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Taxes 2010 2. Taxes 2010 Filing Requirements and Required Disclosures Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Annual Information ReturnsSupporting Organization Annual Information Return Unrelated Business Income Tax ReturnEstimated tax. Taxes 2010 Employment Tax ReturnsException. Taxes 2010 FUTA tax exception. Taxes 2010 FICA tax exemption election. Taxes 2010 Revoking the election. Taxes 2010 Definitions. Taxes 2010 Effect on employees. Taxes 2010 Political Organization Income Tax ReturnExempt function. Taxes 2010 Political organization taxable income. Taxes 2010 Separate fund. Taxes 2010 Failure to file. Taxes 2010 Failure to pay on time. Taxes 2010 Reporting Requirements for a Political OrganizationForm 8871 Form 8872 Donee Information ReturnCharitable deduction property. Taxes 2010 Publicly traded securities. Taxes 2010 Exceptions. Taxes 2010 Form 8283. Taxes 2010 Information Provided to DonorsDisclosure of Quid Pro Quo Contributions Acknowledgment of Charitable Contributions of $250 or More Acknowledgment of Vehicle Contribution Qualified Intellectual Property Report of Cash Received Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting FormsAnnual Information Return Public Inspection of Exemption Application Political Organization Reporting Forms Required DisclosuresSolicitation of Nondeductible Contributions Sales of Information or Services Available Free From Government Dues Used for Lobbying or Political Activities Prohibited Tax Shelter Transactions Miscellaneous RulesOrganizational Changes and Exempt Status Introduction Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period. Taxes 2010 Topics - This chapter discusses: Annual information returns Unrelated business income tax return Employment tax returns Political organization income tax return Reporting requirements for a political organization Donee information return Information provided to donors Report of cash received Public inspection of exemption applications, annual returns, and political organizations reporting forms Required disclosures Miscellaneous rules Useful Items - You may want to see: Publication 15 Circular E, Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 598 Tax on Unrelated Business Income of Exempt Organizations Form (and Instructions) 941 Employer's Quarterly Federal Tax Return 990 Return of Organization Exempt From Income Tax 990-EZ Short Form Return of Organization Exempt From Income Tax Schedule A (Form 990 or 990-EZ) Public Charity Status and Public Support Schedule B (Form 990, 990-EZ, or 990-PF) Schedule of Contributors Schedule C (Form 990 or 990-EZ) Political Campaign and Lobbying Activities Schedule D (Form 990) Supplemental Financial Statements Schedule E (Form 990 or 990-EZ) Schools Schedule F (Form 990) Statement of Activities Outside the United States Schedule G (Form 990 or 990-EZ) Supplemental Information Regarding Fundraising or Gaming Activities Schedule H (Form 990) Hospitals Schedule I (Form 990) Grants and Other Assistance to Organizations, Governments, and Individuals in the United States Schedule J (Form 990) Compensation Information Schedule K (Form 990) Supplemental Information on Tax-Exempt Bonds Schedule L (Form 990 or 990-EZ) Transactions With Interested Persons Schedule M (Form 990) Noncash Contributions Schedule N (Form 990 or 990-EZ) Liquidation, Termination, Dissolution, or Significant Disposition of Assets Schedule O (Form 990 or 990-EZ) Supplemental Information to Form 990 Schedule R (Form 990) Related Organizations and Unrelated Partnerships 990-PF Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation 990-BL Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons 990-T Exempt Organization Business Income Tax Return 990-W Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations 1120-POL U. Taxes 2010 S. Taxes 2010 Income Tax Return for Certain Political Organizations 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code 5768 Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation 6069 Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction 7004 Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes 8282 Donee Information Return 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business 8453-X Political Organization Declaration for Electronic Filing of Notice of Section 527 Status 8822-B Change of Address-Business 8868 Application for Extension of Time to File an Exempt Organization Return 8870 Information Return for Transfers Associated with Certain Personal Benefits Contracts 8871 Political Organization Notice of Section 527 Status 8872 Political Organization Report of Contributions and Expenditures 8886-T Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction 8899 Notice of Income from Donated Intellectual Property 8940 Request for Miscellaneous Determination See chapter 6 for information about getting these publications and forms. Taxes 2010 Annual Information Returns Every organization exempt from federal income tax under section 501(a) must file an Annual Exempt Organization Return except: A church, an interchurch organization of local units of a church, a convention or association of churches, An integrated auxiliary of a church, A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs, A school below college level affiliated with a church or operated by a religious order, Church-affiliated mission societies if more than half of their activities are conducted in, or are directed at persons in, foreign countries, An exclusively religious activity of any religious order, A state institution, the income of which is excluded from gross income under section 115, A corporation described in section 501(c)(1) that is organized under an Act of Congress, an instrumentality of the United States, and is exempt from Federal income taxes, A stock bonus, pension, or profit-sharing trust that qualifies under section 401 (required to file Form 5500, Annual Return/Report of Employee Benefit Plan), A religious or apostolic organization described in section 501(d) (required to file Form 1065, U. Taxes 2010 S. Taxes 2010 Return of Partnership Income), A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C. Taxes 2010 B. Taxes 2010 418, www. Taxes 2010 irs. Taxes 2010 gov/pub/irs-tege/rp1995-48. Taxes 2010 pdf, A private foundation described in section 501(c)(3) and exempt under section 501(a) (required to file Form 990-PF, Return of Private Foundation), A political organization that is a state or local committee of a political party, a political committee of a state or local candidate, a caucus or association of state or local officials, or required to report under the Federal Election Campaign Act of 1971 as a political committee, An exempt organization (other than a private foundation) that normally has annual gross receipts of $50,000 or less, or A foreign organization, or an organization located in a U. Taxes 2010 S. Taxes 2010 possession, that normally has annual gross receipts from sources within the United States of $50,000 or less. Taxes 2010 Supporting Organization Annual Information Return For tax years ending after August 17, 2006, all section 509(a)(3) supporting organizations are required to file Form 990 or 990-EZ with the IRS regardless of the organization's gross receipts, unless it qualifies as one of the following: An integrated auxiliary of a church; The exclusively religious activities of a religious order; or An organization, the gross receipts of which are normally not more than $5,000, that supports a section 509(a)(3) religious order. Taxes 2010 If the organization is described in item (3) above, then it must submit Form 990-N (e-Postcard) unless it voluntarily files Form 990 or 990-EZ. Taxes 2010 On its annual information return, at Part I, Schedule A (Form 990 or 990-EZ) a supporting organization must: List the section 509(a)(3) organizations to which it provides support, Indicate whether it is a Type I, Type II, or Type III supporting organization, and Certify that the organization is not controlled directly or indirectly by disqualified persons (other than by foundation managers and other than one or more publicly supported organizations). Taxes 2010 Annual Electronic Filing Requirement for Small Tax-Exempt Organizations Small tax-exempt organizations with annual gross receipts normally $50,000 or less must submit Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, with the IRS each year, if they choose not to file a Form 990 or 990-EZ. Taxes 2010 Form 990-N requires the following information: The organization's legal name, and mailing address; Any name under which it operates and does business; Its Internet website address (if any); Its taxpayer identification number; The name and address of a principal officer; Organization's annual tax period; Verification that the organization's annual gross receipts are normally $50,000 or less; and Notification if the organization has terminated. Taxes 2010 Form 990-N is due by the 15th day of the fifth month after the close of the tax year. Taxes 2010 For tax years beginning after December 31, 2006, any organization that fails to meet its annual reporting requirement for 3 consecutive years will automatically lose its tax-exempt status. Taxes 2010 To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization. Taxes 2010 Exceptions. Taxes 2010 This filing requirement does not apply to: Churches, their integrated auxiliaries, and conventions or associations of churches; Organizations that are included in a group return; Private foundations required to file Form 990-PF; and Section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ. Taxes 2010 Forms 990 and 990-EZ Exempt organizations, other than private foundations, must file their annual information returns on Form 990 or 990-EZ, unless excepted from filing or allowed to submit Form 990-N, described earlier. Taxes 2010 Generally, political organizations with gross receipts of $25,000 ($100,000 for a qualified state or local political organization (QSLPO)) or more for the tax year are required to file Form 990 or 990-EZ unless specifically excepted from filing the annual return. Taxes 2010 The following political organizations are not required to file Form 990 or Form 990-EZ. Taxes 2010 A state or local committee of a political party. Taxes 2010 A political committee of a state or local candidate. Taxes 2010 A caucus or association of state or local officials. Taxes 2010 A political organization that is required to report as a political committee under the Federal Election Campaign Act. Taxes 2010 A 501(c) organization that has expenditures for influencing or attempting to influence the selection, nomination, election, or appointment of any individual for a federal, state, or local public office. Taxes 2010 Form 990-EZ. Taxes 2010 This is a shortened version of Form 990. Taxes 2010 It is designed for use by small exempt organizations and nonexempt charitable trusts. Taxes 2010 Beginning in tax year 2010, an organization can file either Form 990 or 990-EZ if it meets the following: Its gross receipts during the year are less than $200,000. Taxes 2010 Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year are less than $500,000. Taxes 2010 If your organization does not meet either of these conditions, you cannot file Form 990-EZ. Taxes 2010 Instead you must file Form 990. Taxes 2010 Group return. Taxes 2010 A group return on Form 990 may be filed by a central, parent, or like organization for two or more local organizations, none of which is a private foundation. Taxes 2010 This return is in addition to the central organization's separate annual return if it must file a return. Taxes 2010 It cannot be included in the group return. Taxes 2010 See the instructions for Form 990 for the conditions under which this procedure may be used. Taxes 2010 In any year that an organization is properly included as a subordinate organization on a group return, it should not file its own Form 990. Taxes 2010 Schedule A (Form 990 or 990-EZ). Taxes 2010 Organizations, other than private foundations, that are described in section 501(c)(3) and that are otherwise required to file Form 990 or 990-EZ must also complete Schedule A of that form. Taxes 2010 Schedule B (Form 990, Form 990-EZ, or 990-PF). Taxes 2010 Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors. Taxes 2010 Schedule O (Form 990). Taxes 2010 Organizations that file Form 990 must use this schedule to provide required additional information or if additional space is needed. Taxes 2010 Other schedules may be required to be filed with Form 990 or 990-EZ. Taxes 2010 See the instructions for Form 990 or the instructions for Form 990-EZ for more information. Taxes 2010 Report significant new or changed program services and changes to organizational documents. Taxes 2010 An organization should report new significant program services or significant changes in how it conducts program services, and significant changes to its organizational documents, on its Form 990 rather than in a letter to EO Determinations. Taxes 2010 EO Determinations no longer issues letters confirming the tax-exempt status of organizations that report new services or significant changes, or changes to organizational documents. Taxes 2010 See Miscellaneous Rules, Organization Changes and Exempt Status, later. Taxes 2010 Form 990-PF All private foundations exempt under section 501(c)(3) must file Form 990-PF. Taxes 2010 These organizations are discussed in chapter 3. Taxes 2010 Electronic Filing You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically. Taxes 2010 If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. Taxes 2010 See Regulations section 301. Taxes 2010 6033-4 for more information. Taxes 2010 The IRS may waive the requirement to file electronically in cases of undue hardship. Taxes 2010 For information on filing a waiver, see Notice 2010-13, 2010-4 I. Taxes 2010 R. Taxes 2010 B. Taxes 2010 327, available at www. Taxes 2010 irs. Taxes 2010 gov/ir/2010-04_IRSB/ar14. Taxes 2010 html. Taxes 2010 Form 990. Taxes 2010 An organization is required to file Form 990 electronically if it files at least 250 returns during the calendar year and has total assets of $10 million or more at the end of the tax year. Taxes 2010 Form 990-PF. Taxes 2010 An organization is required to file Form 990-PF electronically if it files at least 250 returns during the calendar year. Taxes 2010 Due Date Forms 990, 990-EZ, or 990-PF must be filed by the 15th day of the fifth month after the end of your organization's accounting period. Taxes 2010 Thus, for a calendar year taxpayer, Forms 990, 990-EZ, or 990-PF is due May 15 of the following year. Taxes 2010 Extension of time to file. Taxes 2010 Use Form 8868 to request an automatic 3-month extension of time to file Forms 990, 990-EZ, or 990-PF and also to apply for an additional (not automatic) 3-month extension if needed. Taxes 2010 Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. Taxes 2010 For more information, see Form 8868 and its instructions. Taxes 2010 When filing Form 8868 for an automatic 3-month extension, neither a signature, nor an explanation is required. Taxes 2010 However, when filing Form 8868 for an additional 3-month extension, both a signature and an explanation are required. Taxes 2010 Application for exemption pending. Taxes 2010 An organization that claims to be exempt under section 501(a) but has not established its exempt status by the due date for filing an information return must complete and file Form 990, 990-EZ, 990–N or 990-PF (if it considers itself a private foundation), unless the organization is exempt from Form 990-series filing requirements. Taxes 2010 If the organization's application is pending with the IRS, it must so indicate on Forms 990, 990-EZ, or 990-PF (whichever applies) by checking the application pending block at the top of page 1 of the return. Taxes 2010 For more information on the filing requirements, see the Instructions for Forms 990, 990-EZ, and 990-PF. Taxes 2010 State reporting requirements. Taxes 2010 Copies of Forms 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. Taxes 2010 See the instructions for