational, and guidance programs for which it was recognized as exempt. File a 1040ez online The facilities are under the management and supervision of trained career professionals who provide residents with personal counseling, physical education programs, and group recreational activities. File a 1040ez online The rentals are not an unrelated trade or business because renting the rooms is substantially related to the organization's exempt purpose. File a 1040ez online Health club program. File a 1040ez online   An exempt charitable organization's purpose is to provide for the welfare of young people. File a 1040ez online The organization conducts charitable activities and maintains facilities that will contribute to the physical, social, mental, and spiritual health of young people at minimum or no cost to them. File a 1040ez online Nominal annual dues are charged for membership in the organization and use of the facilities. File a 1040ez online   In addition, the organization organized a health club program that its members could join for an annual fee in addition to the annual dues. File a 1040ez online The annual fee is comparable to fees charged by similar local commercial health clubs and is sufficiently high to restrict participation in the program to a limited number of members of the community. File a 1040ez online   The health club program is in addition to the general physical fitness program of the organization. File a 1040ez online Operating this program does not contribute importantly to the organization's accomplishing its exempt purpose and, therefore, is an unrelated trade or business. File a 1040ez online Miniature golf course. File a 1040ez online   An exempt youth welfare organization operates a miniature golf course that is open to the general public. File a 1040ez online The course, which is managed by salaried employees, is substantially similar to commercial courses. File a 1040ez online The admission fees charged are comparable to fees of commercial facilities and are designed to return a profit. File a 1040ez online   The operation of the miniature golf course in a commercial manner does not contribute importantly to the accomplishment of the organization's exempt purpose and, therefore, is an unrelated trade or business. File a 1040ez online Sales of hearing aids. File a 1040ez online   A tax-exempt hospital, whose primary activity is rehabilitation, sells hearing aids to patients. File a 1040ez online This activity is an essential part of the hospital's program to test and evaluate patients with hearing deficiencies and contributes importantly to its exempt purpose. File a 1040ez online It is not an unrelated trade or business. File a 1040ez online Nonpatient laboratory testing. File a 1040ez online   Nonpatient laboratory testing performed by a tax-exempt teaching hospital on specimens needed for the conduct of its teaching activities is not an unrelated trade or business. File a 1040ez online However, laboratory testing performed by a tax-exempt non-teaching hospital on referred specimens from private office patients of staff physicians is an unrelated trade or business if these services are otherwise available in the community. File a 1040ez online Selling endorsements. File a 1040ez online   An exempt scientific organization enjoys an excellent reputation in the field of biological research. File a 1040ez online It exploits this reputation regularly by selling endorsements of laboratory equipment to manufacturers. File a 1040ez online Endorsing laboratory equipment does not contribute importantly to the accomplishment of any purpose for which exemption is granted to the organization. File a 1040ez online Accordingly, the sale of endorsements is an unrelated trade or business. File a 1040ez online Sponsoring entertainment events. File a 1040ez online   An exempt university has a regular faculty and a regularly enrolled student body. File a 1040ez online During the school year, the university sponsors the appearance of professional theater companies and symphony orchestras that present drama and musical performances for the students and faculty members. File a 1040ez online Members of the general public also are admitted. File a 1040ez online The university advertises these performances and supervises advance ticket sales at various places, including such university facilities as the cafeteria and the university bookstore. File a 1040ez online Although the presentation of the performances makes use of an intangible generated by the university's exempt educational functions—the presence of the student body and faculty—such drama and music events contribute importantly to the overall educational and cultural functions of the university. File a 1040ez online Therefore, the activity is not an unrelated trade or business. File a 1040ez online Excluded Trade or Business Activities The following activities are specifically excluded from the definition of unrelated trade or business. File a 1040ez online Volunteer workforce. File a 1040ez online   Any trade or business in which substantially all the work is performed for the organization without compensation is not an unrelated trade or business. File a 1040ez online Example 1. File a 1040ez online A retail store operated by an exempt orphanage where unpaid volunteers perform substantially all the work in carrying on the business is not an unrelated trade or business. File a 1040ez online Example 2. File a 1040ez online A volunteer fire company conducts weekly public dances. File a 1040ez online Holding public dances and charging admission on a regular basis may, given the facts and circumstances of a particular case, be considered an unrelated trade or business. File a 1040ez