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2012 Form 1040ez

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2012 Form 1040ez

2012 form 1040ez 8. 2012 form 1040ez   Amortization Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: How To Deduct Amortization Starting a BusinessBusiness Start-Up Costs Costs of Organizing a Corporation Costs of Organizing a Partnership How To Amortize Getting a Lease Section 197 IntangiblesSection 197 Intangibles Defined Assets That Are Not Section 197 Intangibles Safe Harbor for Creative Property Costs Anti-Churning Rules Incorrect Amount of Amortization Deducted Disposition of Section 197 Intangibles Reforestation Costs Geological and Geophysical Costs Pollution Control FacilitiesNew identifiable treatment facility. 2012 form 1040ez Research and Experimental Costs Optional Write-off of Certain Tax Preferences Introduction Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. 2012 form 1040ez It is similar to the straight line method of depreciation. 2012 form 1040ez The various amortizable costs covered in this chapter are included in the list below. 2012 form 1040ez However, this chapter does not discuss amortization of bond premium. 2012 form 1040ez For information on that topic, see chapter 3 of Publication 550, Investment Income and Expenses. 2012 form 1040ez Topics - This chapter discusses: Deducting amortization Amortizing costs of starting a business Amortizing costs of getting a lease Amortizing costs of section 197 intangibles Amortizing reforestation costs Amortizing costs of geological and geophysical costs Amortizing costs of pollution control facilities Amortizing costs of research and experimentation Amortizing costs of certain tax preferences Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 946 How To Depreciate Property Form (and Instructions) 4562 Depreciation and Amortization 4626 Alternative Minimum Tax—Corporations 6251 Alternative Minimum Tax—Individuals See chapter 12 for information about getting publications and forms. 2012 form 1040ez How To Deduct Amortization To deduct amortization that begins during the current tax year, complete Part VI of Form 4562 and attach it to your income tax return. 2012 form 1040ez To report amortization from previous years, in addition to amortization that begins in the current year, list on Form 4562 each item separately. 2012 form 1040ez For example, in 2012, you began to amortize a lease. 2012 form 1040ez In 2013, you began to amortize a second lease. 2012 form 1040ez Report amortization from the new lease on line 42 of your 2013 Form 4562. 2012 form 1040ez Report amortization from the 2012 lease on line 43 of your 2013 Form 4562. 2012 form 1040ez If you do not have any new amortizable expenses for the current year, you are not required to complete Form 4562 (unless you are claiming depreciation). 2012 form 1040ez Report the current year's deduction for amortization that began in a prior year directly on the “Other deduction” or “Other expense line” of your return. 2012 form 1040ez Starting a Business When you start a business, treat all eligible costs you incur before you begin operating the business as capital expenditures which are part of your basis in the business. 2012 form 1040ez Generally, you recover costs for particular assets through depreciation deductions. 2012 form 1040ez However, you generally cannot recover other costs until you sell the business or otherwise go out of business. 2012 form 1040ez For a discussion on how to treat these costs, see If your attempt to go into business is unsuccessful under Capital Expenses in chapter 1. 2012 form 1040ez For costs paid or incurred after September 8, 2008, you can deduct a limited amount of start-up and organizational costs. 2012 form 1040ez The costs that are not deducted currently can be amortized ratably over a 180-month period. 2012 form 1040ez The amortization period starts with the month you begin operating your active trade or business. 2012 form 1040ez You are not required to attach a statement to make this election. 2012 form 1040ez You can choose to forgo this election by affirmatively electing to capitalize your start-up costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. 2012 form 1040ez Once made, the election to either amortize or capitalize start-up costs is irrevocable and applies to all start-up costs that are related to your trade or business. 2012 form 1040ez See Regulations sections 1. 2012 form 1040ez 195-1, 1. 2012 form 1040ez 248-1, and 1. 2012 form 1040ez 709-1. 2012 form 1040ez For costs paid or incurred after October 22, 2004, and before September 9, 2008, you can elect to deduct a limited amount of business start-up and organizational costs in the year your active trade or business begins. 