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H&r Block Free Online Tax Return

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H&r Block Free Online Tax Return

H&r block free online tax return Publication 596 - Introductory Material Table of Contents Future Developments What is the EIC? Can I Claim the EIC? Do I Need This Publication? Do I Have To Have A Child To Qualify For The EIC? How Do I Figure the Amount of EIC? How Can I Quickly Locate Specific information? Is There Help Online? What's New for 2013 Reminders Future Developments For the latest information about developments related to Publication 596, such as legislation enacted after it was published, go to www. H&r block free online tax return irs. H&r block free online tax return gov/pub596. H&r block free online tax return What is the EIC? The earned income credit (EIC) is a tax credit for certain people who work and have earned income under $51,567. H&r block free online tax return A tax credit usually means more money in your pocket. H&r block free online tax return It reduces the amount of tax you owe. H&r block free online tax return The EIC may also give you a refund. H&r block free online tax return Can I Claim the EIC? To claim the EIC, you must meet certain rules. H&r block free online tax return These rules are summarized in Table 1. H&r block free online tax return Table 1. H&r block free online tax return Earned Income Credit in a Nutshell First, you must meet all the rules in this column. H&r block free online tax return Second, you must meet all the rules in one of these columns, whichever applies. H&r block free online tax return Third, you must meet the rule in this column. H&r block free online tax return Chapter 1. H&r block free online tax return  Rules for Everyone Chapter 2. H&r block free online tax return  Rules If You Have a Qualifying Child Chapter 3. H&r block free online tax return  Rules If You Do Not Have a Qualifying Child Chapter 4. H&r block free online tax return  Figuring and Claiming the EIC 1. H&r block free online tax return Your adjusted gross income (AGI) must be less than:  • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. H&r block free online tax return 2. H&r block free online tax return You must have a valid social security number. H&r block free online tax return   3. H&r block free online tax return Your filing status cannot be Married filing separately. H&r block free online tax return   4. H&r block free online tax return You must be a U. H&r block free online tax return S. H&r block free online tax return citizen or resident alien all year. H&r block free online tax return   5. H&r block free online tax return You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). H&r block free online tax return   6. H&r block free online tax return Your investment income must be $3,300 or less. H&r block free online tax return    7. H&r block free online tax return You must have earned income. H&r block free online tax return 8. H&r block free online tax return Your child must meet the relationship, age, residency, and joint return tests. H&r block free online tax return   9. H&r block free online tax return Your qualifying child cannot be used by more than one person to claim the EIC. H&r block free online tax return   10. H&r block free online tax return You cannot be a qualifying child of another person. H&r block free online tax return 11. H&r block free online tax return You must be at least age 25 but under age 65. H&r block free online tax return    12. H&r block free online tax return You cannot be the dependent of another person. H&r block free online tax return   13. H&r block free online tax return You cannot be a qualifying child of another person. H&r block free online tax return   14. H&r block free online tax return You must have lived in the United States more than half of the year. H&r block free online tax return 15. H&r block free online tax return Your earned income must be less than:  • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or  • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. H&r block free online tax return Do I Need This Publication? Certain people who file Form 1040 must use Worksheet 1 in this publication, instead of Step 2 in their Form 1040 instructions, when they are checking whether they can take the EIC. H&r block free online tax return You are one of those people if any of the following statements are true for 2013. H&r block free online tax return You are filing Schedule E (Form 1040). H&r block free online tax return You are reporting income from the rental of personal property not used in a trade or business. H&r block free online tax return You are reporting income on Form 1040, line 21, from Form 8814 (relating to election to report child's interest and dividends). H&r block free online tax return You are reporting an amount on Form 1040, line 13, that includes an amount from Form 4797. H&r block free online tax return If none of the statements above apply to you, your tax form instructions have all the information you need to find out if you can claim the EIC and to figure the amount of your EIC. H&r block free online tax return You do not need this publication. H&r block free online tax return But you can read it to find out whether you can take the EIC and to learn more about the EIC. H&r block free online tax return Do I Have To Have A Child To Qualify For The EIC? No, you can qualify for the EIC without a qualifying child if you are at least age 25 but under age 65 and your earned income is less than $14,340 ($19,680 if married filing jointly). H&r block free online tax return See chapter 3. H&r block free online tax return How Do I Figure the Amount of EIC? If you can claim the EIC, you can either have the IRS figure the amount of your credit, or you can figure it yourself. H&r block free online tax return To figure it yourself, you can complete a worksheet in the instructions for the form you file. H&r block free online tax return