online However, because the work at the dances is performed by unpaid volunteers, the activity is not an unrelated trade or business. File a 1040ez online Convenience of members. File a 1040ez online   A trade or business conducted by a 501(c)(3) organization or by a governmental college or university primarily for the convenience of its members, students, patients, officers, or employees is not an unrelated trade or business. File a 1040ez online For example, a laundry operated by a college for the purpose of laundering dormitory linens and students' clothing is not an unrelated trade or business. File a 1040ez online Qualified sponsorship activities. File a 1040ez online   Soliciting and receiving qualified sponsorship payments is not an unrelated trade or business, and the payments are not subject to unrelated business income tax. File a 1040ez online Qualified sponsorship payment. File a 1040ez online   This is any payment made by a person engaged in a trade or business for which the person will receive no substantial benefit other than the use or acknowledgment of the business name, logo, or product lines in connection with the organization's activities. File a 1040ez online “Use or acknowledgment” does not include advertising the sponsor's products or services. File a 1040ez online The organization's activities include all its activities, whether or not related to its exempt purposes. File a 1040ez online   For example, if, in return for receiving a sponsorship payment, an organization promises to use the sponsor's name or logo in acknowledging the sponsor's support for an educational or fundraising event, the payment is a qualified sponsorship payment and is not subject to the unrelated business income tax. File a 1040ez online   Providing facilities, services, or other privileges (for example, complimentary tickets, pro-am playing spots in golf tournaments, or receptions for major donors) to a sponsor or the sponsor's designees in connection with a sponsorship payment does not affect whether the payment is a qualified sponsorship payment. File a 1040ez online Instead, providing these goods or services is treated as a separate transaction in determining whether the organization has unrelated business income from the event. File a 1040ez online Generally, if the services or facilities are not a substantial benefit or if providing them is a related business activity, the payments will not be subject to the unrelated business income tax. File a 1040ez online   Similarly, the sponsor's receipt of a license to use an intangible asset (for example, a trademark, logo, or designation) of the organization is treated as separate from the qualified sponsorship transaction in determining whether the organization has unrelated business taxable income. File a 1040ez online   If part of a payment would be a qualified sponsorship payment if paid separately, that part is treated as a separate payment. File a 1040ez online For example, if a sponsorship payment entitles the sponsor to both product advertising and the use or acknowledgment of the sponsor's name or logo by the organization, then the unrelated business income tax does not apply to the part of the payment that is more than the fair market value of the product advertising. File a 1040ez online Advertising. File a 1040ez online   A payment is not a qualified sponsorship payment if, in return, the organization advertises the sponsor's products or services. File a 1040ez online For information on the treatment of payments for advertising, see Exploitation of Exempt Activity—Advertising Sales in chapter 4. File a 1040ez online   Advertising includes: Messages containing qualitative or comparative language, price information, or other indications of savings or value; Endorsements; and Inducements to purchase, sell, or use the products or services. File a 1040ez online   The use of promotional logos or slogans that are an established part of the sponsor's identity is not, by itself, advertising. File a 1040ez online In addition, mere distribution or display of a sponsor's product by the organization to the public at a sponsored event, whether for free or for remuneration, is considered use or acknowledgment of the product rather than advertising. File a 1040ez online Exception for contingent payments. File a 1040ez online   A payment is not a qualified sponsorship payment if its amount is contingent, by contract or otherwise, upon the level of attendance at one or more events, broadcast ratings, or other factors indicating the degree of public exposure to one or more events. File a 1040ez online However, the fact that a sponsorship payment is contingent upon an event actually taking place or being broadcast does not, by itself, affect whether a payment qualifies. File a 1040ez online Exception for periodicals. File a 1040ez online   A payment is not a qualified sponsorship payment if it entitles the payer to the use or acknowledgment of the business name, logo, or product lines in the organization's periodical. File a 1040ez online For this purpose, a periodical is any regularly scheduled and printed material (for example, a monthly journal) published by or on behalf of the organization. File a 1040ez online It does not include material that is related to and primarily distributed in connection with a specific event conducted by the organization (for example, a program or brochure distributed at a sponsored event). File a 1040ez online   The treatment of payments that entitle the payer to the depiction of the payer's name, logo, or products lines in an organization's periodical is determined under the rules that apply to advertising activities. File a 1040ez online See Sales of advertising space under