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2011 Tax Filing

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2011 Tax Filing

2011 tax filing Publication 901 - Additional Material Table of Contents How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). 2011 tax filing How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. 2011 tax filing By selecting the method that is best for you, you will have quick and easy access to tax help. 2011 tax filing Free help with your tax return. 2011 tax filing   Free help in preparing your return is available nationwide from IRS-certified volunteers. 2011 tax filing The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income, elderly, disabled, and limited English proficient taxpayers. 2011 tax filing The Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 2011 tax filing Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2011 tax filing Some VITA and TCE sites provide taxpayers the opportunity to prepare their return with the assistance of an IRS-certified volunteer. 2011 tax filing To find the nearest VITA or TCE site, visit IRS. 2011 tax filing gov or call 1-800-906-9887 or 1-800-829-1040. 2011 tax filing   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2011 tax filing To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2011 tax filing aarp. 2011 tax filing org/money/taxaide or call 1-888-227-7669. 2011 tax filing   For more information on these programs, go to IRS. 2011 tax filing gov and enter “VITA” in the search box. 2011 tax filing Internet. 2011 tax filing You can access the IRS website at IRS. 2011 tax filing gov 24 hours a day, 7 days a week to: E-file your return. 2011 tax filing Find out about commercial tax preparation and e-file services available free to eligible taxpayers. 2011 tax filing Check the status of your 2012 refund. 2011 tax filing Go to IRS. 2011 tax filing gov and click on Where’s My Refund. 2011 tax filing Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. 2011 tax filing If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). 2011 tax filing Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 2011 tax filing Where's My Refund? has a new look this year! The tool will include a tracker that displays progress through three stages: (1) return received, (2) refund approved, and (3) refund sent. 2011 tax filing Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. 2011 tax filing So in a change from previous filing seasons, you won't get an estimated refund date right away. 2011 tax filing Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. 2011 tax filing You can obtain a free transcript online at IRS. 2011 tax filing gov by clicking on Order a Return or Account Transcript under “Tools. 2011 tax filing ” For a transcript by phone, call 1-800-908-9946 and follow the prompts in the recorded message. 2011 tax filing You will be prompted to provide your SSN or Individual Taxpayer Identification Number (ITIN), date of birth, street address and ZIP code. 2011 tax filing Download forms, including talking tax forms, instructions, and publications. 2011 tax filing Order IRS products. 2011 tax filing Research your tax questions. 2011 tax filing Search publications by topic or keyword. 2011 tax filing Use the Internal Revenue Code, regulations, or other official guidance. 2011 tax filing View Internal Revenue Bulletins (IRBs) published in the last few years. 2011 tax filing Figure your withholding allowances using the IRS Withholding Calculator at www. 2011 tax filing irs. 2011 tax filing gov/individuals. 2011 tax filing Determine if Form 6251 (Alternative Minimum Tax— Individuals), must be filed by using our Alternative Minimum Tax (AMT) Assistant available at IRS. 2011 tax filing gov by typing Alternative Minimum Tax Assistant in the search box. 2011 tax filing Sign up to receive local and national tax news by email. 2011 tax filing Get information on starting and operating a small business. 2011 tax filing Phone. 2011 tax filing Many services are available by phone. 2011 tax filing   Ordering forms, instructions, and publications. 2011 tax filing Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions (limited to 5 years). 2011 tax filing You should receive your order within 10 days. 2011 tax filing Asking tax questions. 2011 tax filing Call the IRS with your tax questions at 1-800-829-1040. 2011 tax filing Solving problems. 2011 tax filing You can get face-to-face help solving tax problems most business days in IRS Taxpayer Assistance Centers (TAC). 2011 tax filing An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. 2011 tax filing Call your local Taxpayer Assistance Center for an appointment. 2011 tax filing To find the number, go to www. 2011 tax filing irs. 2011 tax filing gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. 2011 tax filing TTY/TDD equipment. 2011 tax filing If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. 2011 tax filing The TTY/TDD telephone number is for individuals who are deaf, hard of hearing, or have a speech disability. 2011 tax filing These individuals can also access the IRS through relay services such as the Federal Relay Service at www. 2011 tax filing gsa. 2011 tax filing gov/fedrelay. 2011 tax filing TeleTax topics. 2011 tax filing Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. 2011 tax filing Checking the status of your 2012 refund. 2011 tax filing To check the status of your 2012 refund, call 1-800-829-1954 or 1-800-829-4477 (automated Where's My Refund? information 24 hours a day, 7 days a week). 2011 tax filing Information about your return will generally be available within 24 hours after the IRS receives your e-filed return, or 4 weeks after you mail your paper return. 2011 tax filing If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). 2011 tax filing Have your 2012 tax return handy so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 2011 tax filing Where's My Refund? will provide an actual personalized refund date as soon as the IRS processes your tax return and approves your refund. 2011 tax filing Where's My Refund? includes information for the most recent return filed in the current year and does not include information about amended returns. 2011 tax filing Evaluating the quality of our telephone services. 2011 tax filing To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. 2011 tax filing One method is for a second IRS representative to listen in on or record random telephone calls. 2011 tax filing Another is to ask some callers to complete a short survey at the end of the call. 2011 tax filing Walk-in. 2011 tax filing Some products and services are available on a walk-in basis. 2011 tax filing   Products. 2011 tax filing You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 2011 tax filing Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 2011 tax filing Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. 