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Tax Amendment Form 2012

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Tax Amendment Form 2012

Tax amendment form 2012 5. Tax amendment form 2012   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Tax amendment form 2012 Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Tax amendment form 2012 Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Tax amendment form 2012 Deduction for employees. Tax amendment form 2012 If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Tax amendment form 2012 Business-use requirement. Tax amendment form 2012 If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Tax amendment form 2012 In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Tax amendment form 2012 You may also have to recapture (include in income) any excess depreciation claimed in previous years. Tax amendment form 2012 A similar inclusion amount applies to certain leased property. Tax amendment form 2012 Passenger automobile limits and rules. Tax amendment form 2012 Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Tax amendment form 2012 You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Tax amendment form 2012 This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Tax amendment form 2012 It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Tax amendment form 2012 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Tax amendment form 2012 What Is Listed Property? Listed property is any of the following. Tax amendment form 2012 Passenger automobiles (as defined later). Tax amendment form 2012 Any other property used for transportation, unless it is an excepted vehicle. Tax amendment form 2012 Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Tax amendment form 2012 Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Tax amendment form 2012 A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Tax amendment form 2012 Improvements to listed property. Tax amendment form 2012   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Tax amendment form 2012 The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Tax amendment form 2012 For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Tax amendment form 2012 Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Tax amendment form 2012 It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Tax amendment form 2012 The following vehicles are not considered passenger automobiles for these purposes. Tax amendment form 2012 An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Tax amendment form 2012 A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Tax amendment form 2012 A truck or van that is a qualified nonpersonal use vehicle. Tax amendment form 2012 Qualified nonpersonal use vehicles. Tax amendment form 2012   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax amendment form 2012 They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Tax amendment form 2012 They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Tax amendment form 2012 For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Tax amendment form 2012 Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Tax amendment form 2012 Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Tax amendment form 2012 Excepted vehicles. Tax amendment form 2012   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Tax amendment form 2012 Clearly marked police and fire vehicles. Tax amendment form 2012 Unmarked vehicles used by law enforcement officers if the use is officially authorized. Tax amendment form 2012 Ambulances used as such and hearses used as such. Tax amendment form 2012 Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Tax amendment form 2012 Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Tax amendment form 2012 Combines, cranes and derricks, and forklifts. Tax amendment form 2012 Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Tax amendment form 2012 Qualified moving vans. Tax amendment form 2012 Qualified specialized utility repair trucks. Tax amendment form 2012 School buses used in transporting students and employees of schools. Tax amendment form 2012 Other buses with a capacity of at least 20 passengers that are used as passenger buses. Tax amendment form 2012 Tractors and other special purpose farm vehicles. Tax amendment form 2012 Clearly marked police and fire vehicle. Tax amendment form 2012   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Tax amendment form 2012 It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Tax amendment form 2012 It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Tax amendment form 2012 It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Tax amendment form 2012 It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Tax amendment form 2012 A marking on a license plate is not a clear marking for these purposes. Tax amendment form 2012 Qualified moving van. Tax amendment form 2012   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Tax amendment form 2012 No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Tax amendment form 2012 Personal use for travel to and from a move site happens no more than five times a month on average. Tax amendment form 2012 Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Tax amendment form 2012 Qualified specialized utility repair truck. Tax amendment form 2012   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Tax amendment form 2012 The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Tax amendment form 2012 Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Tax amendment form 2012 The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Tax amendment form 2012 Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Tax amendment form 2012 It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Tax amendment form 2012 Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Tax amendment form 2012 The following are neither computers nor related peripheral equipment. Tax amendment form 2012 Any equipment that is an integral part of other property that is not a computer. Tax amendment form 2012 Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Tax amendment form 2012 Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Tax amendment form 2012 Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Tax amendment form 2012 The use of your property in performing services as an employee is a business use only if both the following requirements are met. Tax amendment form 2012 The use is for your employer's convenience. Tax amendment form 2012 The use is required as a condition of your employment. Tax amendment form 2012 If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Tax amendment form 2012 Employer's convenience. Tax amendment form 2012   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Tax amendment form 2012 The use is for your employer's convenience if it is for a substantial business reason of the employer. Tax amendment form 2012 The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Tax amendment form 2012 Condition of employment. Tax amendment form 2012   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Tax amendment form 2012 The use of property must be required for you to perform your duties properly. Tax amendment form 2012 Your employer does not have to require explicitly that you use the property. Tax amendment form 2012 However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Tax amendment form 2012 Example 1. Tax amendment form 2012 Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Tax amendment form 2012 She owns and uses a motorcycle to deliver packages to downtown offices. Tax amendment form 2012 We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Tax amendment form 2012 Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Tax amendment form 2012 Example 2. Tax amendment form 2012 Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Tax amendment form 2012 He must travel to these sites on a regular basis. Tax amendment form 2012 Uplift does not furnish an automobile or explicitly require him to use his own automobile. Tax amendment form 2012 However, it pays him for any costs he incurs in traveling to the various sites. Tax amendment form 2012 The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Tax amendment form 2012 Example 3. Tax amendment form 2012 Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Tax amendment form 2012 The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Tax amendment form 2012 Example 4. Tax amendment form 2012 Marilyn Lee is a pilot for Y Company, a small charter airline. Tax amendment form 2012 Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Tax amendment form 2012 Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Tax amendment form 2012 Marilyn owns her own airplane. Tax amendment form 2012 The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Tax amendment form 2012 Example 5. Tax amendment form 2012 David Rule is employed as an engineer with Zip, an engineering contracting firm. Tax amendment form 2012 He occasionally takes work home at night rather than work late in the office. Tax amendment form 2012 He owns and uses a home computer which is virtually identical to the office model. Tax amendment form 2012 His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Tax amendment form 2012 What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Tax amendment form 2012 To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Tax amendment form 2012 If this requirement is not met, the following rules apply. Tax amendment form 2012 Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Tax amendment form 2012 Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Tax amendment form 2012 Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Tax amendment form 2012 This rule applies each year of the recovery period. Tax amendment form 2012 Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Tax amendment form 2012 A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Tax amendment form 2012 Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Tax amendment form 2012 It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Tax amendment form 2012 Exception for leased property. Tax amendment form 2012   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Tax amendment form 2012   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Tax amendment form 2012 This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Tax amendment form 2012 Occasional or incidental leasing activity is insufficient. Tax amendment form 2012 For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Tax amendment form 2012 An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Tax amendment form 2012 How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Tax amendment form 2012 For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Tax amendment form 2012 You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Tax amendment form 2012 For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Tax amendment form 2012 For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Tax amendment form 2012 Entertainment use. Tax amendment form 2012   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Tax amendment form 2012 Commuting use. Tax amendment form 2012   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Tax amendment form 2012 For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Tax amendment form 2012 This is also true for a business meeting held in a car while commuting to work. Tax amendment form 2012 Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Tax amendment form 2012 The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Tax amendment form 2012 Use of your automobile by another person. Tax amendment form 2012   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Tax amendment form 2012 That use is directly connected with your business. Tax amendment form 2012 You properly report the value of the use as income to the other person and withhold tax on the income where required. Tax amendment form 2012 You are paid a fair market rent. Tax amendment form 2012 Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Tax amendment form 2012 Employee deductions. Tax amendment form 2012   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Tax amendment form 2012 See Can Employees Claim a Deduction , earlier. Tax amendment form 2012 Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Tax amendment form 2012 However, it does not include the following uses. Tax amendment form 2012 The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Tax amendment form 2012 The use of property as pay for the services of a 5% owner or related person. Tax amendment form 2012 The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Tax amendment form 2012 Property does not stop being used predominantly for qualified business use because of a transfer at death. Tax amendment form 2012 Exception for leasing or compensatory use of aircraft. Tax amendment form 2012   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Tax amendment form 2012 5% owner. Tax amendment form 2012   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Tax amendment form 2012   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Tax amendment form 2012 More than 5% of the outstanding stock of the corporation. Tax amendment form 2012 Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Tax amendment form 2012 Related persons. Tax amendment form 2012   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Tax amendment form 2012 For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Tax amendment form 2012 Examples. Tax amendment form 2012   The following examples illustrate whether the use of business property is qualified business use. Tax amendment form 2012 Example 1. Tax amendment form 2012 John Maple is the sole proprietor of a plumbing contracting business. Tax amendment form 2012 John employs his brother, Richard, in the business. Tax