those forms. Taxes 2010 Form 8870. Taxes 2010 Organizations that filed a Form 990, 990-EZ, or 990-PF, and paid premiums or received transfers on certain life insurance, annuity, and endowment contracts (personal benefit contracts), must file Form 8870. Taxes 2010 For more information, see Form 8870 and the instructions for that form. Taxes 2010 Automatic Revocation If the organization fails to file a Form 990, 990-EZ, or 990-PF, or fails to submit a Form 990-N, as required, for 3 consecutive years, it will automatically lose its tax-exempt status by operation of law. Taxes 2010 The list of organizations whose tax-exempt status has been automatically revoked is available on IRS. Taxes 2010 gov. Taxes 2010 This list (Auto-Revocation List) may be viewed and searched on Exempt Organizations Select Check. Taxes 2010 The Auto-Revocation List includes each organization's name, Employer Identification Number (EIN) and last known address. Taxes 2010 It also includes the effective date of the automatic revocation and the date it was posted to the list. Taxes 2010 The IRS updates the list monthly to include additional organizations that lose their tax-exempt status. Taxes 2010 Tax Effect of Loss of Tax-Exempt Status If your organization’s tax-exempt status is automatically revoked, you may be required to file one of the following federal income tax returns and pay any applicable income taxes: Form 1120, U. Taxes 2010 S. Taxes 2010 Corporation Income Tax Return, due by the 15th day of the 3rd month after the end of your organization’s tax year, or Form 1041, U. Taxes 2010 S. Taxes 2010 Income Tax Return for Estates and Trusts, due by the 15th day of the 4th month after the end of your organization’s tax year. Taxes 2010 In addition, a section 501(c)(3) organization that loses its tax-exempt status cannot receive tax-deductible contributions and will not be identified in the IRS Business Master File extract as eligible to received tax-deductible contributions, or be included in Exempt Organizations Select Check (Pub 78 database). Taxes 2010 An organization whose exemption was automatically revoked must apply for tax exemption in order to regain its tax exemption (even if it was not originally required to apply). Taxes 2010 In some situations, an organization may be able to obtain exemption retroactive to its date of revocation. Taxes 2010 For more information about automatic revocation, go to IRS. Taxes 2010 gov and select Charities & Non-Profits and then select Revoked? Reinstated? Learn More. Taxes 2010 Penalties Penalties for failure to file. Taxes 2010 Generally, an exempt organization that fails to file a required return must pay a penalty of $20 a day for each day the failure continues. Taxes 2010 The same penalty will apply if the organization does not give all the information required on the return or does not give the correct information. Taxes 2010 Maximum penalty. Taxes 2010 The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year. Taxes 2010 Organization with gross receipts over $1 million. Taxes 2010 For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000. Taxes 2010 Managers. Taxes 2010 If the organization is subject to this penalty, the IRS may specify a date by which the return or correct information must be supplied by the organization. Taxes 2010 Failure to comply with this demand will result in a penalty imposed upon the manager of the organization, or upon any other person responsible for filing a correct return. Taxes 2010 The penalty is $10 a day for each day that a return is not filed after the period given for filing. Taxes 2010 The maximum penalty imposed on all persons with respect to any one return is $5,000. Taxes 2010 Exception for reasonable cause. Taxes 2010 No penalty will be imposed if reasonable cause for failure to file timely can be shown. Taxes 2010 Unrelated Business Income Tax Return Even though your organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. Taxes 2010 Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. Taxes 2010 If your organization has $1,000 or more of unrelated business income, you must file Form 990-T in addition to your required annual information return. Taxes 2010 Estimated tax. Taxes 2010 Quarterly estimated tax payments are due if your organization expects to owe $500 or more in tax including unrelated business income. Taxes 2010 Use Form 990-W to figure your organization's estimated tax payments. Taxes 2010 Travel tour programs. Taxes 2010 Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose to which tax exemption was granted to the organization. Taxes 2010 Whether travel tour activities conducted by an organization are substantially related to the organization's tax exempt purpose is determined by looking at all the relevant facts and circumstances, including, but not limited to, how a travel tour is developed, promoted, and operated. Taxes 2010 Example. Taxes 2010 ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). Taxes 2010 As part of its activities, ABC operates a travel tour program. Taxes 2010 The program is open to all current members of ABC and their guests. Taxes 2010 ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. Taxes 2010 Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. Taxes 2010 XYZ pays ABC a per person fee for each participant. Taxes 2010 Although the literature advertising the tours encourages ABC members to continue their lifelong learning by joining the tours, and a faculty member of ABC's related university frequently joins the tour as a guest of the alumni association, none of the tours include any scheduled instruction or curriculum related to the destinations being visited. Taxes 2010 The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. Taxes 2010 Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. Taxes 2010 Therefore, ABC's tour program is an unrelated trade or business. Taxes 2010 For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T. Taxes 2010 Employment Tax Returns Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements, or if the taxes clearly do not apply. Taxes 2010 For more information, obtain a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941. Taxes 2010 Small Business Health Care Tax Credit. Taxes 2010 If your small tax-exempt organization provides health care coverage for your workers you may qualify for the small business health care tax credit. Taxes 2010 Go to IRS. Taxes 2010 gov and select Affordable Care Act Tax Provisions for more details. Taxes 2010 See Small Business Health Care Tax Credit at www. Taxes 2010 irs. Taxes 2010 gov/newsroom/article/0,,id=223666,00. Taxes 2010 html. Taxes 2010 Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans. Taxes 2010 The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC). Taxes 2010 The Act added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer's share of social security tax. Taxes 2010 The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013. Taxes 2010 This tax credit was extended through December 31, 2013, under the American Taxpayer Relief Act, passed on January 1, 2013. Taxes 2010 The credit can be as high as $6,240 for qualified tax-exempt organizations. Taxes 2010 The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. Taxes 2010 The amount of the credit for qualified tax-exempt organizations may not exceed the organization's employer social security tax for the period for which the credit is claimed. Taxes 2010 All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. Taxes 2010 The process for certifying veterans for this credit is the same for all employers. Taxes 2010 For more information, see Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit and the instructions to Form 8850. Taxes 2010 Notice 2012-13, 2012-9 I. Taxes 2010 R. Taxes 2010 B. Taxes 2010 421, also provides additional guidance on submission Form 8850. Taxes 2010 Organizations described in section 501(c) and exempt from taxation under section 501(a) may claim the credit for qualified veterans who begin work on or after Nov. Taxes 2010 22, 2011, and before January 1, 2013. Taxes 2010 After