2012 form 1040ez Any costs not deducted can be amortized ratably over a 180-month period, beginning with the month you begin business. 2012 form 1040ez If the election is made, you must attach any statement required by Regulations sections 1. 2012 form 1040ez 195-1(b), 1. 2012 form 1040ez 248-1(c), and 1. 2012 form 1040ez 709-1(c), as in effect before September 9, 2008. 2012 form 1040ez Note. 2012 form 1040ez You can apply the provisions of Regulations sections 1. 2012 form 1040ez 195-1, 1. 2012 form 1040ez 248-1, and 1. 2012 form 1040ez 709-1 to all business start-up and organizational costs paid or incurred after October 22, 2004, provided the period of limitations on assessment has not expired for the year of the election. 2012 form 1040ez Otherwise, the provisions under Regulations sections 1. 2012 form 1040ez 195-1(b), 1. 2012 form 1040ez 248-1(c), and 1. 2012 form 1040ez 709-1(c), as in effect before September 9, 2008, will apply. 2012 form 1040ez For costs paid or incurred before October 23, 2004, you can elect to amortize business start-up and organization costs over an amortization period of 60 months or more. 2012 form 1040ez See How To Make the Election , later. 2012 form 1040ez The cost must qualify as one of the following. 2012 form 1040ez A business start-up cost. 2012 form 1040ez An organizational cost for a corporation. 2012 form 1040ez An organizational cost for a partnership. 2012 form 1040ez Business Start-Up Costs Start-up costs are amounts paid or incurred for: (a) creating an active trade or business; or (b) investigating the creation or acquisition of an active trade or business. 2012 form 1040ez Start-up costs include amounts paid or incurred in connection with an existing activity engaged in for profit; and for the production of income in anticipation of the activity becoming an active trade or business. 2012 form 1040ez Qualifying costs. 2012 form 1040ez   A start-up cost is amortizable if it meets both of the following tests. 2012 form 1040ez It is a cost you could deduct if you paid or incurred it to operate an existing active trade or business (in the same field as the one you entered into). 2012 form 1040ez It is a cost you pay or incur before the day your active trade or business begins. 2012 form 1040ez   Start-up costs include amounts paid for the following: An analysis or survey of potential markets, products, labor supply, transportation facilities, etc. 2012 form 1040ez Advertisements for the opening of the business. 2012 form 1040ez Salaries and wages for employees who are being trained and their instructors. 2012 form 1040ez Travel and other necessary costs for securing prospective distributors, suppliers, or customers. 2012 form 1040ez Salaries and fees for executives and consultants, or for similar professional services. 2012 form 1040ez Nonqualifying costs. 2012 form 1040ez   Start-up costs do not include deductible interest, taxes, or research and experimental costs. 2012 form 1040ez See Research and Experimental Costs , later. 2012 form 1040ez Purchasing an active trade or business. 2012 form 1040ez   Amortizable start-up costs for purchasing an active trade or business include only investigative costs incurred in the course of a general search for or preliminary investigation of the business. 2012 form 1040ez These are costs that help you decide whether to purchase a business. 2012 form 1040ez Costs you incur in an attempt to purchase a specific business are capital expenses that you cannot amortize. 2012 form 1040ez Example. 2012 form 1040ez On June 1st, you hired an accounting firm and a law firm to assist you in the potential purchase of XYZ, Inc. 2012 form 1040ez They researched XYZ's industry and analyzed the financial projections of XYZ, Inc. 2012 form 1040ez In September, the law firm prepared and submitted a letter of intent to XYZ, Inc. 2012 form 1040ez The letter stated that a binding commitment would result only after a purchase agreement was signed. 2012 form 1040ez The law firm and accounting firm continued to provide services including a review of XYZ's books and records and the preparation of a purchase agreement. 2012 form 1040ez On October 22nd, you signed a purchase agreement with XYZ, Inc. 2012 form 1040ez All amounts paid or incurred to investigate the business before October 22nd are amortizable investigative costs. 2012 form 1040ez Amounts paid on or after that date relate to the attempt to purchase the business and therefore must be capitalized. 2012 form 1040ez Disposition of business. 2012 form 1040ez   If you completely dispose of your business before the end of the amortization period, you can deduct any remaining deferred start-up costs. 