amendment form 2012 As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Tax amendment form 2012 The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Tax amendment form 2012 The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Tax amendment form 2012 Example 2. Tax amendment form 2012 John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Tax amendment form 2012 He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Tax amendment form 2012 This use of company automobiles by employees is not a qualified business use. Tax amendment form 2012 Example 3. Tax amendment form 2012 James Company Inc. Tax amendment form 2012 owns several automobiles that its employees use for business purposes. Tax amendment form 2012 The employees also are allowed to take the automobiles home at night. Tax amendment form 2012 The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Tax amendment form 2012 This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Tax amendment form 2012 Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Tax amendment form 2012 However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Tax amendment form 2012 Example 1. Tax amendment form 2012 Sarah Bradley uses a home computer 50% of the time to manage her investments. Tax amendment form 2012 She also uses the computer 40% of the time in her part-time consumer research business. Tax amendment form 2012 Sarah's home computer is listed property because it is not used at a regular business establishment. Tax amendment form 2012 She does not use the computer predominantly for qualified business use. Tax amendment form 2012 Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Tax amendment form 2012 She must depreciate it using the straight line method over the ADS recovery period. Tax amendment form 2012 Her combined business/investment use for determining her depreciation deduction is 90%. Tax amendment form 2012 Example 2. Tax amendment form 2012 If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Tax amendment form 2012 She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Tax amendment form 2012 Her combined business/investment use for determining her depreciation deduction is 90%. Tax amendment form 2012 Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Tax amendment form 2012 You also increase the adjusted basis of your property by the same amount. Tax amendment form 2012 Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Tax amendment form 2012 To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Tax amendment form 2012 Example. Tax amendment form 2012 In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Tax amendment form 2012 She used it only for qualified business use for 2009 through 2012. Tax amendment form 2012 Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Tax amendment form 2012 She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Tax amendment form 2012 The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Tax amendment form 2012 During 2013, she used the truck 50% for business and 50% for personal purposes. Tax amendment form 2012 She includes $4,018 excess depreciation in her gross income for 2013. Tax amendment form 2012 The excess depreciation is determined as follows. Tax amendment form 2012 Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Tax amendment form 2012 (Depreciation is from Table A-1. Tax amendment form 2012 ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Tax amendment form 2012 The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Tax amendment form 2012 Where to figure and report recapture. Tax amendment form 2012   Use Form 4797, Part IV, to figure the recapture amount. Tax amendment form 2012 Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Tax amendment form 2012 For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Tax amendment form 2012 If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Tax amendment form 2012 Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Tax amendment form 2012 Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Tax amendment form 2012 For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Tax amendment form 2012 The inclusion amount is the sum of Amount A and Amount B, described next. Tax amendment form 2012 However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Tax amendment form 2012 Amount A. Tax amendment form 2012   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Tax amendment form 2012   The fair market value of the property is the value on the first day of the lease term. Tax amendment form 2012 If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Tax amendment form 2012 Amount B. Tax amendment form 2012   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Tax amendment form 2012 Maximum inclusion amount. Tax amendment form 2012   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Tax amendment form 2012 Inclusion amount worksheet. Tax amendment form 2012   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Tax amendment form 2012 Inclusion Amount Worksheet for Leased Listed Property 1. Tax amendment form 2012 Fair market value   2. Tax amendment form 2012 Business/investment use for first year business use is 50% or less   3. Tax amendment form 2012 Multiply line 1 by line 2. Tax amendment form 2012   4. Tax amendment form 2012 Rate (%) from Table A-19   5. Tax amendment form 2012 Multiply line 3 by line 4. Tax amendment form 2012 This is Amount A. Tax amendment form 2012   6. Tax amendment form 2012 Fair market value   7. Tax amendment form 2012 Average business/investment use for years property leased before the first year business use is 50% or less . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012 . Tax amendment form 2012   8. Tax amendment form 2012 Multiply line 6 by line 7   9. Tax amendment form 2012 Rate (%) from Table A-20   10. Tax amendment form 2012 Multiply line 8 by line 9. Tax amendment form 2012 This is Amount B. Tax amendment form 2012   11. Tax amendment form 2012 Add line 5 and line 10. Tax amendment form 2012 This is your inclusion amount. Tax amendment form 2012 Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax amendment form 2012 )         Example. Tax amendment form 2012 On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Tax amendment form 2012 The lease is for a period of 5 years. Tax amendment form 2012 Larry does not use the computer at a regular business establishment, so it is listed property. Tax amendment form 2012 His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Tax amendment form 2012 He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Tax amendment form 2012 The computer has a 5-year recovery period under both GDS and ADS. Tax amendment form 2012 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Tax amendment form 2012 8%. Tax amendment form 2012 The applicable percentage from Table A-20 is 22. Tax amendment form 2012 0%. Tax amendment form 2012 Larry's deductible rent for the computer for 2013 is $800. Tax amendment form 2012 Larry uses the Inclusion amount worksheet. Tax amendment form 2012 to figure the amount he must include in income for 2013. Tax amendment form 2012 His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Tax amendment form 2012 Inclusion Amount Worksheet for Leased Listed Property 1. Tax amendment form 2012 Fair market value $3,000   2. Tax amendment form 2012 Business/investment use for first year business use is 50% or less 40 % 3. Tax amendment form 2012 Multiply line 1 by line 2. Tax amendment form 2012 1,200   4. Tax amendment form 2012 Rate (%) from Table A-19 −19. Tax amendment form 2012 8 % 5. Tax amendment form 2012 Multiply line 3 by line 4. Tax amendment form 2012 This is Amount A. Tax amendment form 2012 −238   6. Tax amendment form 2012 Fair market value 3,000   7. Tax amendment form 2012 Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Tax amendment form 2012 Multiply line 6 by line 7 2,100   9. Tax amendment form 2012 Rate (%) from Table A-20 22. Tax amendment form 2012 0 % 10. Tax amendment form 2012 Multiply line 8 by line 9. Tax amendment form 2012 This is Amount B. Tax amendment form 2012 462   11. Tax amendment form 2012 Add line 5 and line 10. Tax amendment form 2012 This is your inclusion amount. Tax amendment form 2012 Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax amendment form 2012 ) $224           Lease beginning in the last 9 months of your tax year. Tax amendment form 2012    The inclusion amount is subject to a special rule if all the following apply. Tax amendment form 2012 The lease term begins within 9 months before the close of your tax year. Tax amendment form 2012 You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Tax amendment form 2012 The lease term continues into your next tax year. Tax amendment form 2012 Under this special rule, add the inclusion amount to income in the next tax year. Tax amendment form 2012 Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Tax amendment form 2012 Skip lines 6 through 9 of the worksheet and enter zero on line 10. Tax amendment form 2012 Example 1. Tax amendment form 2012 On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Tax amendment form 2012 The property is 5-year property with a fair market value of $10,000. Tax amendment form 2012 Her property has a recovery period of 5 years under ADS. Tax amendment form 2012 The lease is for 5 years. Tax amendment form 2012 Her business use of the property was 50% in 2012 and 90% in 2013. Tax amendment form 2012 She paid rent of $3,600 for 2012, of which $3,240 is deductible. Tax amendment form 2012 She must include $147 in income in 2013. Tax amendment form 2012 The $147 is the sum of Amount A and Amount B. Tax amendment form 2012 Amount A is $147 ($10,000 × 70% × 2. Tax amendment form 2012 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Tax amendment form 2012 Amount B is zero. Tax amendment form 2012 Lease for less than one year. Tax amendment form 2012   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Tax amendment form 2012 The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Tax amendment form 2012 The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Tax amendment form 2012   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Tax amendment form 2012 If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Tax amendment form 2012 Example 2. Tax amendment form 2012 On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Tax amendment form 2012 This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Tax amendment form 2012 The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Tax amendment form 2012 He must include $71 in income in 2013. Tax amendment form 2012 The $71 is the sum of Amount A and Amount B. Tax amendment form 2012 Amount A is $71 ($15,000 × 45% × 2. Tax amendment form 2012 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Tax amendment form 2012 Amount B is zero. Tax amendment form 2012 Where to report inclusion amount. Tax amendment form 2012   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Tax amendment form 2012 For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Tax amendment form 2012 If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Tax amendment form 2012 Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Tax amendment form 2012 This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Tax amendment form 2012 Exception for leased cars. Tax amendment form 2012   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Tax amendment form 2012 For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Tax amendment form 2012 Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Tax amendment form 2012 They are based on the date you placed the automobile in service. Tax amendment form 2012 Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Tax amendment form 2012 Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax amendment form 2012 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Tax amendment form 2012 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Tax amendment form 2012 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Tax amendment form 2012 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Tax amendment form 2012 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax amendment form 2012 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax amendment form 2012 If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Tax amendment form 2012 If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Tax amendment form 2012 The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Tax amendment form 2012 Example. Tax amendment form 2012 On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Tax amendment form 2012 She used the car only in her business. Tax amendment form 2012 She files her tax return based on the calendar year. Tax amendment form 2012 She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax amendment form 2012 Under MACRS, a car is 5-year property. Tax amendment form 2012 Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Tax amendment form 2012 Virginia multiplies the $14,500 unadjusted basis of her car by 0. Tax amendment form 2012 20 to get her MACRS depreciation of $2,900 for 2013. Tax amendment form 2012 This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Tax amendment form 2012 She can deduct the full $2,900. Tax amendment form 2012 Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Tax amendment form 2012 The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Tax amendment form 2012 Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Tax amendment form 2012 Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Tax amendment form 2012 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Tax amendment form 2012 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax amendment form 2012 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax amendment form 2012 Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Tax