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Federal Tax Forms 1040ez

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Federal Tax Forms 1040ez

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

Federal tax forms 1040ez 3. Federal tax forms 1040ez   Exclusions From Gross Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident AliensForeign Earned Income and Housing Amount Nonresident AliensInterest Income Dividend Income Services Performed for Foreign Employer Gambling Winnings From Dog or Horse Racing Gain From the Sale of Your Main Home Scholarships and Fellowship GrantsExpenses that do not qualify. Federal tax forms 1040ez Introduction Resident and nonresident aliens are allowed exclusions from gross income if they meet certain conditions. Federal tax forms 1040ez An exclusion from gross income is generally income you receive that is not included in your U. Federal tax forms 1040ez S. Federal tax forms 1040ez income and is not subject to U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax. Federal tax forms 1040ez This chapter covers some of the more common exclusions allowed to resident and nonresident aliens. Federal tax forms 1040ez Topics - This chapter discusses: Nontaxable interest, Nontaxable dividends, Certain compensation paid by a foreign employer, Gain from sale of home, and Scholarships and fellowship grants. Federal tax forms 1040ez Useful Items - You may want to see: Publication 54 Tax Guide for U. Federal tax forms 1040ez S. Federal tax forms 1040ez Citizens and Resident Aliens Abroad 523 Selling Your Home See chapter 12 for information about getting these publications. Federal tax forms 1040ez Resident Aliens Resident aliens may be able to exclude the following items from their gross income. Federal tax forms 1040ez Foreign Earned Income and Housing Amount If you are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months, you may qualify for the foreign earned income exclusion. Federal tax forms 1040ez The exclusion is $97,600 in 2013. Federal tax forms 1040ez In addition, you may be able to exclude or deduct certain foreign housing amounts. Federal tax forms 1040ez You may also qualify if you are a bona fide resident of a foreign country and you are a citizen or national of a country with which the United States has an income tax treaty. Federal tax forms 1040ez For more information, see Publication 54. Federal tax forms 1040ez Foreign country. Federal tax forms 1040ez    A foreign country is any territory under the sovereignty of a government other than that of the United States. Federal tax forms 1040ez   The term “foreign country” includes the country's territorial waters and airspace, but not international waters and the airspace above them. Federal tax forms 1040ez It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. Federal tax forms 1040ez   The term “foreign country” does not include U. Federal tax forms 1040ez S. Federal tax forms 1040ez possessions or territories. Federal tax forms 1040ez It does not include the Antarctic region. Federal tax forms 1040ez Nonresident Aliens Nonresident aliens can exclude the following items from their gross income. Federal tax forms 1040ez Interest Income Interest income that is not connected with a U. Federal tax forms 1040ez S. Federal tax forms 1040ez trade or business is excluded from income if it is from: Deposits (including certificates of deposit) with persons in the banking business, Deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law (if the interest paid or credited can be deducted by the association), and Amounts held by an insurance company under an agreement to pay interest on them. Federal tax forms 1040ez State and local government obligations. Federal tax forms 1040ez   Interest on obligations of a state or political subdivision, the District of Columbia, or a U. Federal tax forms 1040ez S. Federal tax forms 1040ez possession, generally is not included in income. Federal tax forms 1040ez However, interest on certain private activity bonds, arbitrage bonds, and certain bonds not in registered form is included in income. Federal tax forms 1040ez Portfolio interest. Federal tax forms 1040ez   Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. Federal tax forms 1040ez To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. Federal tax forms 1040ez Note. Federal tax forms 1040ez For obligations issued after March 18, 2012, portfolio interest does not include interest paid on debt that is not in registered form. Federal tax forms 1040ez Before March 19, 2012, portfolio interest included interest on certain registered and nonregistered (bearer) bonds if the obligations meet the requirements described below. Federal tax forms 1040ez Obligations in registered form. Federal tax forms 1040ez   Portfolio interest