the required certification is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, Form 5884-C. Taxes 2010 File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. Taxes 2010 It is recommended that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit as the forms are processed separately. Taxes 2010 In addition to Form 5884-C and its instructions, tax-exempt employers should see Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit. Taxes 2010 Trust fund recovery penalty. Taxes 2010 If any person required to collect, truthfully account for, and pay over any of these taxes willfully fails to satisfy any of these requirements or willfully tries in any way to evade or defeat any of them, that person will be subject to a penalty. Taxes 2010 The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. Taxes 2010 The term person includes: An officer or employee of a corporation, or A member or employee of a partnership. Taxes 2010 Exception. Taxes 2010 The penalty is not imposed on any unpaid volunteer director or member of a board of trustees of an exempt organization if the unpaid volunteer serves solely in an honorary capacity, does not participate in the day-to-day or financial operations of the organization, and does not have actual knowledge of the failure on which the penalty is imposed. Taxes 2010 This exception does not apply if it results in no one being liable for the penalty. Taxes 2010 FICA and FUTA tax exceptions. Taxes 2010 Payments for services performed by a minister of a church in the exercise of the ministry, or a member of a religious order performing duties required by the order, are generally not subject to FICA or FUTA taxes. Taxes 2010 FUTA tax exception. Taxes 2010 Payments for services performed by an employee of a religious, charitable, educational, or other organization described in section 501(c)(3) that are generally subject to FICA taxes if the payments are $100 or more for the year, are not subject to FUTA taxes. Taxes 2010 FICA tax exemption election. Taxes 2010 Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274. Taxes 2010 To elect the exemption, Form 8274 must be filed before the first date on which a quarterly employment tax return would otherwise be due from the electing organization. Taxes 2010 The organization can make the election only if it is opposed for religious reasons to the payment of FICA taxes. Taxes 2010 The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business. Taxes 2010 Revoking the election. Taxes 2010 The election can be revoked by the IRS if the organization fails to file Form W-2, Wage and Tax Statement, for 2 years and fails to furnish certain information upon request by the IRS. Taxes 2010 Such revocation will apply retroactively to the beginning of the 2-year period. Taxes 2010 Definitions. Taxes 2010 For purposes of this election, the term church means a church, a convention or association of churches, or an elementary or secondary school that is controlled, operated, or principally supported by a church or by a convention or association of churches. Taxes 2010 The term qualified church-controlled organization means any church-controlled section 501(c)(3) tax-exempt organization, other than an organization that both: Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that are not unrelated trades or businesses. Taxes 2010 Effect on employees. Taxes 2010 If a church or qualified church-controlled organization has made an election, payment for services performed for that church or organization, other than in an unrelated trade or business, will not be subject to FICA taxes. Taxes 2010 However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. Taxes 2010 The tax applies to income of $108. Taxes 2010 28 or more for the tax year from that church or organization, and no deductions for trade or business expenses are allowed against this self-employment income. Taxes 2010 Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return. Taxes 2010 Political Organization Income Tax Return Generally, a political organization is treated as an organization exempt from tax. Taxes 2010 Certain political organizations, however, must file an annual income tax return, Form 1120-POL, U. Taxes 2010 S. Taxes 2010 Income Tax Return for Certain Political Organizations, for any year they have political organization taxable income in excess of the $100 specific deduction allowed under section 527. Taxes 2010 A political organization that has $25,000 ($100,000 for a qualified state or local political organization) or more in gross receipts for the tax year must file Form 990 or Form 990-EZ (and Schedule B of the form), unless excepted. Taxes 2010 See Forms 990 and 990-EZ , earlier. Taxes 2010 Political organization. Taxes 2010 A political organization is a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function. Taxes 2010 Exempt function. Taxes 2010 An exempt function means influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, local public office or office in a political organization, or the election of the Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. Taxes 2010 It also includes certain office expenses of a holder of public office or an office in a political organization. Taxes 2010 Certain political organizations are required to notify the IRS that they are section 527 organizations. Taxes 2010 These organizations must use Form 8871. Taxes 2010 Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. Taxes 2010 For a discussion on these forms, see Reporting Requirements for a Political Organization, later. Taxes 2010 Political organization taxable income. Taxes 2010 Political organization taxable income is the excess of: Gross income for the tax year (excluding exempt function income) minus Deductions directly connected with the earning of gross income. Taxes 2010 To figure taxable income, allow for a $100 specific deduction, but do not allow for the net operating loss deduction, the dividends-received deduction, and other special deductions for corporations. Taxes 2010 Exempt organization not a political organization. Taxes 2010 An organization exempt under section 501(c) that spends any amount for an exempt function must file Form 1120-POL for any year which it has political taxable income. Taxes 2010 These organizations must include in gross income the lesser of: The total amount of its exempt function expenditures, or The organization's net investment income. Taxes 2010 Separate fund. Taxes 2010 A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. Taxes 2010 The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization. Taxes 2010 Section 501(c)(3) organizations are precluded from, and may suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office. Taxes 2010 Due date. Taxes 2010 Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. Taxes 2010 Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. Taxes 2010 If any due date falls on a Saturday, Sunday, or legal holiday, the organization can file the return on the next business day. Taxes 2010 Form 1120-POL is not required of an exempt organization that makes expenditures for political purposes if its gross income does not exceed its directly connected deductions by more than $100 for the tax year. Taxes 2010 Extension of time to file. Taxes 2010 Use Form 7004 to request an automatic 6-month extension of time to file Form 1120-POL. Taxes 2010 The extension will be granted if you complete Form 7004 properly, make a proper estimate of the tax (if applicable), file Form 1120-POL by the due date, and pay any tax due. Taxes 2010 Failure to file. Taxes 2010 A political organization that fails to file Form 1120-POL is subject to a penalty equal to 5% of the tax due for each month (or partial month) the return is late up to a maximum of 25% of the tax due, unless the organization shows the failure was due to reasonable cause. Taxes 2010 For more information about filing Form 1120-POL, refer to the instructions accompanying the form. Taxes 2010 Failure to pay on time. Taxes 2010 An organization that does not pay the tax when due generally may have to pay a