2012 form 1040ez However, you can deduct these deferred start-up costs only to the extent they qualify as a loss from a business. 2012 form 1040ez Costs of Organizing a Corporation Amounts paid to organize a corporation are the direct costs of creating the corporation. 2012 form 1040ez Qualifying costs. 2012 form 1040ez   To qualify as an organizational cost, it must be: For the creation of the corporation, Chargeable to a capital account (see chapter 1), Amortized over the life of the corporation if the corporation had a fixed life, and Incurred before the end of the first tax year in which the corporation is in business. 2012 form 1040ez   A corporation using the cash method of accounting can amortize organizational costs incurred within the first tax year, even if it does not pay them in that year. 2012 form 1040ez   Examples of organizational costs include: The cost of temporary directors. 2012 form 1040ez The cost of organizational meetings. 2012 form 1040ez State incorporation fees. 2012 form 1040ez The cost of legal services. 2012 form 1040ez Nonqualifying costs. 2012 form 1040ez   The following items are capital expenses that cannot be amortized: Costs for issuing and selling stock or securities, such as commissions, professional fees, and printing costs. 2012 form 1040ez Costs associated with the transfer of assets to the corporation. 2012 form 1040ez Costs of Organizing a Partnership The costs to organize a partnership are the direct costs of creating the partnership. 2012 form 1040ez Qualifying costs. 2012 form 1040ez   A partnership can amortize an organizational cost only if it meets all the following tests. 2012 form 1040ez It is for the creation of the partnership and not for starting or operating the partnership trade or business. 2012 form 1040ez It is chargeable to a capital account (see chapter 1). 2012 form 1040ez It could be amortized over the life of the partnership if the partnership had a fixed life. 2012 form 1040ez It is incurred by the due date of the partnership return (excluding extensions) for the first tax year in which the partnership is in business. 2012 form 1040ez However, if the partnership uses the cash method of accounting and pays the cost after the end of its first tax year, see Cash method partnership under How To Amortize, later. 2012 form 1040ez It is for a type of item normally expected to benefit the partnership throughout its entire life. 2012 form 1040ez   Organizational costs include the following fees. 2012 form 1040ez Legal fees for services incident to the organization of the partnership, such as negotiation and preparation of the partnership agreement. 2012 form 1040ez Accounting fees for services incident to the organization of the partnership. 2012 form 1040ez Filing fees. 2012 form 1040ez Nonqualifying costs. 2012 form 1040ez   The following costs cannot be amortized. 2012 form 1040ez The cost of acquiring assets for the partnership or transferring assets to the partnership. 2012 form 1040ez The cost of admitting or removing partners, other than at the time the partnership is first organized. 2012 form 1040ez The cost of making a contract concerning the operation of the partnership trade or business including a contract between a partner and the partnership. 2012 form 1040ez The costs for issuing and marketing interests in the partnership such as brokerage, registration, and legal fees and printing costs. 2012 form 1040ez These “syndication fees” are capital expenses that cannot be depreciated or amortized. 2012 form 1040ez Liquidation of partnership. 2012 form 1040ez   If a partnership is liquidated before the end of the amortization period, the unamortized amount of qualifying organizational costs can be deducted in the partnership's final tax year. 2012 form 1040ez However, these costs can be deducted only to the extent they qualify as a loss from a business. 2012 form 1040ez How To Amortize Deduct start-up and organizational costs in equal amounts over the applicable amortization period (discussed earlier). 2012 form 1040ez You can choose an amortization period for start-up costs that is different from the period you choose for organizational costs, as long as both are not less than the applicable amortization period. 2012 form 1040ez Once you choose an amortization period, you cannot change it. 2012 form 1040ez To figure your deduction, divide your total start-up or organizational costs by the months in the amortization period. 2012 form 1040ez The result is the amount you can deduct for each month. 2012 form 1040ez Cash method partnership. 