2011 tax filing Services. 2011 tax filing You can walk in to your local TAC most business days for personal, face-to-face tax help. 2011 tax filing An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 2011 tax filing If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local TAC where you can talk with an IRS representative face-to-face. 2011 tax filing No appointment is necessary—just walk in. 2011 tax filing Before visiting, check www. 2011 tax filing irs. 2011 tax filing gov/localcontacts for hours of operation and services provided. 2011 tax filing If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested by calling your local TAC. 2011 tax filing You can leave a message and a representative will call you back within 2 business days. 2011 tax filing All other issues will be handled without an appointment. 2011 tax filing To call your local TAC, go to  www. 2011 tax filing irs. 2011 tax filing gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. 2011 tax filing Mail. 2011 tax filing You can send your order for forms, instructions, and publications to the address below. 2011 tax filing You should receive a response within 10 days after your request is received. 2011 tax filing  Internal Revenue Service 1201 N. 2011 tax filing Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. 2011 tax filing   The Taxpayer Advocate Service (TAS) is your voice at the IRS. 2011 tax filing Its job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. 2011 tax filing TAS offers free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. 2011 tax filing Remember, the worst thing you can do is nothing at all. 2011 tax filing   TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. 2011 tax filing You face (or your business is facing) an immediate threat of adverse action. 2011 tax filing You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. 2011 tax filing   If you qualify for help, they will do everything they can to get your problem resolved. 2011 tax filing You will be assigned to one advocate who will be with you at every turn. 2011 tax filing TAS has offices in every state, the District of Columbia, and Puerto Rico. 2011 tax filing Although TAS is independent within the IRS, their advocates know how to work with the IRS to get your problems resolved. 2011 tax filing And its services are always free. 2011 tax filing   As a taxpayer, you have rights that the IRS must abide by in its dealings with you. 2011 tax filing The TAS tax toolkit at www. 2011 tax filing TaxpayerAdvocate. 2011 tax filing irs. 2011 tax filing gov can help you understand these rights. 2011 tax filing   If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. 2011 tax filing irs. 2011 tax filing gov/advocate. 2011 tax filing You can also call the toll-free number at 1-877-777-4778. 2011 tax filing Deaf and hard of hearing individuals who have access to TTY/TDD equipment can call 1-800-829-4059. 2011 tax filing These individuals can also access the IRS through relay services such as the Federal Relay Service at www. 2011 tax filing gsa. 2011 tax filing gov/fedrelay. 2011 tax filing   TAS also handles large-scale or systemic problems that affect many taxpayers. 2011 tax filing If you know of one of these broad issues, please report it through the Systemic Advocacy Management System at www. 2011 tax filing irs. 2011 tax filing gov/advocate. 2011 tax filing Low Income Taxpayer Clinics (LITCs). 2011 tax filing   Low Income Taxpayer Clinics (LITCs) are independent from the IRS. 2011 tax filing Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. 2011 tax filing These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. 2011 tax filing Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. 2011 tax filing For more information and to find a clinic near you, see the LITC page on www. 2011 tax filing irs. 2011 tax filing gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. 2011 tax filing This publication is also available by calling 1-800-TAX-FORM (1-800-829-3676) or at your local IRS office. 2011 tax filing Free tax services. 2011 tax filing   Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. 2011 tax filing Learn about free tax information from the IRS, including publications, services, and education and assistance programs. 2011 tax filing The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. 2011 tax filing The majority of the information and services listed in this publication are available to you free of charge. 2011 tax filing If there is a fee associated with a resource or service, it is listed in the publication. 2011 tax filing   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. 2011 tax filing DVD for tax products. 2011 tax filing You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. 2011 tax filing Prior-year forms, instructions, and publications. 2011 tax filing Tax Map: an electronic research tool and finding aid. 2011 tax filing Tax law frequently asked questions. 2011 tax filing Tax Topics from the IRS telephone response system. 2011 tax filing Internal Revenue Code—Title 26 of the U. 2011 tax filing S. 2011 tax filing Code. 2011 tax filing Links to other Internet-based tax research materials. 2011 tax filing Fill-in, print, and save features for most tax forms. 2011 tax filing Internal Revenue Bulletins. 2011 tax filing Toll-free and email technical support. 2011 tax filing Two releases during the year. 2011 tax filing  – The first release will ship the beginning of January 2013. 2011 tax filing  – The final release will ship the beginning of March 2013. 2011 tax filing Purchase the DVD from National Technical Information Service (NTIS) at www. 2011 tax filing irs. 2011 tax filing gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). 2011 tax filing Prev  Up  Next   Home   More Online Publications
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The 2011 Tax Filing

2011 tax filing 2. 2011 tax filing   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. 2011 tax filing ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. 2011 tax filing In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. 2011 tax filing Those cases are called “abusive tax shelters. 2011 tax filing ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. 2011 tax filing Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . 2011 tax filing Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 2011 tax filing Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. 2011 tax filing They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. 2011 tax filing Despite appearances to the contrary, the taxpayer generally risks little. 2011 tax filing Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. 2011 tax filing Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. 2011 tax filing (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. 2011 tax filing ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. 