penalty of 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. Taxes 2010 The penalty will not be imposed if the organization can show that the failure to pay on time was due to reasonable cause. Taxes 2010 Reporting Requirements for a Political Organization Certain political organizations are required to notify the IRS that the organization is to be treated as a section 527 political organization. Taxes 2010 The organization is also required to periodically report certain contributions received and expenditures made by the organization. Taxes 2010 To notify the IRS of section 527 treatment, an organization must file Form 8871. Taxes 2010 To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872. Taxes 2010 Form 8871 A political organization must electronically file Form 8871 to notify the IRS that it is to be treated as a section 527 organization. Taxes 2010 However, an organization is not required to file Form 8871 if: It reasonably expects its annual gross receipts to always be less than $25,000. Taxes 2010 It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U. Taxes 2010 S. Taxes 2010 C. Taxes 2010 431(4)). Taxes 2010 It is a state or local candidate committee. Taxes 2010 It is a state or local committee of a political party. Taxes 2010 It is a section 501(c) organization that has made an “exempt function expenditure. Taxes 2010 ” All other political organizations are required to file Form 8871. Taxes 2010 An organization must provide on Form 8871: Its name and address (including any business address, if different) and its electronic mailing address; Its purpose; The names and addresses of its officers, highly compensated employees, contact person, custodian of records, and members of its board of directors; The name and address of, and relationship to, any related entities (within the meaning of section 168(h)(4)); and Whether it intends to claim an exemption from filing Form 8872, Form 990, or Form 990-EZ. Taxes 2010 Employer identification number. Taxes 2010 If your organization needs an EIN, you can apply for one: Online—Click on the Employer ID Numbers (EINs) link at www. Taxes 2010 IRS. Taxes 2010 gov/businesses/small. Taxes 2010 By telephone at 1-800-829-4933 from 7:00 a. Taxes 2010 m. Taxes 2010 to 10:00 p. Taxes 2010 m. Taxes 2010 in the organization's local time zone. Taxes 2010 By mailing or faxing Form SS-4. Taxes 2010 If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance. Taxes 2010 Due dates. Taxes 2010 The initial Form 8871 must be filed within 24 hours of the date on which the organization was established. Taxes 2010 If there is a material change, an amended Form 8871 must be filed within 30 days of the material change. Taxes 2010 When the organization terminates its existence, it must file a final Form 8871 within 30 days of termination. Taxes 2010 If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. Taxes 2010 How to file. Taxes 2010 An organization must file Form 8871 electronically via the IRS Internet website at www. Taxes 2010 IRS. Taxes 2010 gov/polorgs (Keyword: political orgs). Taxes 2010 Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status. Taxes 2010 After electronically submitting Form 8871, the political organization must print, sign, and mail Form 8453-X to the IRS. Taxes 2010 Upon receipt of the Form 8453-X, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872. Taxes 2010 Penalties Failure to file. Taxes 2010 An organization that is required to file Form 8871, but fails to do so on a timely basis, will not be treated as a tax-exempt section 527 organization for any period before the date Form 8871 is filed. Taxes 2010 Also, the taxable income of the organization for that period will include its exempt function income (including contributions received, membership dues, and political fundraising receipts) minus any deductions directly connected with the production of that income. Taxes 2010 Failure to file an amended Form 8871 will cause the organization not to be treated as a tax-exempt section 527 organization. Taxes 2010 If an organization is treated as not being a tax-exempt section 527 organization, the taxable income of the organization will be determined by considering any exempt function income and deductions during the period beginning on the date of the material change and ending on the date that the amended Form 8871 is filed. Taxes 2010 The tax is computed by multiplying the organization's taxable income by the highest corporate tax rate. Taxes 2010 Fraudulent returns. Taxes 2010 Any individual or corporation that willfully delivers or discloses to the IRS any list, return, account, statement or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation) or imprisoned for not more than 1 year or both. Taxes 2010 Waiver of penalties. Taxes 2010 The IRS may waive any additional tax assessed on an organization for failure to file Form 8871 if the failure was due to reasonable cause and not willful neglect. Taxes 2010 Additional information. Taxes 2010 For more information on Form 8871, see the form and its instructions. Taxes 2010 For a discussion on the public inspection requirements for the form, see Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms , later. Taxes 2010 Form 8872 Every tax-exempt section 527 political organization that accepts a contribution or makes an expenditure, for an exempt function during the calendar year, must file Form 8872 except: A political organization that is not required to file Form 8871 (discussed earlier). Taxes 2010 A political organization that is subject to tax on its income because it did not file or amend Form 8871. Taxes 2010 A qualified state or local political organization (QSLPO), discussed below. Taxes 2010 All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872. Taxes 2010 Qualified state or local political organization. Taxes 2010 A state or local political organization may be a QSLPO if: All of its political activities relate solely to state or local public office (or office in a state or local political organization). Taxes 2010 It is subject to a state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS. Taxes 2010 The state agency and the organization make the reports publicly available. Taxes 2010 No federal candidate or office holder: Controls or materially participates in the direction of the organization, Solicits contributions for the organization, or Directs the disbursements of the organization. Taxes 2010 Information required on Form 8872. Taxes 2010 If an organization pays an individual $500 or more for the calendar year, the organization is required to disclose the individual's name, address, occupation, employer, amount of the expense, the date the expense was paid, and the purpose of the expense on Form 8872. Taxes 2010 If an organization receives contributions of $200 or more from one contributor for the calendar year, the organization must disclose the donor's name, address, occupation, employer, and the date the contributions were made. Taxes 2010 For additional information that is required, see Form 8872. Taxes 2010 Due dates. Taxes 2010 The due dates for filing Form 8872 vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election is held, or any other calendar year (a nonelection year). Taxes 2010 If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. Taxes 2010 Election year filing. Taxes 2010 In election years, Form 8872 must be filed on either a quarterly or a monthly basis. Taxes 2010 Both a pre-election report and a post-election report are also required to be filed in an election year. Taxes 2010 An election year is any year in which a regularly scheduled general election for federal office is held (an even-numbered year). Taxes 2010 Nonelection year filing. Taxes 2010 In nonelection years, the form must be filed on a semiannual or monthly basis. Taxes 2010 A complete listing of these filing periods are in the Form 8872 Instructions. Taxes 2010 A nonelection year is any odd-numbered year. Taxes 2010 How to file. Taxes 2010 Form 8872 can be filed either electronically or by mail. Taxes 2010 However, organizations that