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Online 1040x Filing

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Online 1040x Filing

Online 1040x filing 4. Online 1040x filing   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Online 1040x filing Higher income taxpayers. Online 1040x filing Minimum required for higher income taxpayers. Online 1040x filing Estate or trust payments of estimated tax. Online 1040x filing Lowering or eliminating the penalty. Online 1040x filing ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. Online 1040x filing Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. Online 1040x filing You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Online 1040x filing No penalty. Online 1040x filing   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Online 1040x filing The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Online 1040x filing (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Online 1040x filing ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. Online 1040x filing Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Online 1040x filing You did not have a tax liability for 2012. Online 1040x filing You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Online 1040x filing IRS can figure the penalty for you. Online 1040x filing   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. Online 1040x filing Generally, the IRS will figure the penalty for you and send you a bill. Online 1040x filing   You only need to figure your penalty in the following three situations. Online 1040x filing You are requesting a waiver of part, but not all, of the penalty. Online 1040x filing You are using the annualized income installment method to figure the penalty. Online 1040x filing You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Online 1040x filing However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. Online 1040x filing See Form 2210 , later. Online 1040x filing Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. Online 1040x filing Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. Online 1040x filing General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. Online 1040x filing (Your 2012 tax return must cover a 12-month period. Online 1040x filing ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Online 1040x filing Special rules for certain individuals. Online 1040x filing   There are special rules for farmers and fishermen and certain higher income taxpayers. Online 1040x filing Farmers and fishermen. Online 1040x filing   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. Online 1040x filing   See Farmers and Fishermen , later. Online 1040x filing Higher income taxpayers. Online 1040x filing   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . Online 1040x filing This rule does not apply to farmers or fishermen. Online 1040x filing   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Online 1040x filing Penalty figured separately for each period. Online 1040x filing   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. Online 1040x filing This is true even if you are due a refund when you file your income tax return. Online 1040x filing Example. Online 1040x filing You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Online 1040x filing Early in January 2014, you made an estimate of your total 2013 tax. Online 1040x filing Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Online 1040x filing On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. Online 1040x filing Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Online 1040x filing You do not owe a penalty for your payment due January 15, 2014. Online 1040x filing However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. Online 1040x filing Minimum required each period. Online 1040x filing   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. Online 1040x filing 5% of your 2013 tax, or 25% of your 2012 tax. Online 1040x filing (Your 2012 tax return must cover a 12-month period. Online 1040x filing ) Minimum required for higher income taxpayers. Online 1040x filing   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Online 1040x filing 5% for 25% in (2) under General Rule . Online 1040x filing When penalty is charged. Online 1040x filing   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. Online 1040x filing If a payment is mailed, the date of the U. Online 1040x filing S. Online 1040x filing postmark is considered the date of payment. Online 1040x filing   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Online 1040x filing ) is considered to be the date of payment. Online 1040x filing Estate or trust payments of estimated tax. Online 1040x filing   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. Online 1040x filing Amended returns. Online 1040x filing    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. Online 1040x filing If you file an amended return after the due date of the original return, use the tax shown on the original return. Online 1040x filing   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. Online 1040x filing This rule applies only if both original separate returns were filed on time. Online 1040x filing 2012 separate returns and 2013 joint return. Online 1040x filing    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. Online 1040x filing You filed a separate return if you filed as single, head of household, or married filing separately. Online 1040x filing 2012 joint return and 2013 separate returns. Online 1040x filing    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. Online 1040x filing You are filing a separate return if you file as single, head of household, or married filing separately. Online 1040x filing   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. Online 1040x filing Then multiply the tax on the joint return by the following fraction. Online 1040x filing   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. Online 1040x filing Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Online 1040x filing Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Online 1040x filing For 2013, they file married filing separately. Online 1040x filing Lisa figures her share of the tax on the 2012 joint return as follows. Online 1040x filing 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. Online 1040x filing 67% Lisa's part of tax on joint return ($6,484 × 88. Online 1040x filing 67%) $ 5,749 Form 2210. Online 1040x filing   In most cases, you do not need to file Form 2210. Online 1040x filing The IRS will figure the penalty for you and send you a bill. Online 1040x filing If you want us to figure the penalty for you, leave the penalty line on your return blank. Online 1040x filing Do not file Form 2210. Online 1040x filing   To determine if you should file Form 2210, see Part II of Form 2210. Online 1040x filing If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. Online 1040x filing If you use Form 2210, you cannot file Form 1040EZ. Online 1040x filing   On Form 1040, enter the amount of your penalty on line 77. Online 1040x filing If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Online 1040x filing If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Online 1040x filing   On Form 1040A, enter the amount of your penalty on line 46. Online 1040x filing If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Online 1040x filing If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Online 1040x filing Lowering or eliminating the penalty. Online 1040x filing    You may be