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1040 Tax Form 2011

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1040 Tax Form 2011

1040 tax form 2011 12. 1040 tax form 2011   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. 1040 tax form 2011 Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. 1040 tax form 2011  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. 1040 tax form 2011 5 cents per mile. 1040 tax form 2011 For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. 1040 tax form 2011 Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 1040 tax form 2011 To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. 1040 tax form 2011 What is the tax benefit of taking a business deduction for work-related education. 1040 tax form 2011   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. 1040 tax form 2011 Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. 1040 tax form 2011 An itemized deduction reduces the amount of your income subject to tax. 1040 tax form 2011   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 1040 tax form 2011 This reduces the amount of your income subject to both income tax and self-employment tax. 1040 tax form 2011   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. 1040 tax form 2011 You may qualify for these other benefits even if you do not meet the requirements listed above. 1040 tax form 2011   Also, your work-related education expenses may qualify you to claim more than one tax benefit. 1040 tax form 2011 Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 1040 tax form 2011 Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 1040 tax form 2011 This is education that meets at least one of the following two tests. 1040 tax form 2011 The education is required by your employer or the law to keep your present salary, status, or job. 1040 tax form 2011 The required education must serve a bona fide business purpose of your employer. 1040 tax form 2011 The education maintains or improves skills needed in your present work. 1040 tax form 2011 However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 1040 tax form 2011 You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 1040 tax form 2011 Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. 1040 tax form 2011 Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. 1040 tax form 2011 This additional education is qualifying work-related education if all three of the following requirements are met. 1040 tax form 2011 It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. 1040 tax form 2011 When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. 1040 tax form 2011 See Education To Maintain or Improve Skills , later. 1040 tax form 2011 Example. 1040 tax form 2011 You are a teacher who has satisfied the minimum requirements for teaching. 1040 tax form 2011 Your employer requires you to take an additional college course each year to keep your teaching job. 1040 tax form 2011 If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. 1040 tax form 2011 This image is too large to be displayed in the current screen. 1040 tax form 2011 Please click the link to view the image. 1040 tax form 2011 Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. 1040 tax form 2011 This could include refresher courses, courses on current developments, and academic or vocational courses. 1040 tax form 2011 Example. 1040 tax form 2011 You repair televisions, radios, and stereo systems for XYZ Store. 1040 tax form 2011 To keep up with the latest changes, you take special courses in radio and stereo service. 1040 tax form 2011 These courses maintain and improve skills required in your work. 1040 tax form 2011 Maintaining skills vs. 1040 tax form 2011 qualifying for new job. 1040 tax form 2011   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. 1040 tax form 2011 Education during temporary absence. 1040 tax form 2011   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. 1040 tax form 2011 Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 1040 tax form 2011 Example. 1040 tax form 2011 You quit your biology research job to become a full-time biology graduate student for 1 year. 1040 tax form 2011 If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. 1040 tax form 2011 Education during indefinite absence. 1040 tax form 2011   If you stop work for more than a year, your absence from your job is considered indefinite. 1040 tax form 2011 Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. 1040 tax form 2011 Therefore, it is not qualifying work-related education. 1040 tax form 2011 Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. 1040 tax form 2011 The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 1040 tax form 2011 Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. 1040 tax form 2011 This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. 1040 tax form 2011 You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 1040 tax form 2011 Example 1. 1040 tax form 2011 You are a full-time engineering student. 1040 tax form 2011 Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. 1040 tax form 2011 Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. 1040 tax form 2011 The education is not qualifying work-related education. 1040 tax form 2011 Example 2. 1040 tax form 2011 You are an accountant and you have met the minimum educational requirements of your employer. 1040 tax form 2011 Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 1040 tax form 2011 These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. 1040 tax form 2011 Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 1040 tax form 2011 The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 1040 tax form 2011 If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 1040 tax form 2011 The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. 