have, or expect to have, contributions or expenditures of $50,000 or more for the year must file electronically. Taxes 2010 To file by mail, send Form 8872 to the: Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0027 Electronic filing. Taxes 2010 File electronically via the IRS internet website at www. Taxes 2010 IRS. Taxes 2010 gov/polorgs. Taxes 2010 You will need a user ID and password to electronically file Form 8872. Taxes 2010 Organizations that have completed the electronic filing of Form 8871 and submitted a completed and signed Form 8453-X will receive a username and password in the mail. Taxes 2010 Organizations that have completed the electronic filing of Form 8871, but have not received their user ID and password can request one by writing to the following address: Internal Revenue Service Attn: Request for 8872 Password Mail Stop 6273 Ogden, UT 84201 Lost username and password. Taxes 2010 If you have forgotten or misplaced the username and password issued to your organization after you filed your initial Form 8871, send a letter requesting a new username and password to the address under Electronic filing. Taxes 2010 You can also fax your request to (801) 620-3249. Taxes 2010 It may take 3-6 weeks for your new username and password to arrive, as they will be mailed to the organization. Taxes 2010 Penalty A penalty will be imposed if the organization is required to file Form 8872 and it: Fails to file the form by the due date, or Files the form but fails to report all of the information required or reports incorrect information. Taxes 2010 The penalty is 35% of the total amount of contributions and expenditures to which a failure relates. Taxes 2010 Fraudulent returns. Taxes 2010 Any individual or corporation that willfully delivers or discloses any list, return, account, statement, or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned for not more than 1 year, or both. Taxes 2010 Waiver of penalties. Taxes 2010 The IRS may waive any additional tax assessed on an organization for failure to file Form 8872 if the failure was due to reasonable cause and not willful neglect. Taxes 2010 Donee Information Return Dispositions of donated property. Taxes 2010 If an organization receives charitable deduction property and within three years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282, Donee Information Return. Taxes 2010 However, an organization is not required to file Form 8282 if: The property is valued at $500 or less, or The property is consumed or distributed for charitable purposes. Taxes 2010 Form 8282 must be filed with the IRS within 125 days after the disposition. Taxes 2010 Additionally, a copy of Form 8282 must be given to the donor. Taxes 2010 If the organization fails to file the required information return, penalties may apply. Taxes 2010 Charitable deduction property. Taxes 2010 This is any property (other than money or publicly traded securities) for which the donee organization signed an appraisal summary or Form 8283, Noncash Charitable Contributions. Taxes 2010 Publicly traded securities. Taxes 2010 These are securities for which market quotations are readily available on an established securities market as of the date of the contribution. Taxes 2010 Appraisal summary. Taxes 2010 If the value of the donated property exceeds $5,000, the donor must get a qualified appraisal for contributions of property, see the Exceptions. Taxes 2010 below. Taxes 2010 Exceptions. Taxes 2010 A written appraisal is not needed if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane), if your deduction for the vehicle is limited to the gross proceeds from its sale, Intellectual property, Certain securities considered to have market quotations readily available (see Regulations section 1. Taxes 2010 170A-13(c)(7)(xi)(B)), Inventory and other property donated by a corporation that are qualified contributions for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A), or Any donation of stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Taxes 2010 The donee organization is not a qualified appraiser for the purpose of valuing the donated property. Taxes 2010 For more information, get Publication 561, Determining the Value of Donated Property. Taxes 2010 Form 8283. Taxes 2010 For noncash donations over $5,000, the donor must attach Form 8283 to the tax return to support the charitable deduction. Taxes 2010 The donee must sign Part IV of Section B, Form 8283 unless publicly traded securities are donated. Taxes 2010 The person who signs for the donee must be an official authorized to sign the donee's tax or information returns, or a person specifically authorized to sign by that official. Taxes 2010 The signature does not represent concurrence in the appraised value of the contributed property. Taxes 2010 A signed acknowledgment represents receipt of the property described on Form 8283 on the date specified on the form. Taxes 2010 The signature also indicates knowledge of the information reporting requirements on dispositions, as previously discussed. Taxes 2010 A copy of Form 8283 must be given to the donee. Taxes 2010 Information Provided to Donors In some situations, a donor must obtain certain information from a donee organization to obtain a deduction for a charitable contribution. Taxes 2010 In other situations, the donee organization is required to provide information to the donor. Taxes 2010 A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. Taxes 2010 (See Disclosure statement. Taxes 2010 later. Taxes 2010 ) This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. Taxes 2010 See Quid pro quo contribution below for an example. Taxes 2010 Failure to make the required disclosure may result in a penalty to the organization. Taxes 2010 A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization. Taxes 2010 In certain circumstances, an organization may be able to meet both of these requirements with the same written document. Taxes 2010 Disclosure of Quid Pro Quo Contributions A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution over $75. Taxes 2010 Quid pro quo contribution. Taxes 2010 A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution. Taxes 2010 Your charitable organization must provide the donor a written statement informing the donor of the fair market value of the items or services it provided in exchange for the contribution. Taxes 2010 Generally, a written statement is required for each payment, whenever the contribution portion is over $75. Taxes 2010 Example. Taxes 2010 If a donor gives your charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. Taxes 2010 In this example, the charitable part of the payment is $60. Taxes 2010 Even though the deductible part of the payment is not more than $75, a written statement must be filed because the total payment is more than $75. Taxes 2010 If your organization fails to disclose quid pro quo contributions, the organization may be subject to a penalty. Taxes 2010 Disclosure statement. Taxes 2010 The required written disclosure statement must: Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received. Taxes 2010 The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. Taxes 2010 If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution. Taxes 2010 No disclosure statement is required if any of the following are true. Taxes 2010 The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, 1990-1 C. Taxes 2010 B. Taxes 2010 471, Revenue Procedure 90-12, and Revenue Procedure 92-49, 1992-1 C. Taxes 2010 B. Taxes 2010 507 (as adjusted for inflation), Revenue Procedure 92-49. Taxes 2010 There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop). Taxes 2010 There is only an intangible religious benefit provided to the donor. Taxes 2010 The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. Taxes 2010 For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. Taxes 2010 A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods. Taxes 2010 The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of: Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedure 90-12 (as adjusted