able to lower or eliminate your penalty if you file Form 2210. Online 1040x filing You must file Form 2210 with your return if any of the following applies. Online 1040x filing You request a waiver. Online 1040x filing See Waiver of Penalty , later. Online 1040x filing You use the annualized income installment method. Online 1040x filing See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Online 1040x filing You use your actual withholding for each payment period for estimated tax purposes. Online 1040x filing See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Online 1040x filing You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. Online 1040x filing Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. Online 1040x filing Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. Online 1040x filing Total tax for 2013. Online 1040x filing   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Online 1040x filing    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Online 1040x filing Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Online 1040x filing The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Online 1040x filing Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Online 1040x filing   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Online 1040x filing   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Online 1040x filing Note. Online 1040x filing When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. Online 1040x filing Paid through withholding. Online 1040x filing    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. Online 1040x filing Add to that any write-in amount on line 72 identified as “Form 8689. Online 1040x filing ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. Online 1040x filing On Form 1040EZ, it is the amount on line 7. Online 1040x filing No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Online 1040x filing S. Online 1040x filing citizen or resident for the whole year. Online 1040x filing For this rule to apply, your tax year must have included all 12 months of the year. Online 1040x filing You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Online 1040x filing Example. Online 1040x filing Ray, who is single and 22 years old, was unemployed for a few months during 2012. Online 1040x filing He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Online 1040x filing He had no other income. Online 1040x filing Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). Online 1040x filing He filed a return only to have his withheld income tax refunded to him. Online 1040x filing In 2013, Ray began regular work as an independent contractor. Online 1040x filing Ray made no estimated tax payments in 2013. Online 1040x filing Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. Online 1040x filing Total tax for 2012. Online 1040x filing   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Online 1040x filing    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Online 1040x filing Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. Online 1040x filing The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. Online 1040x filing Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. Online 1040x filing   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. Online 1040x filing   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Online 1040x filing Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Online 1040x filing If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Online 1040x filing Example. Online 1040x filing The tax on Lori Lane's 2012 return was $12,400. Online 1040x filing Her AGI was not more than $150,000 for either 2012 or 2013. Online 1040x filing The tax on her 2013 return (Form 1040, line 55) is $13,044. Online 1040x filing Line 56 (self-employment tax) is $8,902. Online 1040x filing Her 2013 total tax is $21,946. Online 1040x filing For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Online 1040x filing 90% of her 2013 tax is $19,751. Online 1040x filing Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. Online 1040x filing The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. Online 1040x filing Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Online 1040x filing Different 2012 filing status. Online 1040x filing    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. Online 1040x filing Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. Online 1040x filing If you qualify to use this method, it will result in the same penalty amount as the regular method. Online 1040x filing However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Online 1040x filing You can use the short method only if you meet one of the following requirements. Online 1040x filing You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Online 1040x filing You paid the same amount of estimated tax on each of the four payment due dates. Online 1040x filing If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. Online 1040x filing Note. Online 1040x filing If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. Online 1040x filing However, if the payment was only a few days early, the difference is likely to be small. Online 1040x filing You cannot use the short method if any of the following apply. Online 1040x filing You made any estimated tax payments late. Online 1040x filing You checked box C or D in Part II of Form 2210. Online 1040x filing You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Online 1040x filing S. Online 1040x filing income tax withholding. Online 1040x filing If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Online 1040x filing Also, you cannot use your actual withholding during each period to figure your payments for each period. Online 1040x filing These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Online 1040x filing Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Online 1040x filing Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. Online 1040x filing You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. Online 1040x filing You paid one or more estimated tax payments on a date after the due date. Online 1040x filing You paid at least one, but less than four, installments of estimated tax. Online 1040x filing You paid estimated tax payments in un- equal amounts. Online 1040x filing You use the annualized income installment method to figure your underpayment for each payment period. Online 1040x filing You use your actual withholding during each payment period to figure your payments. Online 1040x filing Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. Online 1040x filing Enter the results on line 27 of Section B. Online 1040x filing Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. Online 1040x filing Complete lines 20 through 26 of the first column before going to line 20 of the next column. Online 1040x filing Required installments—line 18. Online 1040x filing   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Online 1040x filing This method—the regular method—is the one to use if you received your income evenly throughout the year. Online 1040x filing   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Online 1040x filing First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Online 1040x filing See Annualized Income Installment Method (Schedule AI), later. Online 1040x filing Payments made—line 19. Online 1040x filing   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. Online 1040x filing For special rules for figuring your payments, see Form 2210 instructions