1040 tax form 2011 You generally will be considered a faculty member when one or more of the following occurs. 1040 tax form 2011 You have tenure. 1040 tax form 2011 Your years of service count toward obtaining tenure. 1040 tax form 2011 You have a vote in faculty decisions. 1040 tax form 2011 Your school makes contributions for you to a retirement plan other than social security or a similar program. 1040 tax form 2011 Example 1. 1040 tax form 2011 The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 1040 tax form 2011 In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 1040 tax form 2011 If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. 1040 tax form 2011 However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 1040 tax form 2011 Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. 1040 tax form 2011 If you have all the required education except the fifth year, you have met the minimum educational requirements. 1040 tax form 2011 The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. 1040 tax form 2011 Example 2. 1040 tax form 2011 Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 1040 tax form 2011 The additional four education courses can be qualifying work-related education. 1040 tax form 2011 Although you do not have all the required courses, you have already met the minimum educational requirements. 1040 tax form 2011 Example 3. 1040 tax form 2011 Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 1040 tax form 2011 The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 1040 tax form 2011 They are needed to meet the minimum educational requirements for employment as a teacher. 1040 tax form 2011 Example 4. 1040 tax form 2011 You have a bachelor's degree and you work as a temporary instructor at a university. 1040 tax form 2011 At the same time, you take graduate courses toward an advanced degree. 1040 tax form 2011 The rules of the university state that you can become a faculty member only if you get a graduate degree. 1040 tax form 2011 Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 1040 tax form 2011 You have not met the minimum educational requirements to qualify you as a faculty member. 1040 tax form 2011 The graduate courses are not qualifying work-related education. 1040 tax form 2011 Certification in a new state. 1040 tax form 2011   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. 1040 tax form 2011 This is true even if you must get additional education to be certified in another state. 1040 tax form 2011 Any additional education you need is qualifying work-related education. 1040 tax form 2011 You have already met the minimum requirements for teaching. 1040 tax form 2011 Teaching in another state is not a new trade or business. 1040 tax form 2011 Example. 1040 tax form 2011 You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 1040 tax form 2011 You move to State B and are promptly hired as a teacher. 1040 tax form 2011 You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 1040 tax form 2011 These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. 1040 tax form 2011 Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. 1040 tax form 2011 This is true even if you do not plan to enter that trade or business. 1040 tax form 2011 If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 1040 tax form 2011 Example 1. 1040 tax form 2011 You are an accountant. 1040 tax form 2011 Your employer requires you to get a law degree at your own expense. 1040 tax form 2011 You register at a law school for the regular curriculum that leads to a law degree. 1040 tax form 2011 Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. 1040 tax form 2011 Example 2. 1040 tax form 2011 You are a general practitioner of medicine. 1040 tax form 2011 You take a 2-week course to review developments in several specialized fields of medicine. 1040 tax form 2011 The course does not qualify you for a new profession. 1040 tax form 2011 It is qualifying work- related education because it maintains or improves skills required in your present profession. 1040 tax form 2011 Example 3. 1040 tax form 2011 While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 1040 tax form 2011 The program will lead to qualifying you to practice psychoanalysis. 1040 tax form 2011 The psychoanalytic training does not qualify you for a new profession. 1040 tax form 2011 It is qualifying work-related education because it maintains or improves skills required in your present profession. 1040 tax form 2011 Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. 1040 tax form 2011 They are part of a program of study that can qualify you for a new profession. 1040 tax form 2011 Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 1040 tax form 2011 A change in duties in any of the following ways is not considered a change to a new business. 1040 tax form 2011 Elementary school teacher to secondary school teacher. 1040 tax form 2011 Teacher of one subject, such as biology, to teacher of another subject, such as art. 1040 tax form 2011 Classroom teacher to guidance counselor. 1040 tax form 2011 Classroom teacher to school administrator. 1040 tax form 2011 What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. 1040 tax form 2011 If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 1040 tax form 2011 You cannot deduct expenses related to tax-exempt and excluded income. 1040 tax form 2011 Deductible expenses. 1040 tax form 2011   The following education expenses can be deducted. 1040 tax form 2011 Tuition, books, supplies, lab fees, and similar items. 1040 tax form 2011 Certain transportation and travel costs. 1040 tax form 2011 Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 1040 tax form 2011 Nondeductible expenses. 