2012 form 1040ez   A partnership using the cash method of accounting can deduct an organizational cost only if it has been paid by the end of the tax year. 2012 form 1040ez However, any cost the partnership could have deducted as an organizational cost in an earlier tax year (if it had been paid that year) can be deducted in the tax year of payment. 2012 form 1040ez How To Make the Election To elect to amortize start-up or organizational costs, you must complete and attach Form 4562 to your return for the first tax year you are in business. 2012 form 1040ez You may also be required to attach an accompanying statement (described later) to your return. 2012 form 1040ez For start-up or organizational costs paid or incurred after September 8, 2008, an accompanying statement is not required. 2012 form 1040ez Generally, for start-up or organizational costs paid or incurred before September 9, 2008, and after October 22, 2004, unless you choose to apply Regulations sections 1. 2012 form 1040ez 195-1, 1. 2012 form 1040ez 248-1, and 1. 2012 form 1040ez 709-1, you must also attach an accompanying statement to elect to amortize the costs. 2012 form 1040ez If you have both start-up and organizational costs, attach a separate statement (if required) to your return for each type of cost. 2012 form 1040ez See Starting a Business , earlier, for more information. 2012 form 1040ez Generally, you must file the return by the due date (including any extensions). 2012 form 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 form 1040ez For more information, see the instructions for Part VI of Form 4562. 2012 form 1040ez You can choose to forgo the election to amortize by affirmatively electing to capitalize your start-up or organizational costs on your income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. 2012 form 1040ez Note. 2012 form 1040ez The election to either amortize or capitalize start-up or organizational costs is irrevocable and applies to all start-up and organizational costs that are related to the trade or business. 2012 form 1040ez If your business is organized as a corporation or partnership, only the corporation or partnership can elect to amortize its start-up or organizational costs. 2012 form 1040ez A shareholder or partner cannot make this election. 2012 form 1040ez You, as a shareholder or partner, cannot amortize any costs you incur in setting up your corporation or partnership. 2012 form 1040ez Only the corporation or partnership can amortize these costs. 2012 form 1040ez However, you, as an individual, can elect to amortize costs you incur to investigate an interest in an existing partnership. 2012 form 1040ez These costs qualify as business start-up costs if you acquire the partnership interest. 2012 form 1040ez Start-up costs election statement. 2012 form 1040ez   If you elect to amortize your start-up costs, attach a separate statement (if required) that contains the following information. 2012 form 1040ez A description of the business to which the start-up costs relate. 2012 form 1040ez A description of each start-up cost incurred. 2012 form 1040ez The month your active business began (or was acquired). 2012 form 1040ez The number of months in your amortization period (which is generally 180 months). 2012 form 1040ez Filing the statement early. 2012 form 1040ez   You can elect to amortize your start-up costs by filing the statement with a return for any tax year before the year your active business begins. 2012 form 1040ez If you file the statement early, the election becomes effective in the month of the tax year your active business begins. 2012 form 1040ez Revised statement. 2012 form 1040ez   You can file a revised statement to include any start-up costs not included in your original statement. 2012 form 1040ez However, you cannot include on the revised statement any cost you previously treated on your return as a cost other than a start-up cost. 2012 form 1040ez You can file the revised statement with a return filed after the return on which you elected to amortize your start-up costs. 2012 form 1040ez Organizational costs election statement. 2012 form 1040ez   If you elect to amortize your corporation's or partnership's organizational costs, attach a separate statement (if required) that contains the following information. 2012 form 1040ez A description of each cost. 2012 form 1040ez The amount of each cost. 2012 form 1040ez The date each cost was incurred. 2012 form 1040ez The month your corporation or partnership began active business (or acquired the business). 2012 form 1040ez The number of months in your amortization period (which is generally 180 months). 2012 form 1040ez Partnerships. 2012 form 1040ez   The statement prepared for a cash basis partnership must also indicate the amount paid before the end of the year for each cost. 2012 form 1040ez   You do not need to separately list any partnership organizational cost that is less than $10. 