for line 19. Online 1040x filing   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. Online 1040x filing If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. Online 1040x filing Actual withholding method. Online 1040x filing    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Online 1040x filing You can make this choice separately for the tax withheld from your wages and for all other withholding. Online 1040x filing This includes any excess social security and tier 1 RRTA tax withheld. Online 1040x filing   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Online 1040x filing   If you use your actual withholding, you must check box D in Form 2210, Part II. Online 1040x filing Then complete Form 2210 using the regular method (Part IV) and file it with your return. Online 1040x filing Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. Online 1040x filing The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. Online 1040x filing For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. Online 1040x filing A 3% rate applies to all four periods. Online 1040x filing Payments. Online 1040x filing    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. Online 1040x filing For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Online 1040x filing You can use the table in the Form 2210 instructions to make your list. Online 1040x filing Follow those instructions for listing income tax withheld and payments made with your return. Online 1040x filing Use the list to determine when each underpayment was paid. Online 1040x filing   If you mail your estimated tax payments, use the date of the U. Online 1040x filing S. Online 1040x filing postmark as the date of payment. Online 1040x filing Line 1b. Online 1040x filing   Apply the payments listed to underpayment balance in the first column until it is fully paid. Online 1040x filing Apply payments in the order made. Online 1040x filing Figuring the penalty. Online 1040x filing   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Online 1040x filing On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. Online 1040x filing On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Online 1040x filing If no payments are applied, figure the penalty on the amount on line 1a. Online 1040x filing Aid for counting days. Online 1040x filing    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Online 1040x filing Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. Online 1040x filing In the same manner, find the number for the date the payment was made. Online 1040x filing Subtract the due date “number” from the payment date “number. Online 1040x filing ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. Online 1040x filing Table 4-1. Online 1040x filing Calendar To Determine the Number of Days a Payment Is Late Instructions. Online 1040x filing Use this table with Form 2210 if you are completing Part IV, Section B. Online 1040x filing First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. Online 1040x filing Then, in the same manner, find the number for the date the payment was made. Online 1040x filing Finally, subtract the due date number from the payment date number. Online 1040x filing The result is the number of days the payment is late. Online 1040x filing Example. Online 1040x filing The payment due date is June 15 (61). Online 1040x filing The payment was made on November 4 (203). Online 1040x filing The payment is 142 days late (203 – 61). Online 1040x filing Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Online 1040x filing Sept. Online 1040x filing Oct. Online 1040x filing Nov. Online 1040x filing Dec. Online 1040x filing Jan. Online 1040x filing Feb. Online 1040x filing Mar. Online 1040x filing Apr. Online 1040x filing 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. Online 1040x filing Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. Online 1040x filing To figure your underpayment using this method, complete Form 2210, Schedule AI. Online 1040x filing Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. Online 1040x filing If you use the annualized income installment method, you must check box C in Part II of Form 2210. Online 1040x filing Also, you must attach Form 2210 and Schedule AI to your return. Online 1040x filing If you use Schedule AI for any payment due date, you must use it for all payment due dates. Online 1040x filing Completing Schedule AI. Online 1040x filing   Follow the Form 2210 instructions to complete Schedule AI. Online 1040x filing For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Online 1040x filing If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. Online 1040x filing Note. Online 1040x filing Each period includes amounts from the previous period(s). Online 1040x filing Period (a) includes items for January 1 through March 31. Online 1040x filing Period (b) includes items for January 1 through May 31. Online 1040x filing Period (c) includes items for January 1 through August 31. Online 1040x filing Period (d) includes items for the entire year. Online 1040x filing Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Online 1040x filing The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. Online 1040x filing If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. Online 1040x filing Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Online 1040x filing The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. Online 1040x filing Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . Online 1040x filing See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Online 1040x filing Form 2210-F. Online 1040x filing   Use Form 2210-F to figure any underpayment penalty. Online 1040x filing Do not attach it to your return unless you check a box in Part I. Online 1040x filing However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Online 1040x filing Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. Online 1040x filing Keep your filled-in Form 2210-F for your records. Online 1040x filing    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. Online 1040x filing Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Online 1040x filing You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Online 1040x filing You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Online 1040x filing You had a reasonable cause for not making the payment. Online 1040x filing Your underpayment was not due to willful neglect. Online 1040x filing How to request a waiver. Online 1040x filing   To request a waiver, see the Instructions for Form 2210. Online 1040x filing Farmers and fishermen. Online 1040x filing   To request a waiver, see the Instructions for Form 2210-F. Online 1040x filing Federally declared disaster. Online 1040x filing   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. Online 1040x filing During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. Online 1040x filing Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Online 1040x filing If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Online 1040x filing   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. Online 1040x filing Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Online 1040x filing If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. Online 1040x filing   Details on the applicable disaster postponement period can be found at IRS. Online 1040x filing gov. Online 1040x filing Enter Tax Relief in Disaster Situations. Online 1040x filing Select the federally declared disaster that affected you. Online 1040x filing    Worksheet 4-1. Online 1040x filing 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Online 1040x filing To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. Online 1040x filing                   1. Online 1040x filing Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Online 1040x filing       2. Online 1040x filing Enter your annualized qualified dividends for the period 2. Online 1040x filing           3. Online 1040x filing Are you filing Schedule D?               □ Yes. Online 1040x filing Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Online 1040x filing If either line 15 or line 16 is blank or a loss, enter -0-. Online 1040x filing 3. Online 1040x filing             □ No. Online 1040x filing Enter your annualized capital gain distributions from Form 1040, line 13             4. Online 1040x filing Add lines 2 and 3   4. Online 1040x filing           5. Online 1040x filing If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Online 1040x filing Otherwise, enter -0-   5. Online 1040x filing           6. Online 1040x filing Subtract line 5 from line 4. Online 1040x filing If zero or less, enter -0- 6. Online 1040x filing       7. Online 1040x filing Subtract line 6 from line 1. Online 1040x filing If zero or less, enter -0- 7. Online 1040x filing       8. Online 1040x filing Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. Online 1040x filing 8. Online 1040x filing       9. Online 1040x filing Enter the smaller of line 1 or line 8 9. Online 1040x filing       10. Online 1040x filing Enter the smaller of line 7 or line 9 10. Online 1040x filing       11. Online 1040x filing Subtract line 10 from line 9. Online 1040x filing This amount is taxed at 0% 11. Online 1040x filing       12. Online 1040x filing Enter the smaller of line 1 or line 6 12. Online 1040x filing       13. Online 1040x filing Enter the amount from line 11 13. Online 1040x filing       14. Online 1040x filing Subtract line 13 from line 12 14. Online 1040x filing       15. Online 1040x filing Multiply line 14 by 15% (. Online 1040x filing 15) 15. Online 1040x filing   16. Online 1040x filing Figure the tax on the amount on line 7. Online 1040x filing If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Online 1040x filing If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Online 1040x filing   17. Online 1040x filing Add lines 15 and 16 17. Online 1040x filing   18. Online 1040x filing Figure the tax on the amount on line 1. Online 1040x filing If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Online 1040x filing If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Online 1040x filing   19. Online 1040x filing Tax on all taxable income. Online 1040x filing Enter the smaller of line 17 or line 18. Online 1040x filing Also enter this amount on line 12 of Schedule AI in the appropriate column. Online 1040x filing However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. Online 1040x filing   Worksheet 4-2. Online 1040x filing 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. Online 1040x filing             1. Online 1040x filing Enter the amount from line 11 of Schedule AI for the period 1. Online 1040x filing   2. Online 1040x filing Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. Online 1040x filing   3. Online 1040x filing Add lines 1 and 2 3. Online 1040x filing   4. Online 1040x filing Tax on the amount on line 3. Online 1040x filing Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Online 1040x filing See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Online 1040x filing (Note. Online 1040x filing You do not have to use the same method for each period on Schedule AI. Online 1040x filing ) 4. Online 1040x filing   5. Online 1040x filing Tax on the amount on line 2. Online 1040x filing If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. Online 1040x filing If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Online 1040x filing   6. Online 1040x filing Subtract line 5 from line 4. Online 1040x filing Enter the result here and on line 12 of Schedule AI. Online 1040x filing If zero or less,  enter -0- 6. Online 1040x filing             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. Online 1040x filing     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. Online 1040x filing If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. Online 1040x filing Complete the rest of Form 8615 according to its instructions. Online 1040x filing Then complete lines 5 and 6 above. Online 1040x filing     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. Online 1040x filing Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Online 1040x filing Next, determine if you have a capital gain excess. Online 1040x filing     Figuring capital gain excess. Online 1040x filing To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). Online 1040x filing If the result is more than zero, that amount is your capital gain excess. Online 1040x filing     No capital gain excess. Online 1040x filing If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. Online 1040x filing Then complete lines 5 and 6 above. Online 1040x filing     Capital gain excess. Online 1040x filing If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. Online 1040x filing Then complete lines 5 and 6 above. Online 1040x filing     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Online 1040x filing     a. Online 1040x filing Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. Online 1040x filing     b. Online 1040x filing Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. Online 1040x filing     c. Online 1040x filing Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Online 1040x filing     d. Online 1040x filing Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). Online 1040x filing   Prev  Up  Next   Home   More Online Publications
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The Online 1040x Filing

Online 1040x filing 4. Online 1040x filing   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. Online 1040x filing Line of business. Online 1040x filing Examples. Online 1040x filing Improvement of business conditions. Online 1040x filing Exception for local legislation. Online 1040x filing De minimis exception. Online 1040x filing Grass roots lobbying. Online 1040x filing 501(c)(7) - Social and Recreation ClubsLimited membership. Online 1040x filing Support. Online 1040x filing Facilities open to public. Online 1040x filing Gross receipts from nonmembership sources. Online 1040x filing Gross receipts. Online 1040x filing Nontraditional activities. Online 1040x filing 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. Online 1040x filing Losses and expenses. Online 1040x filing Distributions of proceeds. Online 1040x filing The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. Online 1040x filing Perpetual care organization. Online 1040x filing Care of individual plots. Online 1040x filing 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. Online 1040x filing 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. Online 1040x filing Waiver of payment of income. Online 1040x filing 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). Online 1040x filing Section 501(c)(3) organizations are covered in chapter 3 of this publication. Online 1040x filing The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. Online 1040x filing 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). Online 1040x filing The discussion that follows describes the information you must provide when applying. Online 