1040 tax form 2011   You cannot deduct personal or capital expenses. 1040 tax form 2011 For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 1040 tax form 2011 This amount is a personal expense. 1040 tax form 2011 Unclaimed reimbursement. 1040 tax form 2011   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. 1040 tax form 2011 Example. 1040 tax form 2011 Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 1040 tax form 2011 You do not file a voucher and you do not get reimbursed. 1040 tax form 2011 Because you did not file a voucher, you cannot deduct the expenses on your tax return. 1040 tax form 2011 Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 1040 tax form 2011 If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. 1040 tax form 2011 Temporary basis. 1040 tax form 2011   You go to school on a temporary basis if either of the following situations applies to you. 1040 tax form 2011 Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 1040 tax form 2011 Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 1040 tax form 2011 Your attendance is temporary up to the date you determine it will last more than 1 year. 1040 tax form 2011 If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. 1040 tax form 2011 Attendance not on a temporary basis. 1040 tax form 2011   You do not go to school on a temporary basis if either of the following situations apply to you. 1040 tax form 2011 Your attendance at school is realistically expected to last more than 1 year. 1040 tax form 2011 It does not matter how long you actually attend. 1040 tax form 2011 Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 1040 tax form 2011 Your attendance is not temporary after the date you determine it will last more than 1 year. 1040 tax form 2011 Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. 1040 tax form 2011 This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 1040 tax form 2011 Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 1040 tax form 2011 Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 1040 tax form 2011 Example 1. 1040 tax form 2011 You regularly work in a nearby town, and go directly from work to home. 1040 tax form 2011 You also attend school every work night for 3 months to take a course that improves your job skills. 1040 tax form 2011 Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 1040 tax form 2011 This is true regardless of the distance traveled. 1040 tax form 2011 Example 2. 1040 tax form 2011 Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 1040 tax form 2011 You can deduct your transportation expenses from your regular work site to school and then home. 1040 tax form 2011 Example 3. 1040 tax form 2011 Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 1040 tax form 2011 Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 1040 tax form 2011 Example 4. 1040 tax form 2011 Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 1040 tax form 2011 Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 1040 tax form 2011 If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 1040 tax form 2011 If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. 1040 tax form 2011 Using your car. 1040 tax form 2011    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. 1040 tax form 2011 The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. 1040 tax form 2011 5 cents per mile. 1040 tax form 2011 Whichever method you use, you can also deduct parking fees and tolls. 1040 tax form 2011 See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. 1040 tax form 2011 Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. 1040 tax form 2011 Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 1040 tax form 2011 For more information, see chapter 1 of Publication 463. 1040 tax form 2011 You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. 1040 tax form 2011 Mainly personal travel. 1040 tax form 2011   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 1040 tax form 2011 You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 1040 tax form 2011   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 1040 tax form 2011 An important factor is the comparison of time spent on personal activities with time spent on educational activities. 1040 tax form 2011 If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. 1040 tax form 2011 Example 1. 1040 tax form 2011 John works in Newark, New Jersey. 1040 tax form 2011 He traveled to Chicago to take a deductible 1-week course at the request of his employer. 1040 tax form 2011 His main reason for going to Chicago was to take the course. 1040 tax form 2011 While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 1040 tax form 2011 Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 1040 tax form 2011 He cannot deduct his transportation expenses of going to Pleasantville. 1040 tax form 2011 He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 1040 tax form 2011 Example 2. 1040 tax form 2011 Sue works in Boston. 1040 tax form 2011 She went to a university in Michigan to take a course for work. 1040 tax form 2011 The course is qualifying work-related education. 1040 tax form 2011 She took one course, which is one-fourth of a full course load of study. 1040 tax form 2011 She spent the rest of the time on personal activities. 1040 tax form 2011 Her reasons for taking the course in Michigan were all personal. 1040 tax form 2011 Sue's trip is mainly personal because three-fourths of her time is considered personal time. 1040 tax form 2011 She cannot deduct the cost of her round-trip train ticket to Michigan. 1040 tax form 2011 She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 1040 tax form 2011 Example 3. 1040 tax form 2011 Dave works in Nashville and recently traveled to California to take a 2-week seminar. 