amendment form 2012 The maximum deduction amounts for trucks and vans are shown in the following table. Tax amendment form 2012 Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Tax amendment form 2012 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Tax amendment form 2012 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax amendment form 2012 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Tax amendment form 2012 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Tax amendment form 2012 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Tax amendment form 2012 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Tax amendment form 2012 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax amendment form 2012 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax amendment form 2012 Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Tax amendment form 2012 Then use the information from this worksheet to prepare Form 4562. Tax amendment form 2012 Depreciation Worksheet for Passenger Automobiles   Part I   1. Tax amendment form 2012 MACRS system (GDS or ADS)     2. Tax amendment form 2012 Property class     3. Tax amendment form 2012 Date placed in service     4. Tax amendment form 2012 Recovery period     5. Tax amendment form 2012 Method and convention     6. Tax amendment form 2012 Depreciation rate (from tables)     7. Tax amendment form 2012 Maximum depreciation deduction for this year from the appropriate table       8. Tax amendment form 2012 Business/investment-use percentage       9. Tax amendment form 2012 Multiply line 7 by line 8. Tax amendment form 2012 This is your adjusted maximum depreciation deduction       10. Tax amendment form 2012 Section 179 deduction claimed this year (not more than line 9). Tax amendment form 2012 Enter -0- if this is not the year you placed the car in service. Tax amendment form 2012         Note. Tax amendment form 2012  1) If line 10 is equal to line 9, stop here. Tax amendment form 2012 Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Tax amendment form 2012  2) If line 10 is less than line 9, complete Part II. Tax amendment form 2012   Part II   11. Tax amendment form 2012 Subtract line 10 from line 9. Tax amendment form 2012 This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Tax amendment form 2012 Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Tax amendment form 2012 Multiply line 12 by line 8. Tax amendment form 2012 This is your business/investment cost       14. Tax amendment form 2012 Section 179 deduction claimed in the year you placed the car in service       15. Tax amendment form 2012 Subtract line 14 from line 13. Tax amendment form 2012 This is your tentative basis for depreciation       16. Tax amendment form 2012 Multiply line 15 by . Tax amendment form 2012 50 if the 50% special depreciation allowance applies. Tax amendment form 2012 This is your special depreciation allowance. Tax amendment form 2012 Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Tax amendment form 2012 Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Tax amendment form 2012  2) If line 16 is less than line 11, complete Part III. Tax amendment form 2012   Part III   17. Tax amendment form 2012 Subtract line 16 from 11. Tax amendment form 2012 This is the limit on the amount you can deduct for MACRS depreciation       18. Tax amendment form 2012 Subtract line 16 from line 15. Tax amendment form 2012 This is your basis for depreciation. Tax amendment form 2012       19. Tax amendment form 2012 Multiply line 18 by line 6. Tax amendment form 2012 This is your tentative MACRS depreciation deduction. Tax amendment form 2012       20. Tax amendment form 2012 Enter the lesser of line 17 or line 19. Tax amendment form 2012 This is your MACRS depreciation deduction. Tax amendment form 2012     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Tax amendment form 2012 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Tax amendment form 2012             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Tax amendment form 2012 If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Tax amendment form 2012 You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Tax amendment form 2012 The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Tax amendment form 2012 See Maximum Depreciation Deduction , earlier. Tax amendment form 2012 Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Tax amendment form 2012 You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Tax amendment form 2012 There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Tax amendment form 2012 Example. Tax amendment form 2012 In May 2007, you bought and placed in service a car costing $31,500. Tax amendment form 2012 The car was 5-year property under GDS (MACRS). Tax amendment form 2012 You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax amendment form 2012 You used the car exclusively for business during the recovery period (2007 through 2012). Tax amendment form 2012 You figured your depreciation as shown below. Tax amendment form 2012 Year Percentage Amount Limit   Allowed 2007 20. Tax amendment form 2012 0% $6,300 $2,960   $2,960 2008 32. Tax amendment form 2012 0 10,080 4,800   4,800 2009 19. Tax amendment form 2012 2 6,048 2,850   2,850 2010 11. Tax amendment form 2012 52 3,629 1,675   1,675 2011 11. Tax amendment form 2012 52 3,629 1,675   1,675 2012 5. Tax amendment form 2012 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Tax amendment form 2012 If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Tax amendment form 2012 If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Tax amendment form 2012 However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Tax amendment form 2012 For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Tax amendment form 2012 Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Tax amendment form 2012 Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Tax amendment form 2012 This excess basis is the additional cash paid for the new automobile in the trade-in. Tax amendment form 2012 The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Tax amendment form 2012 Special rules apply in determining the passenger automobile limits. Tax amendment form 2012 These rules and examples are discussed in section 1. Tax amendment form 2012 168(i)-6(d)(3) of the regulations. Tax amendment form 2012 Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Tax amendment form 2012 For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Tax amendment form 2012 168(i)-6(i) and 1. Tax amendment form 2012 168(i)-6(j) of the regulations. Tax amendment form 2012 What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Tax amendment form 2012 For listed property, you must keep records for as long as any recapture can still occur. Tax amendment form 2012 Recapture can occur in any tax year of the recovery period. Tax amendment form 2012 Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Tax amendment form 2012 You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Tax amendment form 2012 However, your records should back up your receipts in an orderly manner. Tax amendment form 2012 Elements of expenditure or use. Tax amendment form 2012   Your records or other documentary evidence must support all the following. Tax amendment form 2012 The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Tax amendment form 2012 The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Tax amendment form 2012 The date of the expenditure or use. Tax amendment form 2012 The business or investment purpose for the expenditure or use. Tax amendment form 2012   Written documents of your expenditure or use are generally better evidence than oral statements alone. Tax amendment form 2012 You do not have to keep a daily log. Tax amendment form 2012 However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Tax amendment form 2012 Timeliness. Tax amendment form 2012   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Tax amendment form 2012 An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Tax amendment form 2012   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Tax amendment form 2012 Business purpose supported. Tax amendment form 2012   Generally, an adequate record of business purpose must be in the form of a written statement. Tax amendment form 2012 However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Tax amendment form 2012 A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Tax amendment form 2012 For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Tax amendment form 2012 Business use supported. Tax amendment form 2012   An adequate record contains enough information on each element of every business or investment use. Tax amendment form 2012 The amount of detail required to support the use depends on the facts and circumstances. Tax amendment form 2012 For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Tax amendment form 2012   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Tax amendment form 2012 Separate or combined expenditures or uses. Tax amendment form 2012   Each use by you normally is considered a separate use. Tax amendment form 2012 However, you can combine repeated uses as a single item. Tax amendment form 2012   Record each expenditure as a separate item. Tax amendment form 2012 Do not combine it with other expenditures. Tax amendment form 2012 If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Tax amendment form 2012 If you combine these expenses, you do not need to support the business purpose of each expense. Tax amendment form 2012 Instead, you can divide the expenses based on the total business use of the listed property. Tax amendment form 2012   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Tax amendment form 2012 For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Tax amendment form 2012 You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Tax amendment form 2012 Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Tax amendment form 2012 Confidential information. Tax amendment form 2012   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Tax amendment form 2012 You must keep it elsewhere and make it available as support to the IRS director for your area on request. Tax amendment form 2012 Substantial compliance. Tax amendment form 2012   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Tax amendment form 2012   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Tax amendment form 2012 By your own oral or written statement containing detailed information as to the element. Tax amendment form 2012 By other evidence sufficient to establish the element. Tax amendment form 2012   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Tax amendment form 2012 If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Tax amendment form 2012 Sampling. Tax amendment form 2012   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Tax amendment form 2012 Example 1. Tax amendment form 2012 Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Tax amendment form 2012 She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Tax amendment form 2012 There is no other business use of the automobile, but she and family members also use it for personal purposes. Tax amendment form 2012 She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Tax amendment form 2012 Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Tax amendment form 2012 If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax amendment form 2012 Example 2. Tax amendment form 2012 Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Tax amendment form 2012 Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Tax amendment form 2012 The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax amendment form 2012 Example 3. Tax amendment form 2012 Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Tax amendment form 2012 For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Tax amendment form 2012 During these weeks, his business use of the automobile does not follow a consistent pattern. Tax amendment form 2012 During the fourth week of each month, he delivers all business orders taken during the previous month. Tax amendment form 2012 The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Tax amendment form 2012 The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Tax amendment form 2012 Loss of records. Tax amendment form 2012   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Tax amendment form 2012 How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Tax amendment form 2012 Any deduction for a vehicle. Tax amendment form 2012 A depreciation deduction for any other listed property. Tax amendment form 2012 If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Tax amendment form 2012 If you provide the vehicle for your employee's use, the employee must give you this information. Tax amendment form 2012 If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Tax amendment form 2012 Vehicles used by your employees. Tax amendment form 2012   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Tax amendment form 2012 You maintain a written policy statement that prohibits one of the following uses of the vehicles. Tax amendment form 2012 All personal use including commuting. Tax amendment form 2012 Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Tax amendment form 2012 You treat all use of the vehicles by your employees as personal use. Tax amendment form 2012 You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Tax amendment form 2012 For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Tax amendment form 2012 Exceptions. Tax amendment form 2012   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Tax amendment form 2012 Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Tax amendment form 2012 Prev  Up  Next   Home   More Online Publications
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IRS Releases the Dirty Dozen Tax Scams for 2012