To find out how to have the IRS figure it for you, see chapter 4. H&r block free online tax return How Can I Quickly Locate Specific information? You can use the index to look up specific information. H&r block free online tax return In most cases, index entries will point you to headings, tables, or a worksheet. H&r block free online tax return Is There Help Online? Yes. H&r block free online tax return You can use the EITC Assistant at www. H&r block free online tax return irs. H&r block free online tax return gov/eitc to find out if you may be eligible for the credit. H&r block free online tax return The EITC Assistant is available in English and Spanish. H&r block free online tax return What's New for 2013 Earned income amount is more. H&r block free online tax return The maximum amount of income you can earn and still get the credit has increased. H&r block free online tax return You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). H&r block free online tax return Your adjusted gross income also must be less than the amount in the above list that applies to you. H&r block free online tax return For details, see Rules 1 and 15. H&r block free online tax return Investment income amount is more. H&r block free online tax return The maximum amount of investment income you can have and still get the credit has increased to $3,300. H&r block free online tax return See Rule 6—Your Investment Income Must Be $3,300 or Less . H&r block free online tax return Reminders Increased EIC on certain joint returns. H&r block free online tax return . H&r block free online tax return  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. H&r block free online tax return As a result, the EIC table has different columns for married persons filing jointly than for everyone else. H&r block free online tax return When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. H&r block free online tax return Earned income credit has no effect on certain welfare benefits. H&r block free online tax return  Any refund you receive because of the EIC cannot be counted as income when determining whether you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. H&r block free online tax return These programs include the following. H&r block free online tax return Temporary Assistance for Needy Families (TANF). H&r block free online tax return Medicaid. H&r block free online tax return Supplemental security income (SSI). H&r block free online tax return Supplemental Nutrition Assistance Program (food stamps). H&r block free online tax return Low-income housing. H&r block free online tax return In addition, when determining eligibility, the refund cannot be counted as a resource for at least 12 months after you receive it. H&r block free online tax return Check with your local benefit coordinator to find out if your refund will affect your benefits. H&r block free online tax return Do not overlook your state credit. H&r block free online tax return  If you can claim the EIC on your federal income tax return, you may be able to take a similar credit on your state or local income tax return. H&r block free online tax return For a list of states that offer a state EIC, go to www. H&r block free online tax return irs. H&r block free online tax return gov/eitc. H&r block free online tax return EIC questioned by IRS. H&r block free online tax return  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. H&r block free online tax return We will tell you what documents to send us. H&r block free online tax return These may include: birth certificates, school records, etc. H&r block free online tax return The process of establishing your eligibility will delay your refund. H&r block free online tax return Spanish version of Publication 596. H&r block free online tax return  You can order Publicación 596SP, Crédito por Ingreso del Trabajo, from the IRS. H&r block free online tax return It is a Spanish translation of Publication 596. H&r block free online tax return See How To Get Tax Help to find out how to order this and other IRS forms and publications. H&r block free online tax return Photographs of missing children. H&r block free online tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block free online tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block free online tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block free online tax return Comments and suggestions. H&r block free online tax return  We welcome your comments about this publication and your suggestions for future editions. H&r block free online tax return You can write to us at the following address:  Internal Revenue Service Individual Forms and Publications Branch 1111 Constitution Ave. H&r block free online tax return NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. H&r block free online tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block free online tax return You can send your comments from www. H&r block free online tax return irs. H&r block free online tax return gov/formspubs/. H&r block free online tax return Click on “More Information” and then on “Comment on Tax Forms and Publications. H&r block free online tax return ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block free online tax return Ordering forms and publications. H&r block free online tax return  Visit www. H&r block free online tax return irs. H&r block free online tax return gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block free online tax return  Internal Revenue Service 1201 N. H&r block free online tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block free online tax return  If you have a tax question, check the information available on IRS. H&r block free online tax return gov or call 1-800-829-1040. H&r block free online tax return We cannot answer tax questions sent to either of the above addresses. 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The H&r Block Free Online Tax Return

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