2012 form 1040ez Instead, you can list the total amount of these costs with the dates the first and last costs were incurred. 2012 form 1040ez   After a partnership makes the election to amortize organizational costs, it can later file an amended return to include additional organizational costs not included in the partnership's original return and statement. 2012 form 1040ez Getting a Lease If you get a lease for business property, you may recover the cost of acquiring the lease by amortizing it over the term of the lease. 2012 form 1040ez The term of the lease for amortization purposes generally includes all renewal options (and any other period for which you and the lessor reasonably expect the lease to be renewed). 2012 form 1040ez However, renewal periods are not included if 75% or more of the cost of acquiring the lease is for the term of the lease remaining on the acquisition date (not including any period for which you may choose to renew, extend, or continue the lease). 2012 form 1040ez For more information on the costs of getting a lease, see Cost of Getting a Lease in  chapter 3. 2012 form 1040ez How to amortize. 2012 form 1040ez   Enter your deduction in Part VI of Form 4562 if you are deducting amortization that begins during the current year, or on the appropriate line of your tax return if you are not otherwise required to file Form 4562. 2012 form 1040ez Section 197 Intangibles Generally, you may amortize the capitalized costs of “section 197 intangibles” (defined later) ratably over a 15-year period. 2012 form 1040ez You must amortize these costs if you hold the section 197 intangibles in connection with your trade or business or in an activity engaged in for the production of income. 2012 form 1040ez You may not be able to amortize section 197 intangibles acquired in a transaction that did not result in a significant change in ownership or use. 2012 form 1040ez See Anti-Churning Rules, later. 2012 form 1040ez Your amortization deduction each year is the applicable part of the intangible's adjusted basis (for purposes of determining gain), figured by amortizing it ratably over 15 years (180 months). 2012 form 1040ez The 15-year period begins with the later of: The month the intangible is acquired, or The month the trade or business or activity engaged in for the production of income begins. 2012 form 1040ez You cannot deduct amortization for the month you dispose of the intangible. 2012 form 1040ez If you pay or incur an amount that increases the basis of an amortizable section 197 intangible after the 15-year period begins, amortize it over the remainder of the 15-year period beginning with the month the basis increase occurs. 2012 form 1040ez You are not allowed any other depreciation or amortization deduction for an amortizable section 197 intangible. 2012 form 1040ez Tax-exempt use property subject to a lease. 2012 form 1040ez   The amortization period for any section 197 intangible leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), shall not be less than 125 percent of the lease term. 2012 form 1040ez Cost attributable to other property. 2012 form 1040ez   The rules for section 197 intangibles do not apply to any amount that is included in determining the cost of property that is not a section 197 intangible. 2012 form 1040ez For example, if the cost of computer software is not separately stated from the cost of hardware or other tangible property and you consistently treat it as part of the cost of the hardware or other tangible property, these rules do not apply. 2012 form 1040ez Similarly, none of the cost of acquiring real property held for the production of rental income is considered the cost of goodwill, going concern value, or any other section 197 intangible. 2012 form 1040ez Section 197 Intangibles Defined The following assets are section 197 intangibles and must be amortized over 180 months: Goodwill; Going concern value; Workforce in place; Business books and records, operating systems, or any other information base, including lists or other information concerning current or prospective customers; A patent, copyright, formula, process, design, pattern, know-how, format, or similar item; A customer-based intangible; A supplier-based intangible; Any item similar to items (3) through (7); A license, permit, or other right granted by a governmental unit or agency (including issuances and renewals); A covenant not to compete entered into in connection with the acquisition of an interest in a trade or business; Any franchise, trademark, or trade name; and A contract for the use of, or a term interest in, any item in this list. 2012 form 1040ez You cannot amortize any of the intangibles listed in items (1) through (8) that you created rather than acquired unless you created them in acquiring assets that make up a trade or business or a substantial part of a trade or business. 