1040x filing For application procedures, see chapter 1. Online 1040x filing To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. Online 1040x filing In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. Online 1040x filing If the organization provides an excess benefit to certain persons, an excise tax may be imposed. Online 1040x filing See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. Online 1040x filing Examples. Online 1040x filing   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. Online 1040x filing Nonprofit operation. Online 1040x filing   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. Online 1040x filing However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. Online 1040x filing Social welfare. Online 1040x filing   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). Online 1040x filing   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. Online 1040x filing It therefore does not qualify as a section 501(c)(4) organization. Online 1040x filing Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. Online 1040x filing However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. Online 1040x filing Political activity. Online 1040x filing   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Online 1040x filing However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. Online 1040x filing See the discussion in chapter 2 under Political Organization Income Tax Return . Online 1040x filing Social or recreational activity. Online 1040x filing   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). Online 1040x filing Retirement benefit program. Online 1040x filing   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. Online 1040x filing It may qualify under another paragraph of section 501(c) depending on all the facts. Online 1040x filing   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). Online 1040x filing Tax treatment of donations. Online 1040x filing   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. Online 1040x filing Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. Online 1040x filing They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. Online 1040x filing However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Online 1040x filing for more information. Online 1040x filing For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. Online 1040x filing gov. Online 1040x filing Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. Online 1040x filing Volunteer fire companies. Online 1040x filing   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. Online 1040x filing   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). Online 1040x filing In this event, your organization should file Form 1023. Online 1040x filing Homeowners' associations. Online 1040x filing   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. Online 1040x filing The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. Online 1040x filing Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. Online 1040x filing Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. Online 1040x filing   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. Online 1040x filing It also must show that it does not engage in exterior maintenance of private homes. Online 1040x filing   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. Online 1040x filing Other organizations. Online 1040x filing   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. Online 1040x filing 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. Online 1040x filing You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. Online 1040x filing In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. Online 1040x filing Submit any additional information that may be required, as described in this section. Online 1040x filing Tax treatment of donations. Online 1040x filing   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. Online 1040x filing However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. Online 1040x filing For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Online 1040x filing Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. Online 1040x filing To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. Online 1040x filing In addition, no net earnings of the organization can inure to the benefit of any member. Online 1040x filing Composition of membership. Online 1040x filing   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. Online 1040x filing You must show in your application that your organization has the purposes described in the preceding paragraph. Online 1040x filing These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. Online 1040x filing Benefits to members. Online 1040x filing   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. Online 1040x filing However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. Online 1040x filing   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. Online 1040x filing gov. Online 1040x filing Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. Online 1040x filing For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. Online 1040x filing The term harvesting, in this case, includes fishing and related pursuits. Online 1040x filing Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. Online 1040x filing When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. Online 1040x filing The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Online 1040x filing The following list contains some examples of activities that show an agricultural or horticultural purpose. Online 1040x filing Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. Online 1040x filing Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. Online 1040x filing Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. Online 1040x filing Guarding the purity of a specific breed of livestock. Online 1040x filing Encouraging improvements in the production of fish on privately owned fish farms. Online 1040x filing Negotiating with processors for the price to be paid to members for their crops. Online 1040x filing For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. Online 1040x filing gov. Online 1040x filing 501(c)(6) - Business Leagues, etc. Online 1040x filing If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. Online 1040x filing For a discussion of the procedure to follow, see chapter 1. Online 1040x filing Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). Online 1040x filing In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. Online 1040x filing It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. Online 1040x filing A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Online 1040x filing Trade associations and professional associations are considered business leagues. Online 1040x filing Chamber of commerce. Online 1040x filing   A chamber of commerce usually is composed of the merchants and traders of a city. Online 1040x filing Board of trade. Online 1040x filing   A board of trade often consists of persons engaged in similar lines of business. Online 1040x filing For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. Online 1040x filing   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. Online 1040x filing Real estate board. Online 1040x filing   A real estate board consists of members interested in improving the business conditions in the real estate field. Online 1040x filing It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. Online 1040x filing Professional football leagues. Online 1040x filing   