IR-2012-23, Feb. 16, 2012

WASHINGTON –– The Internal Revenue Service today issued its annual “Dirty Dozen” ranking of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“Taxpayers should be careful and avoid falling into a trap with the Dirty Dozen,” said IRS Commissioner Doug Shulman. “Scam artists will tempt people in-person, on-line and by e-mail with misleading promises about lost refunds and free money. Don’t be fooled by these scams.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shutdown scams and prosecute the criminals behind them.

The following is the Dirty Dozen tax scams for 2012:

Identity Theft

Topping this year’s list Dirty Dozen list is identity theft. In response to growing identity theft concerns, the IRS has embarked on a comprehensive strategy that is focused on preventing, detecting and resolving identity theft cases as soon as possible. In addition to the law-enforcement crackdown, the IRS has stepped up its internal reviews to spot false tax returns before tax refunds are issued as well as working to help victims of the identity theft refund schemes.

Identity theft cases are among the most complex ones the IRS handles, but the agency is committed to working with taxpayers who have become victims of identity theft.

The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer’s identity and personal information to file a tax return and claim a fraudulent refund.
 
An IRS notice informing a taxpayer that more than one return was filed in the taxpayer’s name or that the taxpayer received wages from an unknown employer may be the first tip off the individual receives that he or she has been victimized. 

The IRS has a robust screening process with measures in place to stop fraudulent returns. While the IRS is continuing to address tax-related identity theft aggressively, the agency is also seeing an increase in identity crimes, including more complex schemes. In 2011, the IRS protected more than $1.4 billion of taxpayer funds from getting into the wrong hands due to identity theft.

In January, the IRS announced the results of a massive, national sweep cracking down on suspected identity theft perpetrators as part of a stepped-up effort against refund fraud and identity theft.  Working with the Justice Department’s Tax Division and local U.S. Attorneys’ offices, the nationwide effort targeted 105 people in 23 states.

Anyone who believes his or her personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.  For more information, visit the special identity theft page at www.IRS.gov/identitytheft

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare and file their tax returns. Most return preparers provide honest service to their clients. But as in any other business, there are also some who prey on unsuspecting taxpayers.

Questionable return preparers have been known to skim off their clients’ refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds. Taxpayers should choose carefully when hiring a tax preparer. Federal courts have issued hundreds of injunctions ordering individuals to cease preparing returns, and the Department of Justice has pending complaints against many others.

In 2012, every paid preparer needs to have a Preparer Tax Identification Number (PTIN) and enter it on the returns he or she prepares.

Signals to watch for when you are dealing with an unscrupulous return preparer would include that they:

  • Do not sign the return or place a Preparer Tax identification Number on it.
  • Do not give you a copy of your tax return.
  • Promise larger than normal tax refunds.
  • Charge a percentage of the refund amount as preparation fee.
  • Require you to split the refund to pay the preparation fee.
  • Add forms to the return you have never filed before.
  • Encourage you to place false information on your return, such as false income, expenses and/or credits.

For advice on how to find a competent tax professional, see  Tips for Choosing a Tax Preparer.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.
 
Since 2009, 30,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to bring their money back into the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of this year, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

The IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

“Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes are also often spread by word of mouth as unsuspecting and well-intentioned people tell their friends and relatives.

Scammers prey on low income individuals and the elderly. They build false hopes and charge people good money for bad advice. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return. 

Beware. Intentional mistakes of this kind can result in a $5,000 penalty.

False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution. 

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit when their occupations or income levels make the claims unreasonable. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

False Form 1099 Refund Claims

In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Abuse of Charitable Organizations and Deductions

IRS examiners continue to uncover the intentional abuse of 501(c)(3) organizations, including arrangements that improperly shield income or assets from taxation and attempts by donors to maintain control over donated assets or the income from donated property. The IRS is investigating schemes that involve the donation of non-cash assets –– including situations in which several organizations claim the full value of the same non-cash contribution. Often these donations are highly overvalued or the organization receiving the donation promises that the donor can repurchase the items later at a price set by the donor. The Pension Protection Act of 2006 imposed increased penalties for inaccurate appraisals and set new standards for qualified appraisals.

Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
 

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Page Last Reviewed or Updated: 11-Feb-2014