Examples, earlier in this chapter. File a 1040ez online Also see Exploitation of Exempt Activity—Advertising Sales in chapter 4. File a 1040ez online Exception for conventions and trade shows. File a 1040ez online   A payment is not a qualified sponsorship payment if it is made in connection with any qualified convention or trade show activity. File a 1040ez online The exclusion of qualified convention or trade show activities from the definition of unrelated trade or business is explained later under Convention or trade show activity. File a 1040ez online Selling donated merchandise. File a 1040ez online   A trade or business that consists of selling merchandise, substantially all of which the organization received as gifts or contributions, is not an unrelated trade or business. File a 1040ez online For example, a thrift shop operated by a tax-exempt organization that sells donated clothes and books to the general public, with the proceeds going to the exempt organization, is not an unrelated trade or business. File a 1040ez online Employee association sales. File a 1040ez online   The sale of certain items by a local association of employees described in section 501(c)(4), organized before May 17, 1969, is not an unrelated trade or business if the items are sold for the convenience of the association's members at their usual place of employment. File a 1040ez online This exclusion applies only to the sale of work-related clothes and equipment and items normally sold through vending machines, food dispensing facilities, or by snack bars. File a 1040ez online Bingo games. File a 1040ez online   Certain bingo games are not included in the term “unrelated trade or business. File a 1040ez online ” To qualify for this exclusion, the bingo game must meet the following requirements. File a 1040ez online It meets the legal definition of bingo. File a 1040ez online It is legal where it is played. File a 1040ez online It is played in a jurisdiction where bingo games are not regularly conducted by for-profit organizations. File a 1040ez online Legal definition. File a 1040ez online   For a game to meet the legal definition of bingo, wagers must be placed, winners must be determined, and prizes or other property must be distributed in the presence of all persons placing wagers in that game. File a 1040ez online   A wagering game that does not meet the legal definition of bingo does not qualify for the exclusion, regardless of its name. File a 1040ez online For example, “instant bingo,” in which a player buys a pre-packaged bingo card with pull-tabs that the player removes to determine if he or she is a winner, does not qualify. File a 1040ez online Legal where played. File a 1040ez online   This exclusion applies only if bingo is legal under the laws of the jurisdiction where it is conducted. File a 1040ez online The fact that a jurisdiction's law that prohibits bingo is rarely enforced or is widely disregarded does not make the conduct of bingo legal for this purpose. File a 1040ez online No for-profit games where played. File a 1040ez online   This exclusion applies only if for-profit organizations cannot regularly conduct bingo games in any part of the same jurisdiction. File a 1040ez online Jurisdiction is normally the entire state; however, in certain situations, local jurisdiction will control. File a 1040ez online Example. File a 1040ez online Tax-exempt organizations X and Y are organized under the laws of state N, which has a law that permits exempt organizations to conduct bingo games. File a 1040ez online In addition, for-profit organizations are permitted to conduct bingo games in city S, a resort community located in county R. File a 1040ez online Several for-profit organizations conduct nightly games. File a 1040ez online Y conducts weekly bingo games in city S, while X conducts weekly games in county R. File a 1040ez online Since state law confines the for-profit organizations to city S, local jurisdiction controls. File a 1040ez online Y's bingo games conducted in city S are an unrelated trade or business. File a 1040ez online However, X's bingo games conducted in county R outside of city S are not an unrelated trade or business. File a 1040ez online Gambling activities other than bingo. File a 1040ez online   Any game of chance conducted by an exempt organization in North Dakota is not an unrelated trade or business if conducting the game does not violate any state or local law. File a 1040ez online Pole rentals. File a 1040ez online   The term unrelated trade or business does not include qualified pole rentals by a mutual or cooperative telephone or electric company described in section 501(c)(12). File a 1040ez online A qualified pole rental is the rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that the company uses in providing telephone or electric services to its members, and According to the rental, to support one or more wires (in addition to the wires described in 1 ) for use in connection with the transmission by wire of electricity or of telephone or other communications. File a 1040ez online For this purpose, the term rental includes any sale of the right to use the pole (or other structure). File a 1040ez online Distribution of low cost articles. File a 1040ez online   The term unrelated trade or business does not include activities relating to the distribution of low cost articles incidental to soliciting charitable contributions. File a 1040ez online This applies to organizations described in section 501 that are eligible to receive charitable contributions. File a 1040ez online   A distribution is considered incidental to the solicitation of a charitable contribution if: The recipient did not request the distribution, The