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). Online 1040x filing They are exempt whether or not they administer a pension fund for football players. Online 1040x filing General purpose. Online 1040x filing   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Online 1040x filing It must be shown that the conditions of a particular trade or the interests of the community will be advanced. Online 1040x filing Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. Online 1040x filing Line of business. Online 1040x filing   This term generally refers either to an entire industry or to all components of an industry within a geographic area. Online 1040x filing It does not include a group composed of businesses that market a particular brand within an industry. Online 1040x filing Common business interest. Online 1040x filing   A common business interest of all members of the organization must be established by the application documents. Online 1040x filing Examples. Online 1040x filing   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). Online 1040x filing Improvement of business conditions. Online 1040x filing   Generally, this must be shown to be the purpose of the organization. Online 1040x filing This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. Online 1040x filing Stock or commodity exchange. Online 1040x filing   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). Online 1040x filing Legislative activity. Online 1040x filing   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. Online 1040x filing Deduction not allowed for dues used for political or legislative activities. Online 1040x filing   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. Online 1040x filing Influencing legislation. Online 1040x filing Participating or intervening in a political campaign for, or against, any candidate for public office. Online 1040x filing Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). Online 1040x filing Communicating directly with certain executive branch officials to try to influence their official actions or positions. Online 1040x filing See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. Online 1040x filing Exception for local legislation. Online 1040x filing   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. Online 1040x filing Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. Online 1040x filing De minimis exception. Online 1040x filing   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. Online 1040x filing Grass roots lobbying. Online 1040x filing   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. Online 1040x filing Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. Online 1040x filing Tax treatment of donations. Online 1040x filing   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. Online 1040x filing They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. Online 1040x filing   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. Online 1040x filing gov. Online 1040x filing 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. Online 1040x filing In applying for recognition of exemption, you should submit the information described in this section. Online 1040x filing Also see chapter 1 for the procedures to follow. Online 1040x filing Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. Online 1040x filing Discrimination prohibited. Online 1040x filing   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. Online 1040x filing   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. Online 1040x filing Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. Online 1040x filing Private benefit prohibited. Online 1040x filing   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. Online 1040x filing For purposes of this requirement, it is not necessary that net earnings be actually distributed. Online 1040x filing Even undistributed earnings can benefit members. Online 1040x filing Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. Online 1040x filing However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. Online 1040x filing Purposes. Online 1040x filing   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. Online 1040x filing You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. Online 1040x filing   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. Online 1040x filing A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. Online 1040x filing   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. Online 1040x filing For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. Online 1040x filing Limited membership. Online 1040x filing   The membership in a social club must be limited. Online 1040x filing To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. Online 1040x filing   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. Online 1040x filing Corporate members of a club are not the kind of members contemplated by the law. Online 1040x filing Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. Online 1040x filing See Gross receipts from nonmembership sources , later. Online 1040x filing Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. Online 1040x filing   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. Online 1040x filing However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. Online 1040x filing Support. Online 1040x filing   In general, your club should be supported solely by membership fees, dues, and assessments. Online 1040x filing However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. Online 1040x filing Business activities. Online 1040x filing   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. Online 1040x filing However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. Online 1040x filing Facilities open to public. Online 1040x filing   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. Online 1040x filing This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. Online 1040x filing Gross receipts from nonmembership sources. Online 1040x filing   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. Online 1040x filing Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. Online 1040x filing Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. Online 1040x filing If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. Online 1040x filing Gross receipts. Online 1040x filing   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. Online 1040x filing These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. Online 1040x filing Receipts do not include initiation fees and capital contributions. Online 1040x filing Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. Online 1040x filing Nontraditional activities. Online 1040x filing   Activities conducted by a social club need to further its exempt purposes. Online 1040x filing Traditional business activities are those that further a social club's exempt purposes. Online 1040x filing Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. Online 1040x filing Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. Online 1040x filing Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. Online 1040x filing Fraternity foundations. Online 1040x filing   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. Online 1040x filing Tax treatment of donations. Online 1040x filing   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. Online 1040x filing 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. Online 1040x filing The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. Online 1040x filing , purposes. Online 