The Tax Amendment Form 2012

Tax amendment form 2012 1. Tax amendment form 2012   Application, Approval, and Appeal Procedures Table of Contents Introduction Topics - This chapter discusses: Application ProceduresForms Required Required Inclusions Miscellaneous Procedures Rulings and Determination LettersEffective Date of Exemption Revocation or Modification of Exemption Appeal ProceduresAppeals Office Consideration EO Technical Consideration Administrative Remedies Appeal to Courts Group Exemption LetterCentral Organization Application Procedure Keeping the Group Exemption Letter in Force Events Causing Loss of Group Exemption Introduction If your organization is one of the organizations described in this publication and is seeking recognition of tax-exempt status from the IRS, you should follow the procedures described in this chapter and the instructions that accompany the appropriate application forms. Tax amendment form 2012 For information on section 501(c)(3) organizations, go to Section 501(c)(3) Organizations chapter 3. Tax amendment form 2012 If your organization is seeking exemption under one of the other paragraphs of section 501(c), see chapter 4. Tax amendment form 2012 Topics - This chapter discusses: Application procedures that generally apply to all organizations discussed in this publication, including the application forms; Rulings and determination letters (approvals/disapprovals); Appeal procedures available if an adverse determination letter is proposed; and Group exemption letters. Tax amendment form 2012 Application Procedures Oral requests for recognition of exemption will not be considered by the IRS. Tax amendment form 2012 Your application for tax-exempt status must be in writing using the appropriate forms as discussed below. Tax amendment form 2012 Forms Required If your organization is seeking recognition of exemption from federal income tax, it must use a specific application prescribed by the IRS in Revenue Procedure 2013–9, sec. Tax amendment form 2012 3. Tax amendment form 2012 If your organization is a central organization with exempt status, see Group Exemption Letter , later. Tax amendment form 2012 All applications must be signed by an authorized individual. Tax amendment form 2012 Form 1023, Application for Recognition of Exemption. Tax amendment form 2012   File Form 1023 if you are seeking recognition of exemption under section: 501(c)(3) Corporations, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports, or prevention of cruelty for children or animals, 501(e) Cooperative hospital service organization, 501(f) Cooperative service organization of operating educational organizations, 501(k) Certain organizations providing child care, 501(n) Charitable risk pools, and 501(q) Credit counseling organizations. Tax amendment form 2012 Form 1024, Application for Recognition of Exemption Under Section 501(a). Tax amendment form 2012    File Form 1024 if you are seeking recognition of exemption under section: 501(c)(2) Title holding corporations, 501(c)(4) Civic leagues, social welfare organizations, 501(c)(5) Labor, agricultural, or horticultural organizations, 501(c)(6) Business leagues, chambers of commerce, etc. Tax amendment form 2012 , 501(c)(7) Social clubs, 501(c)(8) Fraternal beneficiary societies, orders, or associations, 501(c)(9) Voluntary employees’ beneficiary associations, 501(c)(10) Domestic fraternal societies, orders, etc. Tax amendment form 2012 , 501(c)(12) Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, 501(c)(13) Cemetery companies, 501(c)(15) Mutual insurance companies or associations, 501(c)(17) Trusts providing for the payment of supplemental unemployment compensation benefits, 501(c)(19) A post, organization, auxiliary unit, etc. Tax amendment form 2012 of past or present members of the Armed Forces of the United States, and 501(c)(25) Title holding corporations or trusts. Tax amendment form 2012  Form 8718, User Fee for Exempt Organization Determination Letter Request, must also be sent along with Form 1024. Tax amendment form 2012 Letter application. Tax amendment form 2012   If your organization is seeking recognition of exemption under section 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), or (29), submit a letter application with Form 8718. Tax amendment form 2012 See Required Inclusions for the information to include with the letter application. Tax amendment form 2012 Form 1028. Tax amendment form 2012   Use Form 1028 if your organization is a farmers’ cooperative seeking recognition of exemption under section 521. Tax amendment form 2012 You must also submit Form 8718. Tax amendment form 2012 Form 8871. Tax amendment form 2012    Use Form 8871 if you are a political party or campaign committee for a candidate for federal, state or local office seeking to be treated as tax-exempt under section 527. Tax amendment form 2012 See Political Organization Income Tax Return , later. Tax amendment form 2012    Some organizations do not have to use specific application forms. Tax amendment form 2012 The application your organization must use is specified in the chapter in this publication dealing with your kind of organization. Tax amendment form 2012 It is also shown in the Organization Reference Chart, later. Tax amendment form 2012 Power of attorney. Tax amendment form 2012   If your organization expects to be represented by an individual such as an attorney, CPA, officer or other person authorized to practice before the IRS, whether in person or by correspondence, you must file a Form 2848 with your exemption application. Tax amendment form 2012 The power of attorney must specifically authorize an individual to represent your organization. Tax amendment form 2012 You cannot name an organization, firm, etc. Tax amendment form 2012 as your representative. Tax amendment form 2012 Form 2848, Power of Attorney and Declaration of Representative, can be used for this purpose. Tax amendment form 2012 The categories of individuals who can represent you before the IRS are listed on the form. Tax amendment form 2012 Non-exemption for terrorist organizations. Tax amendment form 2012   An organization that is identified or designated as a terrorist organization within the meaning of section 501(p)(2) is not eligible to apply for recognition of exemption. Tax amendment form 2012 User fee. Tax amendment form 2012   The law requires the payment of a user fee for determination letter requests such as your application for recognition of tax-exempt status. Tax amendment form 2012 If you are filing Form 1023, user fee information is included in Part XI. Tax amendment form 2012 If you are required to apply for recognition of exemption by submitting Form 1024, a letter application, etc. Tax amendment form 2012 and you must pay a user fee, you should use Form 8718 to figure the amount of your user fee and to pay it. Tax amendment form 2012 Your payment must accompany your request. Tax amendment form 2012 The IRS will not process a request unless the fee has been paid. Tax amendment form 2012    For the current user fee amount and processing time for applications go to IRS. Tax amendment form 2012 gov and select “Charities and Non-Profits” from the buttons near the top. Tax amendment form 2012 Then select the underlined link “How to Apply To Be Tax-Exempt” for the latest user fees or I want to check the status of my application for more information. Tax amendment form 2012 You can also call 1-877-829-5500. Tax amendment form 2012 Required Inclusions Employer identification number (EIN). Tax amendment form 2012   Every exempt organization must have an EIN, whether or not it has any employees. Tax amendment form 2012 An EIN is required before an exemption application is submitted. Tax amendment form 2012 Information on how to apply for an EIN by using one of the following methods can be found at Employer ID Numbers (EIN): Online— This is the preferred method for requesting an EIN. Tax amendment form 2012 The EIN is issued immediately once the application information is validated. Tax amendment form 2012 By telephone at 1-800-829-4933, from 7:00 a. Tax amendment form 2012 m. Tax amendment form 2012 to 7:00 p. Tax amendment form 2012 m. Tax amendment form 2012 local time, Monday through Friday. Tax amendment form 2012 The EIN is provided over the phone to an authorized individual. Tax amendment form 2012 By mailing or faxing Form SS-4, Application for Employer Identification Number. Tax amendment form 2012 If the faxed Form SS-4 includes the taxpayer's fax number, a fax will be sent back with the EIN within four (4) business days. Tax amendment form 2012    Use only one method for each entity so you do not receive more than one EIN for an entity. Tax amendment form 2012   If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance. Tax amendment form 2012 Organizing documents. Tax amendment form 2012   Your application should include a copy of the organizing or enabling document that is signed by a principal officer or is accompanied by a written declaration signed by an authorized individual certifying that the document is a complete and accurate copy of the original or meets the requirements of a conformed copy. Tax amendment form 2012   If your organizing or enabling document are articles of incorporation, include evidence that it was filed and approved by a state official. Tax amendment form 2012 (For example, a stamped “Filed” copy dated by the Secretary of State is prima facie evidence that it was filed and approved by a state official. Tax amendment form 2012 ) A copy of the articles of incorporation can also be submitted with a written declaration signed by an authorized individual indicating the copy is complete and was filed and approved by the state, including the date filed. Tax amendment form 2012 Bylaws. Tax amendment form 2012   Bylaws alone are not organizing documents. Tax amendment form 2012 However, if your organization has adopted bylaws, include a current copy. Tax amendment form 2012 The bylaws need not be signed if submitted as an attachment. Tax amendment form 2012   If your organization's name has been officially changed by an amendment to your organizing instruments, you should also attach a conformed copy of that amendment to your application. Tax amendment form 2012    Bylaws may be considered an organizing document only if they are properly structured (includes name, purpose, signatures, and intent to form an organization). Tax amendment form 2012 Conformed copy. Tax amendment form 2012   A conformed copy is a copy that agrees with the original and all amendments to it. Tax amendment form 2012 If the original document required a signature, the copy should either be signed by a principal officer or, if not signed, be accompanied by a written declaration signed by an authorized officer of the organization. Tax amendment form 2012 With either option, the officer must certify that the document is a complete and accurate copy of the original. Tax amendment form 2012 A certificate of incorporation should be approved and dated by an appropriate state official. Tax amendment form 2012 Attachments. Tax amendment form 2012    When submitting attachments, every attachment should show your organization's name and EIN. Tax amendment form 2012 It should also state that it is an attachment to your application form and identify the part and line item number to which it applies. Tax amendment form 2012 Original documents. Tax amendment form 2012   Do not submit original documents because they become part of the IRS file and cannot be returned. Tax amendment form 2012 Description of activities. Tax amendment form 2012   Your application must include a full description of the proposed activities of your organization, including each of the fundraising activities of a section 501(c)(3) organization and a narrative description of anticipated receipts and contemplated expenditures. Tax amendment form 2012 When describing the activities in which your organization expects to engage, you must include the standards, criteria, procedures, or other means that your organization adopted or planned for carrying out those activities. Tax amendment form 2012   To determine the information you need to provide, you should study the part of this publication that applies to your organization. Tax amendment form 2012 The appropriate chapter will describe the purposes and activities that your organization must pursue, engage in, and include in your application in order to achieve exempt status. Tax amendment form 2012   Often, your organization's articles of organization (or other organizing instruments) contain descriptions of your organization's purposes and activities. Tax amendment form 2012   Your application should describe completely and in detail your past, present, and planned activities. Tax amendment form 2012 Financial data. Tax amendment form 2012   You must include in your application financial statements showing your receipts and expenditures and a balance sheet for the current year and the 3 preceding years (or for the number of years your organization was in existence, if less than 4 years). Tax amendment form 2012 For each accounting period, you must describe the sources of your receipts and the nature of your expenditures. Tax amendment form 2012   If you have not yet begun operations, or have