2011 tax filing This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. 2011 tax filing Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. 2011 tax filing However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. 2011 tax filing Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. 2011 tax filing These provisions include the following. 2011 tax filing Disclosure of reportable transactions. 2011 tax filing   You must disclose information for each reportable transaction in which you participate. 2011 tax filing See Reportable Transaction Disclosure Statement , later. 2011 tax filing   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. 2011 tax filing To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. 2011 tax filing   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. 2011 tax filing They must provide this number to all persons to whom they acted as a material advisor. 2011 tax filing They must provide the number at the time the transaction is entered into. 2011 tax filing If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. 2011 tax filing For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. 2011 tax filing Requirement to maintain list. 2011 tax filing   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. 2011 tax filing The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. 2011 tax filing See Regulations section 301. 2011 tax filing 6112-1 for more information (including what information is required to be included on the list). 2011 tax filing Confidentiality privilege. 2011 tax filing   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. 2011 tax filing Appraisal requirement for donated property. 2011 tax filing   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. 2011 tax filing If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. 2011 tax filing If you file electronically, see Form 8453, U. 2011 tax filing S. 2011 tax filing Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. 2011 tax filing For more information about appraisals, including exceptions, see Publication 561. 2011 tax filing Passive activity loss and credit limits. 2011 tax filing   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. 2011 tax filing For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. 2011 tax filing Interest on penalties. 2011 tax filing   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. 2011 tax filing Accounting method restriction. 2011 tax filing   Tax shelters generally cannot use the cash method of accounting. 2011 tax filing Uniform capitalization rules. 2011 tax filing   The uniform capitalization rules generally apply to producing property or acquiring it for resale. 2011 tax filing Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. 2011 tax filing For more information, see Publication 538. 2011 tax filing Denial of deduction for interest on an underpayment due to a reportable transaction. 2011 tax filing   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. 2011 tax filing This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. 2011 tax filing Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. 2011 tax filing The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. 2011 tax filing Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. 2011 tax filing So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. 2011 tax filing In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. 2011 tax filing The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. 2011 tax filing Investor Reporting You may be required to file a reportable transaction disclosure statement. 2011 tax filing Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. 2011 tax filing Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. 2011 tax filing Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). 2011 tax filing In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. 2011 tax filing  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. 2011 tax filing If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. 2011 tax filing If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. 2011 tax filing See Penalty for failure to disclose a reportable transaction , later under Penalties. 2011 tax filing The following discussion briefly describes reportable transactions. 2011 tax filing For more details, see the Instructions for Form 8886. 2011 tax filing Reportable transaction. 2011 tax filing   A reportable transaction is any of the following. 2011 tax filing A listed transaction. 2011 tax filing A confidential transaction. 2011 tax filing A transaction with contractual protection. 2011 tax filing A loss transaction. 2011 tax filing A transaction of interest entered into after November 1, 2006. 2011 tax filing Note. 2011 tax filing Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. 2011 tax filing Listed transaction. 2011 tax filing   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. 2011 tax filing These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. 2011 tax filing For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2009-31_IRB/ar07. 2011 tax filing html. 2011 tax filing Confidential transaction. 2011 tax filing   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. 2011 tax filing A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. 2011 tax filing The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. 2011 tax filing Transaction with contractual protection. 2011 tax filing   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. 2011 tax filing For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2007-07_IRB/ar15. 2011 tax filing html. 2011 tax filing Loss transaction. 2011 tax filing   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. 2011 tax filing A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. 2011 tax filing   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. 2011 tax filing For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2004-50_IRB/ar11. 2011 tax filing html. 2011 tax filing Transaction of interest. 2011 tax filing   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. 2011 tax filing The IRS has identified the following transactions of interest. 2011 tax filing “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. 2011 tax filing R. 2011 tax filing B. 2011 tax filing 545, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2007-36_IRB/ar20. 2011 tax filing html. 2011 tax filing Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. 2011 tax filing R. 2011 tax filing B. 2011 tax filing 544, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2007-36_IRB/ar19. 2011 tax filing html. 2011 tax filing Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. 2011 tax filing R. 2011 tax filing B. 2011 tax filing 1194, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2008-47_IRB/ar11. 2011 tax filing html. 2011 tax filing Certain transactions involving a U. 2011 tax filing S. 2011 tax filing taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. 