1040x filing The procedures to follow in applying for recognition of exemption are described in chapter 1. Online 1040x filing If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. Online 1040x filing If so, your organization need not apply for individual recognition of exemption. Online 1040x filing For more information, see Group Exemption Letter in chapter 1 of this publication. Online 1040x filing Tax treatment of donations. Online 1040x filing   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Online 1040x filing Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Online 1040x filing The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. Online 1040x filing Lodge system. Online 1040x filing   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. Online 1040x filing Payment of benefits. Online 1040x filing   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. Online 1040x filing An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. Online 1040x filing   The benefits must be limited to members and their dependents. Online 1040x filing If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. Online 1040x filing Whole-life insurance. Online 1040x filing   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. Online 1040x filing Reinsurance pool. Online 1040x filing   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. Online 1040x filing Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Online 1040x filing The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. Online 1040x filing S. Online 1040x filing , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. Online 1040x filing The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Online 1040x filing 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. Online 1040x filing Both the application form to file and the information to provide are discussed later under the section that describes your employee association. Online 1040x filing Chapter 1 describes the procedures to follow in applying for exemption. Online 1040x filing Tax treatment of donations. Online 1040x filing   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. Online 1040x filing Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. Online 1040x filing A local employees' association must apply for recognition of exemption by filing Form 1024. Online 1040x filing The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. Online 1040x filing A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. Online 1040x filing Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. Online 1040x filing Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. Online 1040x filing The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. Online 1040x filing To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Online 1040x filing Note. Online 1040x filing Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. Online 1040x filing Notice requirement. Online 1040x filing   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Online 1040x filing The organization gives notice by filing Form 1024. Online 1040x filing If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. Online 1040x filing An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Online 1040x filing Membership. Online 1040x filing   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. Online 1040x filing This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. Online 1040x filing   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. Online 1040x filing For example, the owner of a business whose employees are members of the association can be a member. Online 1040x filing An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. Online 1040x filing Employees. Online 1040x filing   Employees include individuals who became entitled to membership because they are or were employees. Online 1040x filing For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. Online 1040x filing   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. Online 1040x filing Conversely, membership is involuntary if the designation as a member is due to employee status. Online 1040x filing However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. Online 1040x filing An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. Online 1040x filing Payment of benefits. Online 1040x filing   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. Online 1040x filing The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). Online 1040x filing Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. Online 1040x filing Nondiscrimination requirements. Online 1040x filing   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. Online 1040x filing However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. Online 1040x filing   A plan meets the nondiscrimination requirements only if both of the following statements are true. Online 1040x filing Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. Online 1040x filing The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. Online 1040x filing A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. Online 1040x filing   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. Online 1040x filing This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. Online 1040x filing   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. Online 1040x filing The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. Online 1040x filing For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). Online 1040x filing Excluded employees. Online 1040x filing   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. Online 1040x filing These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. Online 1040x filing Highly compensated individual. Online 1040x filing   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. Online 1040x filing Go to IRS. Online 1040x filing gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. Online 1040x filing However, the employer can choose not to have (3) apply. Online 1040x filing Aggregation rules. Online 1040x filing   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. Online 1040x filing Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. Online 1040x filing Leased employees are treated as employees of the recipient. Online 1040x filing One employee. Online 1040x filing   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). Online 1040x filing Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. Online 1040x filing The trust must be a valid, existing trust under local law and must be evidenced by an executed document. Online 1040x filing A conformed copy of the plan of which the trust is a part should be attached to the application. Online 1040x filing To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Online 1040x filing Note. Online 1040x filing Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. Online 1040x filing Notice requirement. Online 1040x filing   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Online 1040x filing The organization gives notice by filing Form 1024. Online 1040x filing If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. Online 1040x filing An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Online 1040x filing Types of payments. Online 1040x filing   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. Online 1040x filing In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. Online 1040x filing Diversion of funds. Online 1040x filing   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). Online 1040x filing Discrimination in benefits. Online 