operated for less than 1 year, a proposed budget for 2 full accounting periods and a current statement of assets and liabilities will be acceptable. Tax amendment form 2012 Exempt status established in application. Tax amendment form 2012   If your application and its supporting documents show that your organization meets the requirements for tax-exempt status under the Code section you applied, the IRS will issue a favorable determination letter or ruling. Tax amendment form 2012 Miscellaneous Procedures To help in processing your application, be sure to attach all schedules, statements, and other documents required by the application form. Tax amendment form 2012 If you do not attach them, you may have to resubmit your application or you may otherwise encounter a delay in processing your application. Tax amendment form 2012 Incomplete application. Tax amendment form 2012   If an application is not complete and does not contain all the required attachments found under Required Inclusions, the IRS may return it to you for completion. Tax amendment form 2012 The IRS may keep the application and send a letter requesting the missing information if most of the information has been received. Tax amendment form 2012   If the IRS returns the application or requests additional information from you, that application will be considered filed on the date the substantially completed application is postmarked, or if no postmark, received at the IRS. Tax amendment form 2012   Generally, the user fee will not be refunded if an incomplete application is filed. Tax amendment form 2012   Additional information may be requested if necessary to clarify the nature of your organization. Tax amendment form 2012 Application made under wrong paragraph of section 501(c). Tax amendment form 2012   Occasionally, an organization appears to qualify for exemption under a paragraph of section 501(c) that is different from the one for which the organization applied. Tax amendment form 2012 If the application was made on Form 1024, which applies to more than one paragraph of section 501(c), the organization can be recognized as exempt under any paragraph to which the form applies if the organization has agreed to have its application considered under that paragraph. Tax amendment form 2012 It must also supply any additional information required for the application under the new paragraph. Tax amendment form 2012 Different application form needed. Tax amendment form 2012   If a different application form is required for your organization, the IRS will so advise your organization and will provide the appropriate application form for your convenience in reapplying under that paragraph, if you wish to do so. Tax amendment form 2012 Although supporting information previously furnished need not be duplicated, you must provide any necessary additional information required for the application. Tax amendment form 2012 If your reply is not received within a limited time, your application will be processed only for the paragraph under which you originally applied. Tax amendment form 2012   When a specific application form is needed for the paragraph under which your organization qualifies, that form is required before a letter recognizing exemption can be issued. Tax amendment form 2012 This includes cases in which a determination letter is modified to recognize an organization's exempt status under a paragraph other than the paragraph under which it originally established exemption. Tax amendment form 2012 IRS responses. Tax amendment form 2012   Organizations that submit a complete application will receive an acknowledgment from the IRS. Tax amendment form 2012 Others will receive a letter requesting more information or returning an incomplete application. Tax amendment form 2012 Applicants also will be notified if the application is forwarded to EO Technical Office for consideration. Tax amendment form 2012 These letters will be sent out as soon as possible after receipt of the organization's application. Tax amendment form 2012 Withdrawal of application. Tax amendment form 2012   An application may be withdrawn at any time before the issuance of a ruling or determination letter upon the written request of a principal officer or authorized representative of your organization. Tax amendment form 2012 However, the withdrawal will not prevent the information contained in the application from being used by the IRS in any subsequent examination of your organization's returns. Tax amendment form 2012 The information forwarded with an application will not be returned to your organization and, generally, when an application is withdrawn, the user fee paid will not be refunded. Tax amendment form 2012 Requests for withholding of information from the public. Tax amendment form 2012   The law requires many exempt organizations and private foundations to make their application forms and annual information returns available for public inspection. Tax amendment form 2012 The law also requires the IRS to make available for public inspection, in accordance with section 6104 and the related regulations, your approved application for recognition of exemption (including any papers submitted in support of the application) and the ruling or determination letter (discussed later, under Rulings and Determination Letters . Tax amendment form 2012 )   Any information submitted in the application or in support of it that relates to any trade secret, patent, process, style of work, or apparatus, upon request, can be withheld from public inspection if the IRS determines that the disclosure of such information would adversely affect the organization. Tax amendment form 2012 Your request must: Identify the material to be withheld (the document, page, paragraph, and line) by clearly marking it “Not Subject To Public Inspection. Tax amendment form 2012 ” Include the reasons for your organization's position that the information is of the type that can be withheld from public inspection. Tax amendment form 2012 Be filed with the office where your organization files the documents in which the material to be withheld is contained. Tax amendment form 2012 Where to file. Tax amendment form 2012   Send your application for exempt status and Form 8718, (if required) to: Internal Revenue Service PO Box 12192 Covington, KY 41012-0192   Your application will be considered by EO Determinations, who will either issue a favorable determination letter to your organization, issue an adverse determination letter denying the exempt status claimed in the application, or refer the case to the Exempt Organizations Technical Office (EO Technical). Tax amendment form 2012    Form 8940, Request for Miscellaneous Determination. Tax amendment form 2012 You can request miscellaneous determinations under sections 507, 509(a), 4940, 4942, 4945, and 6033 with Form 8940. Tax amendment form 2012 Nonexempt charitable trusts also file Form 8940 for an initial determination of section 509(a)(3) status or change to their type. Tax amendment form 2012 See Form 8940 and instructions for more information. Tax amendment form 2012 Requests other than applications. Tax amendment form 2012 Requests other than applications for recognition of exemption or Form 8940 (for example, requests for rulings involving feeder organizations, application of excise taxes to activities of private foundations, taxation of unrelated business income, etc. Tax amendment form 2012 ) should be sent to: Internal Revenue Service  Attention: EO Letter Rulings PO Box 27720 McPherson Station Washington, DC 20038 These requests, similar to applications for recognition of exemption previously discussed, must be accompanied by the appropriate user fee. Tax amendment form 2012 The schedule for user fees, including those for requests other than applications, can be found in Revenue Procedure 2013-8, 2013-1 I. Tax amendment form 2012 R. Tax amendment form 2012 B. Tax amendment form 2012 237. Tax amendment form 2012 Referral to EO Technical. Tax amendment form 2012   EO Determinations will refer to EO Technical any exempt organization issue concerning qualification for exemption or foundation status for which there is no published precedent or for which there is reason to believe that nonuniformity exists. Tax amendment form 2012 EO Determinations can request technical advice on any technical or procedural question that cannot be resolved on the basis of law, regulations, or a clearly applicable revenue ruling or other published precedent. Tax amendment form 2012 An organization can request that an issue be referred to EO Technical for technical advice if it feels that a lack of uniformity exists as to the disposition of the issue or if an issue is so unusual or complex as to warrant consideration by EO Technical. Tax amendment form 2012 If a determination letter is issued based on technical advice from EO Technical regarding qualification for exemption or foundation status, no further administrative appeal is available on the issue that was the subject of technical advice. Tax amendment form 2012 Reminder. Tax amendment form 2012   The law requires payment of a user fee for determination letter requests. Tax amendment form 2012 Go to IRS. Tax amendment form 2012 gov/Charities and select Current User Fees-Exempt Organizations to find the required payment. Tax amendment form 2012 Payment must accompany each request. Tax amendment form 2012 Rulings and Determination Letters Elimination of the advance public charity status. Tax amendment form 2012   New regulations eliminate the advance ruling process for a section 501(c)(3) organization. Tax amendment form 2012 Under the new regulations, a new section 501(c)(3) organization will be classified as a publicly supported organization and not a private foundation if it can show when it applies for tax-exempt status that it reasonably can be expected to be publicly supported. Tax amendment form 2012 The new rules no longer require the organization to file Form 8734, Support Schedule for Advance Ruling Period, after completing its first 5 tax years. Tax amendment form 2012 See Elimination of the Advance Ruling Process . Tax amendment form 2012 An organization must describe fully the activities in which it expects to engage. Tax amendment form 2012 This includes standards, procedures, or other means adopted or planned by the organization for carrying out its activities, expected sources of funds, and the nature of its contemplated expenses. Tax amendment form 2012 When an organization does not supply the information previously mentioned under Application Procedures , or fails to furnish a sufficiently detailed description of its proposed activities to permit a conclusion that it will clearly be exempt, a proposed adverse determination letter or ruling may be issued. Tax amendment form 2012 Adverse determination. Tax amendment form 2012   A proposed adverse ruling or determination letter will be issued to an organization that has not provided sufficiently detailed information to establish that it qualifies for exemption or if the information provided establishes that it does not qualify for exemption. Tax amendment form 2012 An organization can appeal a proposed adverse ruling or determination letter. Tax amendment form 2012 See Appeal Procedures , later. Tax amendment form 2012 Effective Date of Exemption A ruling or determination letter recognizing exemption is usually effective as of the date of formation of an organization if, during the period before the date of the ruling or determination letter, its purposes and activities were those required by the law. Tax amendment form 2012 (See Application for Recognition of Exemption in chapter 3 for the special rule for organizations applying for recognition of exemption under section 501(c)(3). Tax amendment form 2012 ) Upon obtaining recognition of exemption, the organization can file a claim for a refund of income taxes paid for the period for which its exempt status is recognized. Tax amendment form 2012 If an organization is required to alter its activities or substantially amend its charter to qualify, the ruling or determination letter recognizing exemption will be effective as of the date specified in the letter. Tax amendment form 2012 If a nonsubstantive amendment is made, such as correction of a clerical error in the enabling instrument or the addition of a dissolution clause, exemption will ordinarily be recognized as of the date of formation if the activities of the organization before the ruling or determination are consistent with the exemption requirements. Tax amendment form 2012 A ruling or determination letter recognizing exemption cannot be relied on if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization. Tax amendment form 2012 Also, a ruling or determination letter cannot be relied on if it is based on any inaccurate material factual representations. Tax amendment form 2012 Revocation or Modification of Exemption A ruling or determination letter recognizing exemption may be revoked or modified by: A notice to the organization to which the ruling or determination letter originally was issued, Enactment of legislation or ratification of a tax treaty, A decision of the United States Supreme Court, Issuance of temporary or final regulations, or Issuance of a revenue ruling, a revenue