2011 tax filing R. 2011 tax filing B. 2011 tax filing 312, available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2009-03_IRB/ar10. 2011 tax filing html. 2011 tax filing   For updates to this list, go to www. 2011 tax filing irs. 2011 tax filing gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. 2011 tax filing Penalties Investing in an abusive tax shelter may lead to substantial expenses. 2011 tax filing First, the promoter generally charges a substantial fee. 2011 tax filing If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. 2011 tax filing You may also be subject to the penalty for failure to pay tax. 2011 tax filing These penalties are explained in the following paragraphs. 2011 tax filing Accuracy-related penalties. 2011 tax filing   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). 2011 tax filing Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. 2011 tax filing Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. 2011 tax filing   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. 2011 tax filing   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). 2011 tax filing Negligence or disregard of rules or regulations. 2011 tax filing   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. 2011 tax filing The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. 2011 tax filing    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. 2011 tax filing It also includes any failure to keep adequate books and records. 2011 tax filing A return position that has a reasonable basis is not negligence. 2011 tax filing   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. 2011 tax filing   The penalty for disregard of rules and regulations can be avoided if all the following are true. 2011 tax filing You keep adequate books and records. 2011 tax filing You have a reasonable basis for your position on the tax issue. 2011 tax filing You make an adequate disclosure of your position. 2011 tax filing Use Form 8275 to make your disclosure and attach it to your return. 2011 tax filing To disclose a position contrary to a regulation, use Form 8275-R. 2011 tax filing Use Form 8886 to disclose a reportable transaction (discussed earlier). 2011 tax filing Substantial understatement of tax. 2011 tax filing   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. 2011 tax filing An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. 2011 tax filing The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. 2011 tax filing   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. 2011 tax filing In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. 2011 tax filing Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. 2011 tax filing   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. 2011 tax filing An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. 2011 tax filing Substantial valuation misstatement. 2011 tax filing   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. 2011 tax filing The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. 2011 tax filing You underpaid your tax by more than $5,000 because of the misstatement. 2011 tax filing You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. 2011 tax filing   You may be assessed a penalty of 40% for a gross valuation misstatement. 2011 tax filing If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. 2011 tax filing The penalty rate is also 40% if the property's correct value or adjusted basis is zero. 2011 tax filing Transaction lacking economic substance. 2011 tax filing   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. 2011 tax filing For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. 2011 tax filing   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. 2011 tax filing   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. 2011 tax filing   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. 2011 tax filing Relevant facts include any facts affecting the tax treatment of the transaction. 2011 tax filing    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. 2011 tax filing Undisclosed foreign financial asset understatement. 2011 tax filing   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. 2011 tax filing An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. 2011 tax filing The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. 2011 tax filing Any foreign business you control, reportable on Form 5471, Information Return of U. 2011 tax filing S. 2011 tax filing Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. 2011 tax filing S. 2011 tax filing Persons With Respect to Certain Foreign Partnerships. 2011 tax filing Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. 2011 tax filing S. 2011 tax filing Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. 2011 tax filing Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. 2011 tax filing    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. 2011 tax filing See the Instructions for Form 8938 for details. 2011 tax filing    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. 2011 tax filing Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. 2011 tax filing Penalty for incorrect appraisals. 2011 tax filing   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. 2011 tax filing For details on the penalty amount and exceptions, see Publication 561. 2011 tax filing Penalty for failure to disclose a reportable transaction. 2011 tax filing   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). 2011 tax filing For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). 2011 tax filing This penalty is in addition to any other penalty that may be imposed. 2011 tax filing   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. 2011 tax filing For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. 2011 tax filing irs. 2011 tax filing gov/irb/2007-09_IRB/ar12. 2011 tax filing html. 2011 tax filing Accuracy-related penalty for a reportable transaction understatement. 2011 tax filing   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. 2011 tax filing This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. 2011 tax filing The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. 2011 tax filing You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. 2011 tax filing The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. 2011 tax filing   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. 2011 tax filing Civil fraud penalty. 2011 tax filing   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. 2011 tax filing Joint return. 2011 tax filing   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. 2011 tax filing Failure to pay tax. 2011 tax filing   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. 2011 tax filing Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. 2011 tax filing Prev  Up  Next   Home   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