1040 tax form 2011 The seminar is qualifying work-related education. 1040 tax form 2011 While there, he spent an extra 8 weeks on personal activities. 1040 tax form 2011 The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 1040 tax form 2011 Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 1040 tax form 2011 He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 1040 tax form 2011 Cruises and conventions. 1040 tax form 2011   Certain cruises and conventions offer seminars or courses as part of their itinerary. 1040 tax form 2011 Even if the seminars or courses are work related, your deduction for travel may be limited. 1040 tax form 2011 This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 1040 tax form 2011   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. 1040 tax form 2011 50% limit on meals. 1040 tax form 2011   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 1040 tax form 2011 If you were reimbursed for the meals, see How To Treat Reimbursements , later. 1040 tax form 2011   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 1040 tax form 2011 Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. 1040 tax form 2011 Example. 1040 tax form 2011 You are a French language teacher. 1040 tax form 2011 While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 1040 tax form 2011 You chose your itinerary and most of your activities to improve your French language skills. 1040 tax form 2011 You cannot deduct your travel expenses as education expenses. 1040 tax form 2011 This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. 1040 tax form 2011 No Double Benefit Allowed You cannot do either of the following. 1040 tax form 2011 Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. 1040 tax form 2011 Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 1040 tax form 2011 See Adjustments to Qualifying Work-Related Education Expenses, next. 1040 tax form 2011 Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. 1040 tax form 2011 You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 1040 tax form 2011 Tax-free educational assistance. 1040 tax form 2011   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). 1040 tax form 2011 Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 tax form 2011 Amounts that do not reduce qualifying work-related education expenses. 1040 tax form 2011   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040 tax form 2011 Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. 1040 tax form 2011 How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 1040 tax form 2011 There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 1040 tax form 2011 You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 1040 tax form 2011 Note. 1040 tax form 2011 The following rules about reimbursement arrangements also apply to expense allowances received from your employer. 1040 tax form 2011 Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. 1040 tax form 2011 Your expenses must have a business connection. 1040 tax form 2011 This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. 1040 tax form 2011 You must adequately account to your employer for your expenses within a reasonable period of time. 1040 tax form 2011 You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. 1040 tax form 2011 If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. 1040 tax form 2011 If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. 1040 tax form 2011 Accountable plan rules not met. 1040 tax form 2011   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. 1040 tax form 2011 Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). 1040 tax form 2011 Expenses equal reimbursement. 1040 tax form 2011   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. 1040 tax form 2011 Because your expenses and reimbursements are equal, you do not have a deduction. 1040 tax form 2011 Excess expenses. 1040 tax form 2011   If your expenses are more than your reimbursement, you can deduct your excess expenses. 1040 tax form 2011 This is discussed later, under Deducting Business Expenses . 1040 tax form 2011 Allocating your reimbursements for meals. 1040 tax form 2011   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. 1040 tax form 2011 If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. 1040 tax form 2011 Make the allocation as follows. 1040 tax form 2011 Divide your meal expenses by your total expenses. 1040 tax form 2011 Multiply your total reimbursement by the result from (1). 1040 tax form 2011 This is the allocated reimbursement for your meal expenses. 1040 tax form 2011 Subtract the amount figured in (2) from your total reimbursement. 1040 tax form 2011 The difference is the allocated reimbursement for your other expenses of qualifying work-related education. 1040 tax form 2011 Example. 1040 tax form 2011 Your employer paid you an expense allowance of $2,000 under an accountable plan. 1040 tax form 2011 The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. 1040 tax form 2011 There was no indication of how much of the reimbursement was for each type of expense. 1040 tax form 2011 Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). 1040 tax form 2011 Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. 1040 tax form 2011   1. 1040 tax form 2011 $425 meal expenses  $2,500 total expenses = . 1040 tax form 2011 17   2. 1040 tax form 2011 $2,000 (reimbursement)×. 1040 tax form 2011 17     =$340 (allocated reimbursement for meal expenses)   3. 1040 tax form 2011 $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). 1040 tax form 2011 After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). 1040 tax form 2011 Nonaccountable Plans Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay and report the total in box 1 of your Form W-2. 