procedure, or other statement published in the Internal Revenue Bulletin or Cumulative Bulletin. Tax amendment form 2012 When revocation takes effect. Tax amendment form 2012   If the organization omitted or misstated a material fact, operated in a manner materially different from that originally represented, or, with regard to organizations to which section 503 applies, engaged in a prohibited transaction (such as diverting corpus or income from its exempt purpose), the revocation or modification may be retroactive. Tax amendment form 2012 Material change in organization. Tax amendment form 2012   If there is a material change, inconsistent with exemption, in the character, purpose, or method of operation of the organization, revocation or modification will ordinarily take effect as of the date of that material change. Tax amendment form 2012 Relief from retroactivity. Tax amendment form 2012   If a ruling or determination letter was issued in error or the IRS changed its position after issuing a letter or ruling, and if section 7805(b) relief is granted, retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination letter was modified or revoked. Tax amendment form 2012 For more information on requesting section 7805(b) relief, see Revenue Procedure 2013-4, 2013-1 I. Tax amendment form 2012 R. Tax amendment form 2012 B. Tax amendment form 2012 126, sec. Tax amendment form 2012 13 (or later update). Tax amendment form 2012 Foundations. Tax amendment form 2012   The determination of the effective date is the same for the revocation or modification of foundation status or operating foundation status unless the effective date is expressly covered by statute or regulations. Tax amendment form 2012 Written notice. Tax amendment form 2012   If an EO area manager concludes, as a result of examining an information return or considering information from any other source, that a ruling or determination letter should be revoked or modified, the organization will be advised in writing of the proposed action and the reasons for it. Tax amendment form 2012   The organization will also be advised of its right to protest the proposed action by requesting Appeals Office consideration. Tax amendment form 2012 The appeal procedures are discussed next. Tax amendment form 2012 Appeal Procedures If your organization applies for tax-exempt status and EO Determination decides your organization does not qualify, your organization will be advised of its rights to protest the determination by requesting Appeals Office consideration. Tax amendment form 2012 This process does not apply to determinations issued by EO Technical. Tax amendment form 2012 Your organization must submit a statement of its views fully explaining its reasoning. Tax amendment form 2012 The statement must be submitted within 30 days from the date of the adverse determination letter and must state whether it wishes Appeals Office consideration. Tax amendment form 2012 Representation. Tax amendment form 2012   A principal officer or trustee can represent an organization at any level of appeal within the IRS. Tax amendment form 2012 Also, an attorney, certified public accountant, or individual enrolled to practice before the IRS can represent the organization. Tax amendment form 2012   If the organization's representative attends a conference without a principal officer or trustee, the representative must file a proper power of attorney or a tax information authorization before receiving or inspecting confidential information. Tax amendment form 2012 Form 2848 or Form 8821, Tax Information Authorization, as appropriate (or any other properly written power of attorney or authorization), can be used for this purpose. Tax amendment form 2012 These forms can be obtained from the IRS. Tax amendment form 2012 For more information, see Publication 947, Practice Before the IRS and Power of Attorney. Tax amendment form 2012 Appeals Office Consideration EO Determinations will consider the statement protesting and appealing (hereinafter appealing) the adverse determination and decide if the information affects its determination. Tax amendment form 2012 If the appeal does not provide a basis to reconsider its adverse determination, it will forward the appeal and case file to the Appeals Office. Tax amendment form 2012 For more information about the role of the Appeals Office, see Publication 892, Exempt Organization Appeal Procedures for Unagreed Issues. Tax amendment form 2012 The appeal should include the following information. Tax amendment form 2012 The organization's name, address, daytime telephone number, and employer identification number. Tax amendment form 2012 A statement that the organization wants to protest the determination. Tax amendment form 2012 A copy of the letter showing the determination you disagree with, or the date and symbols on the determination letter. Tax amendment form 2012 A statement of facts supporting the organization's position in any contested factual issue. Tax amendment form 2012 A statement outlining the law or other authority the organization is relying on. Tax amendment form 2012 A statement as to whether a conference at the Appeals Office is desired. Tax amendment form 2012 The statement of facts in item 4 must be declared true under penalties of perjury. Tax amendment form 2012 This may be done by adding to the protest the following signed declaration:   “Under penalties of perjury, I declare that I have examined the statement of facts presented in this protest and in any accompanying schedules and statements and, to the best of my knowledge and belief, it is true, correct, and complete. Tax amendment form 2012 ”           Signature. Tax amendment form 2012   If the organization's representative submits the appeal, a substitute declaration must be included, stating: That the representative prepared the appeal and accompanying documents, and Whether the representative knows personally that the statements of fact contained in the appeal and accompanying documents are true and correct. Tax amendment form 2012 Be sure the appeal contains all of the information requested. Tax amendment form 2012 Incomplete appeals will be returned for completion. Tax amendment form 2012 If a conference is requested, it will be held at the Appeals Office, unless the organization requests that the meeting be held at a field office convenient to both parties. Tax amendment form 2012 The Appeals Office, after considering the organization's appeal as well as information presented in any conference held, will notify the organization of its decision and issue an appropriate determination letter. Tax amendment form 2012 An adverse decision can be appealed to the courts (discussed later). Tax amendment form 2012 The Appeals Office must request technical advice from EO Technical on any exempt organization issue concerning qualification for exemption or foundation status for which there is no published precedent or for which there is reason to believe that nonuniformity exists. Tax amendment form 2012 If an organization believes that its case involves such an issue, it should ask the Appeals Office to request technical advice. Tax amendment form 2012 Any determination letter issued on the basis of technical advice from EO Technical cannot be appealed to the Appeals Office for those issues that were the subject of the technical advice from EO Technical. Tax amendment form 2012 EO Technical Consideration If an application is referred to EO Technical for issuance of a ruling and an adverse ruling is issued, the organization will be informed of the basis for the conclusion, its right to file a protest within 30 days, and its right to have a conference with EO Technical. Tax amendment form 2012 Administrative Remedies In the case of an application under section 501(c)(3), all of the following actions, called administrative remedies, must be completed by your organization before an unfavorable ruling or determination letter from the IRS can be appealed to the courts. Tax amendment form 2012 The filing of a substantially completed application Form 1023 or group exemption request under section 501(c)(3) (described earlier in this chapter) or the filing of a request for a determination of foundation status (see Private Foundations and Public Charities in chapter 3). Tax amendment form 2012 In the case of a late-filed application, requesting relief under Regulations section 301. Tax amendment form 2012 9100 regarding applications for extensions of time for making an election or application for relief from tax (see Application for Recognition of Exemption in chapter 3). Tax amendment form 2012 The timely submission of all additional information requested to perfect an exemption application or request for determination of private foundation status. Tax amendment form 2012 Exhaustion of all administrative appeals available within the IRS, including protest of an adverse ruling issued by EO Technical in the case of an exemption application. Tax amendment form 2012 The actions just described will not be considered completed until the IRS has had a reasonable time to act upon the appeal or protest, as the case may be. Tax amendment form 2012 An organization will not be considered to have exhausted its administrative remedies before the earlier of: The completion of the steps just listed and the sending by certified or registered mail of a notice of final determination, or The expiration of the 270-day period in which the IRS has not issued a notice of final determination and the organization has taken, in a timely manner, all reasonable steps to secure a ruling or determination. Tax amendment form 2012 270-day period. Tax amendment form 2012   The 270-day period will be considered by the IRS to begin on the date a substantially completed Form 1023 or group exemption request is sent to the IRS. Tax amendment form 2012 See Application Procedures , earlier, for information needed to complete Form 1023. Tax amendment form 2012   If the application does not contain all of the required items, it will not be further processed and may be returned to the applicant for completion. Tax amendment form 2012 The 270-day period, in this event, will not be considered as starting until the date the application is remailed to the IRS with the requested information, or, if a postmark is not evident, on the date the IRS receives a substantially completed application. Tax amendment form 2012 Appeal to Courts If the IRS issues an unfavorable determination letter or ruling to your organization and you have exhausted all the administrative remedies just discussed, your organization can seek judicial remedies. Tax amendment form 2012 For example, if your organization has paid the tax resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a refund in a U. Tax amendment form 2012 S. Tax amendment form 2012 District Court or the U. Tax amendment form 2012 S. Tax amendment form 2012 Court of Federal Claims. Tax amendment form 2012 Or, if your organization elected not to pay the tax deficiency resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a redetermination of the tax deficiencies in the United States Tax Court. Tax amendment form 2012 For more information on these types of suits, get Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Tax amendment form 2012 In certain situations, your organization can file suit for a declaratory judgment in the U. Tax amendment form 2012 S. Tax amendment form 2012 District Court for the District of Columbia, the U. Tax amendment form 2012 S. Tax amendment form 2012 Court of Federal Claims, or the U. Tax amendment form 2012 S. Tax amendment form 2012 Tax Court. Tax amendment form 2012 This remedy is available if your organization received an adverse notice of final determination, or if the IRS failed to make a timely determination on your initial or continuing qualification or classification as an exempt organization. Tax amendment form 2012 However, your exempt status claim must be as: An organization qualifying under section 501(c)(3), An organization to which a deduction for a contribution is allowed under section 170(c)(2), An organization that is a private foundation under section 509(a), A private operating foundation under section 4942(j)(3), or A cooperative organization that is exempt from tax under section 521. Tax amendment form 2012 Adverse notice of final determination. Tax amendment form 2012   The adverse notice of final determination referred to above is a ruling or determination letter sent by certified or registered mail holding that your organization: Is not described in section 501(c)(3) or section 170(c)(2), Is a private foundation as defined in section 4942(j)(3), or Is a public charity described in a part of section 509(a) or section 170(b)(1)(A) other than the part under which your organization requested classification. Tax amendment form 2012 Favorable court rulings - IRS procedure. Tax amendment form 2012   If a suit results in a final determination that your organization is exempt from tax, the IRS will issue a favorable ruling or determination letter, provided your organization has filed an application for exemption and submitted a statement that the underlying facts and applicable law are the same as in the period considered by the court. Tax amendment form 2012 Group Exemption Letter A