1040x filing   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. Online 1040x filing However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. Online 1040x filing Prohibited transactions and exemption. Online 1040x filing   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. Online 1040x filing It must file the claim on Form 1024. Online 1040x filing The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. Online 1040x filing An authorized principal officer of your organization must make this declaration under the penalties of perjury. Online 1040x filing   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. Online 1040x filing However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. Online 1040x filing Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. Online 1040x filing For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. Online 1040x filing 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. Online 1040x filing Benevolent life insurance associations of a purely local character and like organizations. Online 1040x filing Mutual ditch or irrigation companies and like organizations. Online 1040x filing Mutual or cooperative telephone companies and like organizations. Online 1040x filing A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. Online 1040x filing The information to be provided upon application by each of these organizations is described in this section. Online 1040x filing For information as to the procedures to follow in applying for exemption, see chapter 1. Online 1040x filing General requirements. Online 1040x filing   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. Online 1040x filing They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. Online 1040x filing Mutual character. Online 1040x filing   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. Online 1040x filing They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. Online 1040x filing To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. Online 1040x filing   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. Online 1040x filing Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. Online 1040x filing The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. Online 1040x filing Membership. Online 1040x filing   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. Online 1040x filing In a stock company, the stockholders are members. Online 1040x filing However, a mutual life insurance organization cannot have policyholders other than its members. Online 1040x filing Losses and expenses. Online 1040x filing   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. Online 1040x filing Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. Online 1040x filing If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. Online 1040x filing Distributions of proceeds. Online 1040x filing   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. Online 1040x filing Such distribution represents a refund in the costs of services rendered to the member. Online 1040x filing The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. Online 1040x filing Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. Online 1040x filing Mutual or cooperative telephone company. Online 1040x filing   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. Online 1040x filing Mutual or cooperative electric company. Online 1040x filing   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. Online 1040x filing   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. Online 1040x filing Qualified pole rental. Online 1040x filing   The term qualified pole rental means any 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 are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. Online 1040x filing   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). Online 1040x filing The 85% requirement is applied on the basis of an annual accounting period. Online 1040x filing Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. Online 1040x filing Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. Online 1040x filing Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. Online 1040x filing Example. Online 1040x filing   The books of an organization reflect the following for the calendar year. Online 1040x filing Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. Online 1040x filing   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. Online 1040x filing   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. Online 1040x filing   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. Online 1040x filing Tax treatment of donations. Online 1040x filing   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. Online 1040x filing Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. Online 1040x filing If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. Online 1040x filing To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. Online 1040x filing If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. Online 1040x filing A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. Online 1040x filing A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. Online 1040x filing Organizations similar to local benevolent life insurance companies. Online 1040x filing   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. Online 1040x filing However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. Online 1040x filing Burial and funeral benefit insurance organization. Online 1040x filing   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. Online 1040x filing An organization that provides its benefits in the form of supplies and service is not a life insurance company. Online 1040x filing Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. Online 1040x filing Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. Online 1040x filing They can serve noncontiguous areas. Online 1040x filing Like organization. Online 1040x filing   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. Online 1040x filing Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. Online 1040x filing 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. Online 1040x filing For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. Online 1040x filing A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. Online 1040x filing A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. Online 1040x filing The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. Online 1040x filing If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. Online 1040x filing Operating a mortuary is not permitted. Online 1040x filing However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. Online 1040x filing How income can be used. Online 1040x filing   You should show that your organization's earnings are or will be used only in one or more of the following ways. Online 1040x filing To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. Online 1040x filing To buy cemetery property. Online 1040x filing To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. Online 1040x filing No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. Online 1040x filing Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. Online 1040x filing Buying cemetery property. Online 1040x filing   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. Online 1040x filing You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. Online 1040x filing   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. Online 1040x filing Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not