1040 tax form 2011 You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. 1040 tax form 2011 This is discussed later under Deducting Business Expenses . 1040 tax form 2011 An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. 1040 tax form 2011 Reimbursements for nondeductible expenses. 1040 tax form 2011   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. 1040 tax form 2011 You must include them in your income. 1040 tax form 2011 For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. 1040 tax form 2011   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. 1040 tax form 2011 Deducting Business Expenses Self-employed persons and employees report their business expenses differently. 1040 tax form 2011 The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 1040 tax form 2011 Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). 1040 tax form 2011 If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. 1040 tax form 2011 See the instructions for the form you file for information on how to complete it. 1040 tax form 2011 Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. 1040 tax form 2011 If either (1) or (2) applies, you can deduct the total qualifying cost. 1040 tax form 2011 If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 1040 tax form 2011 In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 1040 tax form 2011 (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 1040 tax form 2011 ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 1040 tax form 2011 Form 2106 or 2106-EZ. 1040 tax form 2011   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. 1040 tax form 2011 Form not required. 1040 tax form 2011   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. 1040 tax form 2011   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. 1040 tax form 2011 (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. 1040 tax form 2011 ) Using Form 2106-EZ. 1040 tax form 2011   This form is shorter and easier to use than Form 2106. 1040 tax form 2011 Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. 1040 tax form 2011   If you do not meet both of these requirements, use Form 2106. 1040 tax form 2011 Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. 1040 tax form 2011 Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. 1040 tax form 2011 You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. 1040 tax form 2011 You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . 1040 tax form 2011 For more information on qualified performing artists, see chapter 6 of Publication 463. 1040 tax form 2011 Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. 1040 tax form 2011 They are not subject to the 2%-of-adjusted-gross-income limit. 1040 tax form 2011 To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 1040 tax form 2011 For more information on impairment-related work expenses, see chapter 6 of Publication 463. 1040 tax form 2011 Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 1040 tax form 2011 Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 1040 tax form 2011 If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. 1040 tax form 2011 However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. 1040 tax form 2011 Examples of records to keep. 1040 tax form 2011   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. 1040 tax form 2011 You should keep adequate records or have sufficient evidence that will support your expenses. 1040 tax form 2011 Estimates or approximations do not qualify as proof of an expense. 1040 tax form 2011 Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. 1040 tax form 2011 , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. 1040 tax form 2011 Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. 1040 tax form 2011 Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. 1040 tax form 2011 Complete information about any scholarship or fellowship grants, including amounts you received during the year. 1040 tax form 2011 Illustrated Example Victor Jones teaches math at a private high school in North Carolina. 1040 tax form 2011 He was selected to attend a 3-week math seminar at a university in California. 1040 tax form 2011 The seminar will improve his skills in his current job and is qualifying work-related education. 1040 tax form 2011 He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. 1040 tax form 2011 Victor will file Form 1040. 1040 tax form 2011 His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. 1040 tax form 2011 He shows his expenses for the seminar in Part I of the form. 1040 tax form 2011 He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. 1040 tax form 2011 He enters $400 on line 4 for his tuition and books. 1040 tax form 2011 On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. 1040 tax form 2011 He multiplies that amount by 50% and enters the result, $263, on line 5. 1040 tax form 2011 On line 6, Victor totals the amounts from lines 3 through 5. 1040 tax form 2011 He carries the total, $2,313, to Schedule A (Form 1040), line 21. 1040 tax form 2011 Since he does not claim any vehicle expenses, Victor leaves Part II blank. 1040 tax form 2011 His filled-in form is shown on the next page. 1040 tax form 2011 This image is too large to be displayed in the current screen. 1040 tax form 2011 Please click the link to view the image. 1040 tax form 2011 Form 2106-EZ for V. 1040 tax form 2011 Jones Prev  Up  Next   Home   More Online Publications
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The 1040 Tax Form 2011