includes interest paid on an obligation that is in registered form, and for which you have received documentation that the beneficial owner of the obligation is not a United States person. Federal tax forms 1040ez   Generally, an obligation is in registered form if: (i) the obligation is registered as to both principal and any stated interest with the issuer (or its agent) and any transfer of the obligation may be effected only by surrender of the old obligation and reissuance to the new holder; (ii) the right to principal and stated interest with respect to the obligation may be transferred only through a book entry system maintained by the issuer or its agent; or (iii) the obligation is registered as to both principal and stated interest with the issuer or its agent and can be transferred both by surrender and reissuance and through a book entry system. Federal tax forms 1040ez   An obligation that would otherwise be considered to be in registered form is not considered to be in registered form as of a particular time if it can be converted at any time in the future into an obligation that is not in registered form. Federal tax forms 1040ez For more information on whether obligations are considered to be in registered form, see Portfolio interest in Publication 515. Federal tax forms 1040ez Obligations not in registered form. Federal tax forms 1040ez    For obligations issued before March 19, 2012, interest on an obligation that is not in registered form (bearer obligation) is portfolio interest if the obligation is foreign-targeted. Federal tax forms 1040ez A bearer obligation is foreign-targeted if: There are arrangements to ensure that the obligation will be sold, or resold in connection with the original issue, only to a person who is not a United States person, Interest on the obligation is payable only outside the United States and its possessions, and The face of the obligation contains a statement that any United States person who holds the obligation will be subject to limits under the United States income tax laws. Federal tax forms 1040ez   Documentation is not required for interest on bearer obligations to qualify as portfolio interest. Federal tax forms 1040ez In some cases, however, you may need documentation for purposes of Form 1099 reporting and backup withholding. Federal tax forms 1040ez Interest that does not qualify as portfolio interest. Federal tax forms 1040ez   Payments to certain persons and payments of contingent interest do not qualify as portfolio interest. Federal tax forms 1040ez You must withhold at the statutory rate on such payments unless some other exception, such as a treaty provision, applies. Federal tax forms 1040ez Contingent interest. Federal tax forms 1040ez   Portfolio interest does not include contingent interest. Federal tax forms 1040ez Contingent interest is either of the following: Interest that is determined by reference to: Any receipts, sales, or other cash flow of the debtor or related person, Income or profits of the debtor or related person, Any change in value of any property of the debtor or a related person, or Any dividend, partnership distributions, or similar payments made by the debtor or a related person. Federal tax forms 1040ez For exceptions, see Internal Revenue Code section 871(h)(4)(C). Federal tax forms 1040ez Any other type of contingent interest that is identified by the Secretary of the Treasury in regulations. Federal tax forms 1040ez Related persons. Federal tax forms 1040ez   Related persons include the following. Federal tax forms 1040ez Members of a family, including only brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. Federal tax forms 1040ez ), and lineal descendants (children, grandchildren, etc. Federal tax forms 1040ez ). Federal tax forms 1040ez Any person who is a party to any arrangement undertaken for the purpose of avoiding the contingent interest rules. Federal tax forms 1040ez Certain corporations, partnerships, and other entities. Federal tax forms 1040ez For details, see Nondeductible Loss in chapter 2 of Publication 544. Federal tax forms 1040ez Exception for existing debt. Federal tax forms 1040ez   Contingent interest does not include interest paid or accrued on any debt with a fixed term that was issued: On or before April 7, 1993, or After April 7, 1993, pursuant to a written binding contract in effect on that date and at all times thereafter before that debt was issued. Federal tax forms 1040ez Dividend Income The following dividend income is exempt from the 30% tax. Federal tax forms 1040ez Certain dividends paid by foreign corporations. Federal tax forms 1040ez   There is no 30% tax on U. Federal tax forms 1040ez S. Federal tax forms 1040ez source dividends you receive from a foreign corporation. Federal tax