for inflation), Revenue Procedure 90-12. Taxes 2010 Good faith estimate of fair market value (FMV). Taxes 2010 An organization can use any reasonable method to estimate the FMV of goods or services it provided to a donor, as long as it applies the method in good faith. Taxes 2010 The organization can estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. Taxes 2010 Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued. Taxes 2010 Example 1. Taxes 2010 A charity provides a 1-hour tennis lesson with a tennis professional for the first $500 payment it receives. Taxes 2010 The tennis professional provides 1-hour lessons on a commercial basis for $100. Taxes 2010 A good faith estimate of the lesson's FMV is $100. Taxes 2010 Example 2. Taxes 2010 For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. Taxes 2010 A good faith estimate of the FMV of the right to hold the event in the museum can be made by using the cost of renting a hotel ballroom with a capacity, amenities, and atmosphere comparable to the museum room, even though the hotel ballroom lacks the unique art displayed in the museum room. Taxes 2010 If the hotel ballroom rents for $2,500, a good faith estimate of the FMV of the right to hold the event in the museum is $2,500. Taxes 2010 Example 3. Taxes 2010 For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. Taxes 2010 The artist does not provide tours on a commercial basis. Taxes 2010 Tours of the museum normally are free to the public. Taxes 2010 A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist. Taxes 2010 Penalty for failure to disclose. Taxes 2010 A penalty is imposed on a charity that does not make the required disclosure of a quid pro quo contribution of more than $75. Taxes 2010 The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing. Taxes 2010 The charity can avoid the penalty if it can show that the failure was due to reasonable cause. Taxes 2010 Acknowledgment of Charitable Contributions of $250 or More A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment from the charitable organization. Taxes 2010 The donor must get the acknowledgment by the earlier of: The date the donor files the original return for the year the contribution is made, or The due date, including extensions, for filing the return. Taxes 2010 The donor is responsible for requesting and obtaining the written acknowledgment from the donee. Taxes 2010 A charitable organization that receives a payment made as a contribution is treated as the donee organization for this purpose even if the organization (according to the donor's instructions or otherwise) distributes the amount received to one or more charities. Taxes 2010 Quid pro quo contribution. Taxes 2010 If the donee provides goods or services to the donor in exchange for the contribution (a quid pro quo contribution), the acknowledgment must include a good faith estimate of the value of the goods or services. Taxes 2010 See Disclosure of Quid Pro Quo Contributions earlier. Taxes 2010 Form of acknowledgment. Taxes 2010 Although there is no prescribed format for the written acknowledgment, it must provide enough information to substantiate the amount of the contribution. Taxes 2010 For more information, see IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements. Taxes 2010 Cash contributions. Taxes 2010 To deduct a contribution of cash, a check, or other monetary gift (regardless of the amount), a donor must maintain a bank record or a written communication from the donee organization showing the donee's name, date, and amount of the contribution. Taxes 2010 In the case of a lump-sum contribution (rather than a contribution by payroll deduction) made through the Combined Federal Campaign or a similar program such as a United Way Campaign, the written communication must include the name of the donee organization that is the ultimate recipient of the charitable contribution. Taxes 2010 Contributions by payroll deduction. Taxes 2010 An organization may substantiate an employee's contribution by deduction from its payroll by: A pay stub, Form W-2, or other document showing a contribution to a donee organization, together with A pledge card or other document from the donee organization that shows its name. Taxes 2010 For contributions of $250 or more, the document must state that the donee organization provides no goods or services for any payroll contributions. Taxes 2010 The amount withheld from each payment of wages to a taxpayer is treated as a separate contribution. Taxes 2010 Acknowledgment of Vehicle Contribution If an exempt organization receives a contribution of a qualified vehicle with a claimed value of more than $500, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. Taxes 2010 The donee organization can use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. Taxes 2010 See section 3. Taxes 2010 03 of Notice 2005-44 for guidance on the information that must be included in a contemporaneous written acknowledgment and the deadline for furnishing the acknowledgment to the donor. Taxes 2010 Any donee organization that provides a contemporaneous written acknowledgment to a donor is required to report to the IRS the information contained in the acknowledgment. Taxes 2010 The report is due by February 28 (March 31 if filing electronically) of the year following the year in which the donee organization provides the acknowledgment to the donor. Taxes 2010 The organization must file the report on Copy A of Form 1098-C. Taxes 2010 An organization that files Form 1098-C on paper should send it with Form 1096, Annual Summary and Transmittal of U. Taxes 2010 S. Taxes 2010 Information Returns. Taxes 2010 See the Instructions for Form 1096 for the correct filing location. Taxes 2010 An organization that is required to file 250 or more Forms 1098-C during the calendar year must file the forms electronically or magnetically. Taxes 2010 Specifications for filing Form 1098-C electronically or magnetically can be found in Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically at www. Taxes 2010 IRS. Taxes 2010 gov/pub/irs-pdf/p1220. Taxes 2010 pdf. Taxes 2010 Acknowledgment For a contribution of a qualified vehicle with a claimed value of $500 or less, do not file Form 1098-C. Taxes 2010 However, you can use it as the contemporaneous written acknowledgment under section 170(f)(8) by providing the donor with Copy C only. Taxes 2010 See the Instructions for Form 1098-C. Taxes 2010 Generally, the organization should complete Form 1098-C as the written acknowledgment to the donor and the IRS. Taxes 2010 The contents of the acknowledgment depend upon whether the organization: Sells a qualified vehicle without any significant intervening use or material improvement, Intends to make a significant intervening use of or material improvement to a qualified vehicle prior to sale, or Sells a qualified vehicle to a needy individual at a price significantly below fair market value, or a gratuitous transfer to a needy individual in direct furtherance of a charitable purpose of the organization of relieving the poor and distressed or the underprivileged who are in need of a means of transportation. Taxes 2010 For more information on the acknowledgment, see Notice 2005-44, 2005-25 I. Taxes 2010 R. Taxes 2010 B. Taxes 2010 1287, at www. Taxes 2010 irs. Taxes 2010 gov/irb/2005-25_IRB/2005-25_IRB/ar09. Taxes 2010 html. Taxes 2010 Material improvements or significant intervening use. Taxes 2010 To constitute significant intervening use, the organization must actually use the vehicle to substantially further the organization's regularly conducted activities, and the use must be significant, not incidental. Taxes 2010 Factors in determining whether a use is a significant intervening use depend on the nature, extent, frequency, and duration. Taxes 2010 For this purpose, use includes providing transportation on a regular basis for a significant period of time or significant use directly related to training in vehicle repair. Taxes 2010 Use does not include the use of a vehicle to provide training in business skills, such as marketing