1040 tax form 2011 5. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011  Additionally, section 6033 provides new disclosure requirements on a tax-exempt entity that is a party to a prohibited tax shelter transaction. 1040 tax form 2011 Tax-exempt entities. 1040 tax form 2011   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). 1040 tax form 2011 Religious or apostolic associations or corporations described in section 501(d). 1040 tax form 2011 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). 1040 tax form 2011 Indian tribal governments within the meaning of section 7701(a)(40). 1040 tax form 2011 Entity manager. 1040 tax form 2011    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. 1040 tax form 2011 Prohibited tax shelter transaction. 1040 tax form 2011   A prohibited tax shelter transaction is any listed transaction, within the meaning of section 6707A(c)(2), and any prohibited reportable transactions. 1040 tax form 2011 A prohibited reportable transaction is a confidential transaction within the meaning of Regulations section 1. 1040 tax form 2011 6011-4(b)(3), and a transaction with contractual protection within the meaning of Regulations section 1. 1040 tax form 2011 6011-4(b)(4). 1040 tax form 2011 See the Instructions for Form 8886 for more information on listed transactions and prohibited reportable transactions. 1040 tax form 2011 Subsequently listed transaction. 1040 tax form 2011   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. 1040 tax form 2011 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). 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 For more information about this excise tax, including information about how it is figured, see the Instructions for Form 4720. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 To report this tax, file Form 4720. 1040 tax form 2011 Excess Benefit Transactions Excise tax on excess benefit transactions. 1040 tax form 2011   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. 1040 tax form 2011 A manager of the organization may also have to pay an excise tax under section 4958. 1040 tax form 2011 These taxes are reported on Form 4720. 1040 tax form 2011   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. 1040 tax form 2011   There are three taxes under section 4958. 1040 tax form 2011 Disqualified persons are liable for the first two taxes and certain organization managers are liable for the third tax. 1040 tax form 2011    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. 1040 tax form 2011 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. 1040 tax form 2011 The disqualified person who benefited from the transaction is liable for the tax. 1040 tax form 2011 See definition of Disqualified person, later at Disqualified person. 1040 tax form 2011 Additional tax on the disqualified person. 1040 tax form 2011   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. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011   To avoid the 200% tax, a disqualified person must correct the excess benefit transaction during the taxable period. 1040 tax form 2011 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. 1040 tax form 2011 Taxable period. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 This tax cannot exceed $20,000 ($10,000 for transactions entered in a tax year beginning before August 18, 2006), for each transaction. 1040 tax form 2011 There is also joint and several liability for this tax. 1040 tax form 2011 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. 1040 tax form 2011 Organization Manager. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 For example, a director who votes against giving an excess benefit would ordinarily not be subject to the 10% tax. 1040 tax form 2011 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. 1040 tax form 2011 Knowing does not mean having reason to know. 1040 tax form 2011 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. 1040 tax form 2011 Participation by an organization manager is willful if it is voluntary, conscious, and intentional. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 For purposes of determining the value of economic benefits, the value of property, including the right to use property, is the fair market value. 1040 tax form 2011 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. 1040 tax form 2011 Donor advised fund transactions occurring after August 17, 2006. 1040 tax form 2011   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. 1040 tax form 2011   The excess benefit in this transaction is the amount of the grant, loan, compensation, or other similar payment. 1040 tax form 2011 For additional information, see the Instructions for Form 4720. 1040 tax form 2011 Supporting organization transactions occurring after July 25, 2006. 1040 tax form 2011   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. 1040 tax form 2011   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)). 1040 tax form 2011   The excess benefit for substantial contributors and parties related to those contributors includes the amount of the grant, loan, compensation, or other similar payment. 1040 tax form 2011 For additional information, see the Instructions for Form 4720. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 Correcting the excess benefit. 1040 tax form 2011   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. 1040 tax form 2011   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. 1040 tax form 2011 The correction amount equals the excess benefit plus the interest on the excess benefit. 1040 tax form 2011 The interest rate can be no lower than the applicable federal rate, compounded annually, for the month the transaction occurred. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011   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. 1040 tax form 2011   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. 1040 tax form 2011 Exception. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 For donor advised funds, sponsoring organizations, and certain supporting organizations occurring after August 17, 2006. 1040 tax form 2011   The following persons will be considered disqualified persons along with certain family members and 35% controlled entities associated with them. 1040 tax form 2011 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. 1040 tax form 2011 For certain supporting organization transactions occurring after July 25, 2006. 1040 tax form 2011   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. 1040 tax form 2011 Investment advisor. 1040 tax form 2011   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. 1040 tax form 2011 Substantial contributor. 1040 tax form 2011   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. 1040 tax form 2011 A substantial contributor includes the grantor of a trust. 1040 tax form 2011 Family members. 1040 tax form 2011   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). 1040 tax form 2011 35% controlled entity. 1040 tax form 2011   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. 1040 tax form 2011   In determining the holdings of a business enterprise, any stock or other interest owned directly or indirectly shall apply. 1040 tax form 2011 Persons having substantial influence. 1040 tax form 2011   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. 1040 tax form 2011 Treasurers and chief financial officers. 1040 tax form 2011 Persons with a material financial interest in a provider-sponsored organization. 1040 tax form 2011 Persons not considered to have substantial influence. 1040 tax form 2011   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. 1040 tax form 2011 Facts and circumstances. 1040 tax form 2011   The determination of whether a person has substantial influence over the affairs of an organization is based on all the facts and circumstances. 1040 tax form 2011 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. 1040 tax form 2011 The person founded the organization. 1040 tax form 2011 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. 1040 tax form 2011 The person's compensation is primarily based on revenues derived from activities of the organization that the person controls. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 The person owns a controlling interest (measured by either vote or value) in a corporation, partnership, or trust that is a disqualified person. 1040 tax form 2011 The person is a nonstock organization controlled directly or indirectly by one or more disqualified persons. 1040 tax form 2011   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. 1040 tax form 2011 The person has taken a bona fide vow of poverty as an employee or agent of a religious organization or on its behalf. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 The direct supervisor of the person is not a disqualified person. 1040 tax form 2011 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. 1040 tax form 2011   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. 1040 tax form 2011 A person may be a disqualified person with respect to transactions with more than one organization. 1040 tax form 2011 Reasonable Compensation. 1040 tax form 2011    Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances. 1040 tax form 2011 The section 162 standard will apply in determining the reasonableness of compensation. 1040 tax form 2011 The fact that a bonus or revenue-sharing arrangement is subject to a cap is a relevant factor in determining reasonableness of compensation. 1040 tax form 2011   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). 1040 tax form 2011 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. 1040 tax form 2011    Intent to treat benefits as compensation. 1040 tax form 2011 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. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 Exception. 1040 tax form 2011   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. 1040 tax form 2011 Rebuttable presumption that a transaction is not an excess benefit transaction. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 Before making its determination, the authorized body obtained and relied upon appropriate data as to comparability. 1040 tax form 2011 (There is a special safe harbor for small organizations. 1040 tax form 2011 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. 1040 tax form 2011 ) The authorized body adequately documents the basis for its determination concurrently with making that determination. 1040 tax form 2011 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. 1040 tax form 2011 Disregarded benefits. 1040 tax form 2011   The following economic benefits are disregarded for section 4958 purposes. 1040 tax form 2011 Nontaxable fringe benefits that are excluded from income under section 132. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 Special Exception for Initial Contracts      Section 4958 does not apply to any fixed payment made to a person under an initial contract. 1040 tax form 2011   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. 1040 tax form 2011   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). 1040 tax form 2011   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. 1040 tax form 2011   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. 1040 tax form 2011 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. 1040 tax form 2011 More information. 1040 tax form 2011   For more information, see the Instructions to Forms 990 and 4720. 1040 tax form 2011 Excess Business Holdings Private foundations are generally not permitted to hold more than a 20% interest in an unrelated business enterprise. 1040 tax form 2011 They may be subject to an excise tax on the amount of any excess business holdings. 