forms 1040ez See Second exception under Dividends in chapter 2 for how to figure the amount of U. Federal tax forms 1040ez S. Federal tax forms 1040ez source dividends. Federal tax forms 1040ez Certain interest-related dividends. Federal tax forms 1040ez   There is no 30% tax on interest-related dividends from sources within the United States that you receive from a mutual fund or other regulated investment company in 2013. Federal tax forms 1040ez The mutual fund will designate in writing which dividends are interest-related dividends. Federal tax forms 1040ez Certain short-term capital gain dividends. Federal tax forms 1040ez   There may not be any 30% tax on certain short-term capital gain dividends from sources within the United States that you receive from a mutual fund or other regulated investment company. Federal tax forms 1040ez The mutual fund will designate in writing which dividends are short-term capital gain dividends. Federal tax forms 1040ez This tax relief will not apply to you if you are present in the United States for 183 days or more during your tax year. Federal tax forms 1040ez Services Performed for Foreign Employer If you were paid by a foreign employer, your U. Federal tax forms 1040ez S. Federal tax forms 1040ez source income may be exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax, but only if you meet one of the situations discussed next. Federal tax forms 1040ez Employees of foreign persons, organizations, or offices. Federal tax forms 1040ez   Income for personal services performed in the United States as a nonresident alien is not considered to be from U. Federal tax forms 1040ez S. Federal tax forms 1040ez sources and is tax exempt if you meet all three of the following conditions. Federal tax forms 1040ez You perform personal services as an employee of or under a contract with a nonresident alien individual, foreign partnership, or foreign corporation, not engaged in a trade or business in the United States; or you work for an office or place of business maintained in a foreign country or possession of the United States by a U. Federal tax forms 1040ez S. Federal tax forms 1040ez corporation, a U. Federal tax forms 1040ez S. Federal tax forms 1040ez partnership, or a U. Federal tax forms 1040ez S. Federal tax forms 1040ez citizen or resident. Federal tax forms 1040ez You perform these services while you are a nonresident alien temporarily present in the United States for a period or periods of not more than a total of 90 days during the tax year. Federal tax forms 1040ez Your pay for these services is not more than $3,000. Federal tax forms 1040ez If you do not meet all three conditions, your income from personal services performed in the United States is U. Federal tax forms 1040ez S. Federal tax forms 1040ez source income and is taxed according to the rules in chapter 4. Federal tax forms 1040ez   If your pay for these services is more than $3,000, the entire amount is income from a trade or business within the United States. Federal tax forms 1040ez To find if your pay is more than $3,000, do not include any amounts you get from your employer for advances or reimbursements of business travel expenses, if you were required to and did account to your employer for those expenses. Federal tax forms 1040ez If the advances or reimbursements are more than your expenses, include the excess in your pay for these services. Federal tax forms 1040ez   A day means a calendar day during any part of which you are physically present in the United States. Federal tax forms 1040ez Example 1. Federal tax forms 1040ez During 2013, Henry Smythe, a nonresident alien from a nontreaty country, worked for an overseas office of a U. Federal tax forms 1040ez S. Federal tax forms 1040ez partnership. Federal tax forms 1040ez Henry, who uses the calendar year as his tax year, was temporarily present in the United States for 60 days during 2013 performing personal services for the overseas office of the partnership. Federal tax forms 1040ez That office paid him a total gross salary of $2,800 for those services. Federal tax forms 1040ez During 2013, he was not engaged in a trade or business in the United States. Federal tax forms 1040ez The salary is not considered U. Federal tax forms 1040ez S. Federal tax forms 1040ez source income and is exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax. Federal tax forms 1040ez Example 2. Federal tax forms 1040ez The facts are the same as in Example 1, except that Henry's total gross salary for the services performed in the United States during 2013 was $4,500. Federal tax forms 1040ez He received $2,875 in 2013, and $1,625 in 2014. Federal tax forms 1040ez During 2013, he was engaged in a trade or business in the United States because the compensation for his