distribution is made without the express consent of the recipient, and The article is accompanied by a request for a charitable contribution to the organization and a statement that the recipient may keep the low cost article regardless of whether a contribution is made. File a 1040ez online   An article is considered low cost if the cost of an item (or the aggregate costs if more than one item) distributed to a single recipient in a tax year is not more than $5, indexed annually for inflation. File a 1040ez online The maximum cost of a low cost article is $9. File a 1040ez online 70 for 2011. File a 1040ez online The cost of an article is the cost to the organization that distributes the item or on whose behalf it is distributed. File a 1040ez online Exchange or rental of member lists. File a 1040ez online   The exchange or rental of member or donor lists between organizations described in section 501 that are eligible to receive charitable contributions is not included in the term unrelated trade or business. File a 1040ez online Hospital services. File a 1040ez online   The providing of certain services at or below cost by an exempt hospital to other exempt hospitals that have facilities for 100 or fewer inpatients is not an unrelated trade or business. File a 1040ez online This exclusion applies only to services described in section 501(e)(1)(A). File a 1040ez online Public entertainment activity. File a 1040ez online   An unrelated trade or business does not include a qualified public entertainment activity. File a 1040ez online A public entertainment activity is one traditionally conducted at a fair or exposition promoting agriculture and education, including any activity whose purpose is designed to attract the public to fairs or expositions or to promote the breeding of animals or the development of products or equipment. File a 1040ez online   A qualified public entertainment activity is one conducted by a qualifying organization: In conjunction with an international, national, state, regional, or local fair or exposition; In accordance with state law that permits the activity to be operated or conducted solely by such an organization or by an agency, instrumentality, or political subdivision of the state; or In accordance with state law that permits an organization to be granted a license to conduct an activity for not more than 20 days on paying the state a lower percentage of the revenue from the activity than the state charges nonqualifying organizations that hold similar activities. File a 1040ez online   For these purposes, a qualifying organization is an organization described in section 501(c)(3), 501(c)(4), or 501(c)(5) that regularly conducts an agricultural and educational fair or exposition as one of its substantial exempt purposes. File a 1040ez online Its conducting qualified public entertainment activities will not affect determination of its exempt status. File a 1040ez online Convention or trade show activity. File a 1040ez online   An unrelated trade or business does not include qualified convention or trade show activities conducted at a convention, annual meeting, or trade show. File a 1040ez online   A qualified convention or trade show activity is any activity of a kind traditionally conducted by a qualifying organization in conjunction with an international, national, state, regional, or local convention, annual meeting, or show if: One of the purposes of the organization in sponsoring the activity is promoting and stimulating interest in, and demand for, the products and services of that industry or educating the persons in attendance regarding new products and services or new rules and regulations affecting the industry; and The show is designed to achieve its purpose through the character of the exhibits and the extent of the industry products that are displayed. File a 1040ez online   For these purposes, a qualifying organization is one described in section 501(c)(3), 501(c)(4), 501(c)(5), or 501(c)(6). File a 1040ez online The organization must regularly conduct, as one of its substantial exempt purposes, a qualified convention or trade show activity. File a 1040ez online   The rental of display space to exhibitors (including exhibitors who are suppliers) at a qualified convention or trade show is not an unrelated trade or business even if the exhibitors who rent the space are permitted to sell or solicit orders. File a 1040ez online For this purpose, a supplier's exhibit is one in which the exhibitor displays goods or services that are supplied to, rather than by, members of the qualifying organization in the conduct of these members' own trades or businesses. File a 1040ez online    Certain Internet activities conducted by a trade association described in section 501(c)(6) will be considered qualified convention and trade show activity if conducted on a special supplementary section of the association's website in conjunction with a trade show conducted by the association. File a 1040ez online The trade show itself must be a qualified convention and trade show activity. File a 1040ez online The supplementary section of the website must be ancillary to, and serve to augment and enhance, the trade show, as when it makes available the same information available at the trade show and is available only during a time period that coincides with the time period that the trade show is in operation. File a 1040ez online Conversely, Internet activities that are not conducted in conjunction with a qualified convention and trade show activity and that do not augment and enhance the trade show cannot themselves be qualified convention and trade show activity. File a 1040ez online Prev  Up  Next   Home   More Online Publications