or sales. Taxes 2010 Examples of significant use include: Driving a vehicle every day for 1 year to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. Taxes 2010 Driving a vehicle for 10,000 miles over a 1-year period to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. Taxes 2010 Material improvements include major repairs and additions that improve the condition of the vehicle in a manner that significantly increases the value. Taxes 2010 To be a material improvement, the improvement cannot be funded by an additional payment to the organization from the donor of the vehicle. Taxes 2010 Material improvements do not include cleaning, minor repairs, routine maintenance, painting, removal of dents or scratches, cleaning or repair of upholstery, and installation of theft deterrent devices. Taxes 2010 Penalties. Taxes 2010 If your charitable organization receives contributions of used motor vehicles, boats, and airplanes valued over $500 it may be subject to a penalty if it knowingly: Fails to furnish an acknowledgement in a timely manner, showing the required information, or Furnishes a false or fraudulent acknowledgement of the contribution. Taxes 2010 Other penalties may apply. Taxes 2010 See Part O in the 2012 General Instructions for Certain Information Returns. Taxes 2010 An acknowledgment containing a certification will be presumed to be false or fraudulent if the qualified vehicle is sold to a buyer other than a needy individual without a significant intervening use or material improvement within 6 months of the date of the contribution. Taxes 2010 If a charity sells a donated vehicle at auction, the IRS will not accept as substantiation an acknowledgment from the charity stating that the vehicle is to be transferred to a needy individual for significantly below fair market value. Taxes 2010 Vehicles sold at auction are not sold at prices significantly below fair market value, and the IRS will not treat vehicles sold at auction as qualifying for this exception. Taxes 2010 The penalty for a false or fraudulent acknowledgment where the donee certifies that the vehicle will not be transferred for money, other property, or services before completion of material improvements or significant intervening use or the donee certifies that the vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of the donee's charitable purpose is the larger of $5,000 or the claimed value of the vehicle multiplied by 39. Taxes 2010 6%. Taxes 2010 The penalty for an acknowledgment relating to a qualified vehicle being sold in an arm's length transaction to an unrelated party is the larger of the gross proceeds from the sale or the sales price stated in the acknowledgment multiplied by 39. Taxes 2010 6%. Taxes 2010 Qualified Intellectual Property A taxpayer who contributes qualified intellectual property to a charity may be entitled to a charitable deduction, in addition to any initial deduction allowed in the year of contribution. Taxes 2010 The additional deduction is based on a specified percentage of the qualified donee income with respect to the qualified intellectual property. Taxes 2010 To qualify for the additional charitable deduction, the donor must provide notice to the donee at the time of the contribution that the donor intends to treat the contribution as qualified intellectual property contribution for purposes of sections 170(m) and 6050L. Taxes 2010 Every donee organization described in section 170(c) (except a private foundation as defined in section 509(a) that is not described in section 170(b)(1)(F)) that receives or accrues net income from a charitable gift of qualified intellectual property must file Form 8899. Taxes 2010 Form 8899. Taxes 2010 Form 8899, Notice of Income From Donated Intellectual Property, is used by a donee to report net income from qualified intellectual property to the donor of the property and to the IRS and is due by the last day of the first full month following the close of the donee’s tax year. Taxes 2010 This form must be filed for each tax year of the donee in which the donated property produces net income, but only if all or part of that tax year occurs during the 10-year period beginning on the date of the contribution and that tax year does not begin after the expiration of the legal life of the donated property. Taxes 2010 Qualified donee income. Taxes 2010 Qualified donee income is any net income received by or accrued to the donee that is properly allocable to the qualified intellectual property for the tax year of the donee which ends within or with the tax year of the donor. Taxes 2010 Income is not treated as allocated to qualified intellectual property if it is received or accrued after the earlier of the expiration of the legal life of the qualified intellectual property, or the 10-year period beginning with the date of
Understanding your CP276A Notice
We didn't receive a correctly completed tax liability schedule. We normally charge a Federal Tax Deposit (FTD) penalty when this happens. We decided not to do so this time.
Tax publications you may find useful
How to get help
Calling the toll free number listed on the top right corner of your notice is the fastest way to get your questions answered.
You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).
What you need to do
- Review your tax liability schedule. Enter the liability amount for each payroll date and see if your payroll tax deposit liability matches the tax liability you reported on your tax form. When they don't match, we reject your tax liability schedule.
- Correct the copy of your tax return and the schedule that you kept for your records.
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Answers to Common Questions
Do I have to reply to this notice?
No, but you should check your records to see why your tax liability schedule was incorrect.
How do I know whether I should make monthly or semiweekly payroll tax deposits?
Go back and look at the total tax liability for the four quarters before the quarter ending in June of last year if you file a quarterly return. Annual return filers should go back and look at the total tax liability of the year before their previous filing year.
For either a quarterly or an annual filer, a total tax liability of $50,000 or less means you can make your federal payroll tax deposits monthly. A tax liability greater than $50,000 means you have to make semiweekly payroll tax deposits.
When are my payroll tax deposits due?
The following table shows the schedule for semiweekly payroll tax deposits:
|The payroll tax liability period is Saturday, Sunday, Monday, and Tuesday
||Make the tax deposit by the following Friday.
|The payroll tax liability period is Wednesday, Thursday, and Friday
||Make the tax deposit by the following Wednesday.
|A holiday falls on a weekday after the payroll tax liability period and before or on the normal deposit day
||Extend the deposit due date one business day for each day of holiday.
Monthly payroll tax depositors must make their tax deposits by the fifteenth of each month. When the fifteenth falls on a Saturday, a Sunday, or a legal holiday, tax deposits are due on the next business day.
Do I have to make my payroll tax deposits electronically?
Normally, yes. However, you may send your payment in with your tax return when your tax liability is $2,500 or less. If you file a quarterly tax return, another time when you may send in your payment with your return is when:
- Your tax liabilities never totaled $100,000 or more in a deposit period, and
- Your tax liability in the preceding quarter was $2,500 or less.
Tips for next time you file
Report each tax liability (not your deposits) on the tax liability schedule.
Make sure that that the amount on your tax liability schedule matches the payroll tax amount on your tax return.
Do not list negative amounts on your tax liability schedule.
Understanding your notice
Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.
Notice CP276A, Page 1
Notice CP276A, Page 2
Page Last Reviewed or Updated: 14-Mar-2014
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