group exemption letter is a ruling or determination letter issued to a central organization recognizing on a group basis the exemption under section 501(c) of subordinate organizations on whose behalf the central organization has applied for recognition of exemption. Tax amendment form 2012 A central organization is an organization that has one or more subordinates under its general supervision or control. Tax amendment form 2012 A subordinate organization is a chapter, local, post, or unit of a central organization. Tax amendment form 2012 A central organization may be a subordinate itself, such as a state organization that has subordinate units and is itself affiliated with a national (central) organization. Tax amendment form 2012 A subordinate organization may or may not be incorporated, but it must have an organizing document. Tax amendment form 2012 A subordinate that is organized and operated in a foreign country cannot be included in a group exemption letter. Tax amendment form 2012 A subordinate described in section 501(c)(3) cannot be included in a group exemption letter if it is a private foundation described in section 509(a). Tax amendment form 2012 If your organization is a subordinate controlled by a central organization (for example, a church, a veterans' organization, or a fraternal organization), you should check with the central organization to see if it has been issued a group exemption letter that covers your organization. Tax amendment form 2012 If it has, you do not have to file a separate application unless your organization no longer wants to be included in the group exemption letter. Tax amendment form 2012 If the group exemption letter does not cover your organization, ask your central organization about being included in the next annual group ruling update that it submits to the IRS. Tax amendment form 2012 Central Organization Application Procedure If your organization is a central organization with affiliated subordinates under its control, it can apply for a group exemption letter for its subordinates, provided it has obtained recognition of its own exemption before or concurrently with the group exemption. Tax amendment form 2012 You should make the application for such subordinates by letter instead of submitting either Form 1023 or 1024. Tax amendment form 2012 This procedure relieves each of the subordinates covered by a group exemption letter from filing its own application. Tax amendment form 2012 A central organization obtains its own recognition of exemption by sending its application to the IRS address shown on Form 8718 or Form 1023. Tax amendment form 2012 If the central organization has previously obtained recognition of its own exemption, it must indicate its employer identification number and the date of the letter recognizing its exemption. Tax amendment form 2012 It need not forward documents already submitted. Tax amendment form 2012 However, if it has not already done so, the central organization must submit a copy of any amendment to its governing instruments or internal regulations as well as any information about changes in its character, purposes, or method of operation. Tax amendment form 2012 Employer identification number. Tax amendment form 2012   The central organization must have an EIN before it submits a completed exemption or group exemption application. Tax amendment form 2012 Each subordinate must have its own EIN, even if it has no employees. Tax amendment form 2012 When submitting its group exemption application, the central organization must provide an EIN for each subordinate organization. Tax amendment form 2012 Information required for subordinate organizations. Tax amendment form 2012   In addition to the information required to obtain recognition of its own exemption, the central organization must submit information for those subordinates to be included in the group exemption letter. Tax amendment form 2012 The information should be forwarded in a letter signed by a principal officer of the central organization setting forth or including as attachments the following. Tax amendment form 2012 Information verifying that the subordinates: Are affiliated with the central organization at the close of its annual accounting period; Are subject to its general supervision or control; Are all eligible to qualify for exemption under the same paragraph of section 501(c), though not necessarily the paragraph under which the central organization itself is exempt; Are not private foundations if the application for a group exemption letter involves section 501(c)(3); Are all on the same accounting period as the central organization if they are to be included in group returns; and Are organizations that have been formed within the 15-month period preceding the date of submission of the group exemption application if they are claiming section 501(c)(3) status and are subject to the requirements of section 508(a) and wish to be recognized as exempt from their dates of creation (a group exemption letter may be issued covering subordinates, one or more of which have not been organized within the 15-month period preceding the date of submission, if all subordinates are willing to be recognized as exempt only from the date of application). Tax amendment form 2012 A detailed description of the purposes and activities of the subordinates, including the sources of receipts and the nature of expenditures. Tax amendment form 2012 A sample copy of a uniform governing instrument (such as a charter or articles of association) adopted by the subordinates, or, in its absence, copies of representative instruments. Tax amendment form 2012 An affirmation to the effect that, to the best of the officer's knowledge, the purposes and activities of the subordinates are as stated in (2) and (3), above. Tax amendment form 2012 A statement that each of the subordinates has provided a written authorization to the central organization, signed by an authorized officer of the subordinate, agreeing to be included in the group exemption (see also New 501(c)(3) organizations that want to be included , later in this section). Tax amendment form 2012 A list of subordinates to be included in the group exemption letter to which the IRS has issued an outstanding ruling or determination letter relating to exemption. Tax amendment form 2012 If the application for a group exemption letter involves section 501(c)(3) and is subject to the provisions of the Code requiring that it give timely notice that it is not a private foundation (see Private Foundations in chapter 3), an affirmation to the effect that, to the best of the officer's knowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as defined in section 509(a). Tax amendment form 2012 For each subordinate that is a school claiming exemption under section 501(c)(3), the information required by Revenue Ruling 71-447, 1971-2 C. Tax amendment form 2012 B. Tax amendment form 2012 230 and Revenue Procedure 75-50, 1975-2 C. Tax amendment form 2012 B. Tax amendment form 2012 587 (these requirements are fully described in chapter 3, under Private Schools ; see also Schedule B, Form 1023). Tax amendment form 2012 For any school affiliated with a church, the information to show that the provisions of Revenue Ruling 75-231, 1975-1 C. Tax amendment form 2012 B. Tax amendment form 2012 158, have been met. Tax amendment form 2012 A list of the names, mailing addresses, actual addresses if different, and EINs of subordinates to be included in the group exemption letter. Tax amendment form 2012 A current directory of subordinates may be furnished instead of the list if it includes the required information and if the subordinates not to be included in the group exemption letter are identified. Tax amendment form 2012 New 501(c)(3) organizations that want to be included. Tax amendment form 2012   A new organization, described in section 501(c)(3), that wants to be included in a group exemption letter must submit its authorization (as explained in item number 5, earlier, under Information required for subordinate organizations ) to the central organization before the end of the 15th month after it was formed in order to satisfy the requirement of section 508(a). Tax amendment form 2012 The central organization must also include this subordinate in its next annual submission of information, as discussed later, under Information Required Annually . Tax amendment form 2012 Keeping the Group Exemption Letter in Force Continued effectiveness of a group exemption letter is based on the following conditions. Tax amendment form 2012 The continued existence of the central organization. Tax amendment form 2012 The continued qualification of the central organization for exemption under section 501(c). Tax amendment form 2012 The submission by the central organization of the information regarding its subordinate organizations that is required annually (described under Information Required Annually). Tax amendment form 2012 The annual filing of an information return (Form 990, for example) by the central organization if required. Tax amendment form 2012 The continued effectiveness of a group exemption letter as to a particular subordinate is based on these four conditions, as well as on the continued conformity by the subordinate to the requirements for inclusion in a group exemption letter, the authorization for inclusion, and the annual filing of any required information return for the subordinate. Tax amendment form 2012 Information Required Annually To maintain a group exemption letter, the central organization must submit annually, at least 90 days before the close of its annual accounting period, all of the following information. Tax amendment form 2012 Information about all changes in the purposes, character, or method of operation of the subordinates included in the group exemption letter. Tax amendment form 2012 A separate list (that includes the names, mailing addresses, actual addresses if different, and EINs of the affected subordinates) for each of the three following categories. Tax amendment form 2012 Subordinates that have changed their names or addresses during the year. Tax amendment form 2012 Subordinates no longer to be included in the group exemption letter because they no longer exist or have disaffiliated from or withdrawn their authorization to the central organization. Tax amendment form 2012 Subordinates to be added to the group exemption letter because they are newly organized or affiliated or because they have recently authorized the central organization to include them. Tax amendment form 2012 An annotated directory of subordinates will not be accepted for this purpose. Tax amendment form 2012 If there were none of the above changes, the central organization must submit a statement to that effect. Tax amendment form 2012 The same information about new subordinates that was required in the initial application for group exemption. Tax amendment form 2012 (This information is listed in items 1 through 10, under Information required for subordinate organizations. Tax amendment form 2012 , earlier. Tax amendment form 2012 ) If a new subordinate does not differ in any material respects from the subordinates included in the application for group exemption, however, a statement to this effect may be submitted in lieu of detailed information. Tax amendment form 2012 The organization should send this information to:   Ogden Service Center  Mail Stop 6271 Ogden, UT 84404-4749 Submitting the required information annually does not relieve the central organization or any of its subordinates of the duty to submit any other information that may be required by an EO area manager to determine whether the conditions for continued exemption are being met. Tax amendment form 2012 Events Causing Loss of Group Exemption A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when: The central organization notifies the IRS that it is going out of existence, The central organization notifies the IRS, by its annual submission or otherwise, that any of its subordinates will no longer fulfill the conditions for continued effectiveness, explained earlier, or The IRS notifies the central organization or the affected subordinate that the group exemption letter will no longer have effect for some or all of the group because the conditions for continued effectiveness of a group exemption letter have not been fulfilled. Tax amendment form 2012 When notice is given under any of these three conditions, the IRS will no longer recognize the exempt status of the affected subordinates until they file separate applications on their own behalf or the central organization files complete supporting information for their reinclusion in the group exemption at the time of its annual submission. Tax amendment form 2012 However, when the notice is given by the IRS and the withdrawal of recognition is based on the failure of the organization to comply with the requirements for recognition of tax-exempt status under the particular subsection of section 501(c), the revocation will ordinarily take effect as of the date of that failure. Tax amendment form 2012 The notice, however, will be given only after the appeal procedures described earlier in this chapter are completed. Tax amendment form 2012 Prev  Up  Next   Home   More Online Publications