1040 tax form 2011 For purposes of section 4943, for tax years beginning after August 17, 2006, donor advised funds and certain supporting organizations are considered private foundations. 1040 tax form 2011 Donor advised fund. 1040 tax form 2011   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. 1040 tax form 2011 Supporting organizations. 1040 tax form 2011   Only certain supporting organizations are subject to the excess business holdings tax under section 4943. 1040 tax form 2011 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. 1040 tax form 2011 Taxes. 1040 tax form 2011   A private foundation that has excess holdings in a business enterprise may become liable for an excise tax based on the amount of holdings. 1040 tax form 2011 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. 1040 tax form 2011 The excess holdings are determined on the day during the tax year when they were the largest. 1040 tax form 2011   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. 1040 tax form 2011   For more information on the tax on excess business holdings, see the Instructions for Form 4720. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 Taxable distribution. 1040 tax form 2011   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). 1040 tax form 2011    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. 1040 tax form 2011 The tax on taxable distributions applies to distributions occurring in tax years beginning after August 17, 2006. 1040 tax form 2011 Sponsoring organization. 1040 tax form 2011   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. 1040 tax form 2011 Donor advised fund. 1040 tax form 2011    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. 1040 tax form 2011 Exception. 1040 tax form 2011 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. 1040 tax form 2011 The procedure must be designed to ensure that all grants meet the requirements of section 4945(g)(1), (2), or (3). 1040 tax form 2011 Disqualified supporting organization. 1040 tax form 2011   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. 1040 tax form 2011 Tax on sponsoring organization. 1040 tax form 2011   A tax of 20% of the amount of each taxable distribution is imposed on the sponsoring organization. 1040 tax form 2011 Tax on fund manager. 1040 tax form 2011   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. 1040 tax form 2011 Any fund manager who took part in the distribution and is liable for the tax must pay the tax. 1040 tax form 2011 The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. 1040 tax form 2011 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. 1040 tax form 2011   For more information on the tax on taxable distributions of sponsoring organizations, see the Instructions for Form 4720. 1040 tax form 2011 Taxes on Prohibited Benefits Resulting From Donor Advised Fund Distributions Prohibited benefit. 1040 tax form 2011   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. 1040 tax form 2011 The tax on prohibited benefits applies to distributions occurring in tax years beginning after August 17, 2006. 1040 tax form 2011 Donor advisor. 1040 tax form 2011   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. 1040 tax form 2011 Related party. 1040 tax form 2011   A related party includes any family member or 35% controlled entity. 1040 tax form 2011 See the definition of those terms under Disqualified Person , earlier. 1040 tax form 2011 Tax on donor, donor advisor, or related person. 1040 tax form 2011    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). 1040 tax form 2011 The advisor and the party who received the benefit are jointly and severally liable for the tax. 1040 tax form 2011 Tax on fund managers. 1040 tax form 2011   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. 1040 tax form 2011 Any fund manager who took part in the distribution and is liable for the tax must pay the tax. 1040 tax form 2011 The maximum amount of tax on all fund managers for any one taxable distribution is $10,000. 1040 tax form 2011 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. 1040 tax form 2011 Exception. 1040 tax form 2011   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. 1040 tax form 2011   For more information on taxes on prohibited benefits distributed from donor advised funds, see the Instructions for Form 4720. 1040 tax form 2011 Excise Taxes on Private Foundations There is an excise tax on the net investment income of most domestic private foundations. 1040 tax form 2011 Capital gains from appreciation are included in the tax base on private foundation net investment income. 1040 tax form 2011 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. 1040 tax form 2011 Form 990-W is used to calculate the estimated tax. 1040 tax form 2011 In addition, there are several other rules that apply to excise taxes on private foundations. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 For more information on the excise taxes imposed on private foundations, see the Instructions for Form 4720 and the Instructions for Form 990-PF. 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 Both of these excise taxes are reported on Schedule A (Form 990-BL). 1040 tax form 2011 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. 1040 tax form 2011 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. 1040 tax form 2011 These entities must meet section 501(r)(3) requirements at all times during their tax year. 1040 tax form 2011 Section 501(r)(3) requirements pertain to a hospital organization preparing a community health needs assessment (CHNA). 1040 tax form 2011 See Schedule H, Hospitals (Form 990), for details. 1040 tax form 2011 Prev  Up  Next   Home   More Online Publications