personal services in the United States was more than $3,000. Federal tax forms 1040ez Henry's salary is U. Federal tax forms 1040ez S. Federal tax forms 1040ez source income and is taxed under the rules in chapter 4. Federal tax forms 1040ez Crew members. Federal tax forms 1040ez   Compensation for services performed by a nonresident alien in connection with the individual's temporary presence in the United States as a regular crew member of a foreign vessel (for example, a boat or ship) engaged in transportation between the United States and a foreign country or U. Federal tax forms 1040ez S. Federal tax forms 1040ez possession is not U. Federal tax forms 1040ez S. Federal tax forms 1040ez source income and is exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax. Federal tax forms 1040ez This exemption does not apply to compensation for services performed on foreign aircraft. Federal tax forms 1040ez Students and exchange visitors. Federal tax forms 1040ez   Nonresident alien students and exchange visitors present in the United States under “F,” “J,” or “Q” visas can exclude from gross income pay received from a foreign employer. Federal tax forms 1040ez   This group includes bona fide students, scholars, trainees, teachers, professors, research assistants, specialists, or leaders in a field of specialized knowledge or skill, or persons of similar description. Federal tax forms 1040ez It also includes the alien's spouse and minor children if they come with the alien or come later to join the alien. Federal tax forms 1040ez   A nonresident alien temporarily present in the United States under a “J” visa includes an alien individual entering the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. Federal tax forms 1040ez Foreign employer. Federal tax forms 1040ez   A foreign employer is: A nonresident alien individual, foreign partnership, or foreign corporation, or An office or place of business maintained in a foreign country or in a U. Federal tax forms 1040ez S. Federal tax forms 1040ez possession by a U. Federal tax forms 1040ez S. Federal tax forms 1040ez corporation, a U. Federal tax forms 1040ez S. Federal tax forms 1040ez partnership, or an individual who is a U. Federal tax forms 1040ez S. Federal tax forms 1040ez citizen or resident. Federal tax forms 1040ez   The term “foreign employer” does not include a foreign government. Federal tax forms 1040ez Pay from a foreign government that is exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez income tax is discussed in chapter 10. Federal tax forms 1040ez Income from certain annuities. Federal tax forms 1040ez   Do not include in income any annuity received under a qualified annuity plan or from a qualified trust exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez income tax if you meet both of the following conditions. Federal tax forms 1040ez You receive the annuity only because: You performed personal services outside the United States while you were a nonresident alien, or You performed personal services inside the United States while you were a nonresident alien and you met the three conditions, described earlier, under Employees of foreign persons, organizations, or offices . Federal tax forms 1040ez At the time the first amount is paid as an annuity under the plan (or by the trust), 90% or more of the employees for whom contributions or benefits are provided under the annuity plan (or under the plan of which the trust is a part) are U. Federal tax forms 1040ez S. Federal tax forms 1040ez citizens or residents. Federal tax forms 1040ez   If the annuity qualifies under condition (1) but not condition (2) above, you do not have to include the amount in income if: You are a resident of a country that gives a substantially equal exclusion to U. Federal tax forms 1040ez S. Federal tax forms 1040ez citizens and residents, or You are a resident of a beneficiary developing country under Title V of the Trade Act of 1974. Federal tax forms 1040ez   If you are not sure whether the annuity is from a qualified annuity plan or qualified trust, ask the person who made the payment. Federal tax forms 1040ez Income affected by treaties. Federal tax forms 1040ez   Income of any kind that is exempt from U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax under a treaty to which the United States is a party is excluded from your gross income. Federal tax forms 1040ez Income on which the tax is only limited by treaty, however, is included in gross income. Federal tax forms 1040ez See chapter 9. Federal tax forms 1040ez Gambling Winnings From Dog or Horse Racing You can exclude from your gross income winnings from legal wagers initiated outside the United States in a parimutuel pool with respect to a live horse or dog race in the United States. Federal tax forms 1040ez Gain From the Sale of Your Main Home If you sold your main home, you may be able to exclude up to $250,000 of the gain on the sale of your home. Federal tax forms 1040ez If you are married and file a joint return, you may be able to exclude up to $500,000. Federal tax forms 1040ez For information on the requirements for this exclusion, see Publication 523. Federal tax forms 1040ez This exclusion does not apply to nonresident aliens who are subject to the expatriation tax rules discussed in chapter 4. Federal tax forms 1040ez Scholarships and Fellowship Grants If you are a candidate for a degree, you may be able to exclude from your income part or all of the amounts you receive as a qualified scholarship. Federal tax forms 1040ez The rules discussed here apply to both resident and nonresident aliens. Federal tax forms 1040ez If a nonresident alien receives a grant that is not from U. Federal tax forms 1040ez S. Federal tax forms 1040ez sources, it is not subject to U. Federal tax forms 1040ez S. Federal tax forms 1040ez tax. Federal tax forms 1040ez See Scholarships, Grants, Prizes, and Awards in chapter 2 to determine whether your grant is from U. Federal tax forms 1040ez S. Federal tax forms 1040ez sources. Federal tax forms 1040ez A scholarship or fellowship is excludable from income only if: You are a candidate for a degree at an eligible educational institution, and You use the scholarship or fellowship to pay qualified education expenses. Federal tax forms 1040ez Candidate for a degree. Federal tax forms 1040ez   You are a candidate for a degree if you: Attend a primary or secondary school or are pursuing a degree at a college or university, or Attend an accredited educational institution that is authorized to provide: A program that is acceptable for full credit toward a bachelor's or higher degree, or A program of training to prepare students for gainful employment in a recognized occupation. Federal tax forms 1040ez Eligible educational institution. Federal tax forms 1040ez   An eligible educational institution is one that maintains a regular faculty and curriculum and normally has a regularly enrolled body of students in attendance at the place where it carries on its educational activities. Federal tax forms 1040ez Qualified education expenses. Federal tax forms 1040ez   These are expenses for: Tuition and fees required to enroll at or attend an eligible educational institution, and Course-related expenses, such as fees, books, supplies, and equipment that are required for the courses at the eligible educational institution. Federal tax forms 1040ez These items must be required of all students in your course of instruction. Federal tax forms 1040ez However, in order for these to be qualified education expenses, the terms of the scholarship or fellowship cannot require that it be used for other purposes, such as room and board, or specify that it cannot be used for tuition or course-related expenses. Federal tax forms 1040ez Expenses that do not qualify. Federal tax forms 1040ez   Qualified education expenses do not include the cost of: Room and board, Travel, Research, Clerical help, or Equipment and other expenses that are not required for enrollment in or attendance at an eligible educational institution. Federal tax forms 1040ez This is true even if the fee must be paid to the institution as a condition of enrollment or attendance. Federal tax forms 1040ez Scholarship or fellowship amounts used to pay these costs are taxable. Federal tax forms 1040ez Amounts used to pay expenses that do not qualify. Federal tax forms 1040ez   A scholarship amount used to pay any expense that does not qualify is taxable, even if the expense is a fee that must be paid to the institution as a condition of enrollment or attendance. Federal tax forms 1040ez Payment for services. Federal tax forms 1040ez   You cannot exclude from income the portion of any scholarship, fellowship, or tuition reduction that represents payment for past, present, or future teaching, research, or other services. Federal tax forms 1040ez This is true even if all candidates for a degree are required to perform the services as a condition for receiving the degree. Federal tax forms 1040ez Example. Federal tax forms 1040ez On January 7, Maria Gomez is notified of a scholarship of $2,500 for the spring semester. Federal tax forms 1040ez As a condition for receiving the scholarship, Maria must serve as a part-time teaching assistant. Federal tax forms 1040ez Of the $2,500 scholarship, $1,000 represents payment for her services. Federal tax forms 1040ez Assuming that Maria meets all other conditions, she can exclude no more than $1,500 from income as a qualified scholarship. Federal tax forms 1040ez Prev  Up  Next   Home   More Online Publications