2012 form 1040ez Goodwill. 2012 form 1040ez   This is the value of a trade or business based on expected continued customer patronage due to its name, reputation, or any other factor. 2012 form 1040ez Going concern value. 2012 form 1040ez   This is the additional value of a trade or business that attaches to property because the property is an integral part of an ongoing business activity. 2012 form 1040ez It includes value based on the ability of a business to continue to function and generate income even though there is a change in ownership (but does not include any other section 197 intangible). 2012 form 1040ez It also includes value based on the immediate use or availability of an acquired trade or business, such as the use of earnings during any period in which the business would not otherwise be available or operational. 2012 form 1040ez Workforce in place, etc. 2012 form 1040ez   This includes the composition of a workforce (for example, its experience, education, or training). 2012 form 1040ez It also includes the terms and conditions of employment, whether contractual or otherwise, and any other value placed on employees or any of their attributes. 2012 form 1040ez   For example, you must amortize the part of the purchase price of a business that is for the existence of a highly skilled workforce. 2012 form 1040ez Also, you must amortize the cost of acquiring an existing employment contract or relationship with employees or consultants. 2012 form 1040ez Business books and records, etc. 2012 form 1040ez   This includes the intangible value of technical manuals, training manuals or programs, data files, and accounting or inventory control systems. 2012 form 1040ez It also includes the cost of customer lists, subscription lists, insurance expirations, patient or client files, and lists of newspaper, magazine, radio, and television advertisers. 2012 form 1040ez Patents, copyrights, etc. 2012 form 1040ez   This includes package design, computer software, and any interest in a film, sound recording, videotape, book, or other similar property, except as discussed later under Assets That Are Not Section 197 Intangibles . 2012 form 1040ez Customer-based intangible. 2012 form 1040ez   This is the composition of market, market share, and any other value resulting from the future provision of goods or services because of relationships with customers in the ordinary course of business. 2012 form 1040ez For example, you must amortize the part of the purchase price of a business that is for the existence of the following intangibles. 2012 form 1040ez A customer base. 2012 form 1040ez A circulation base. 2012 form 1040ez An undeveloped market or market growth. 2012 form 1040ez Insurance in force. 2012 form 1040ez A mortgage servicing contract. 2012 form 1040ez An investment management contract. 2012 form 1040ez Any other relationship with customers involving the future provision of goods or services. 2012 form 1040ez   Accounts receivable or other similar rights to income for goods or services provided to customers before the acquisition of a trade or business are not section 197 intangibles. 2012 form 1040ez Supplier-based intangible. 2012 form 1040ez   A supplier-based intangible is the value resulting from the future acquisitions, (through contract or other relationships with suppliers in the ordinary course of business) of goods or services that you will sell or use. 2012 form 1040ez The amount you pay or incur for supplier-based intangibles includes, for example, any portion of the purchase price of an acquired trade or business that is attributable to the existence of a favorable relationship with persons providing distribution services (such as a favorable shelf or display space or a retail outlet), or the existence of favorable supply contracts. 2012 form 1040ez Do not include any amount required to be paid for the goods or services to honor the terms of the agreement or other relationship. 2012 form 1040ez Also, see Assets That Are Not Section 197 Intangibles below. 2012 form 1040ez Government-granted license, permit, etc. 2012 form 1040ez   This is any right granted by a governmental unit or an agency or instrumentality of a governmental unit. 2012 form 1040ez For example, you must amortize the capitalized costs of acquiring (including issuing or renewing) a liquor license, a taxicab medallion or license, or a television or radio broadcasting license. 2012 form 1040ez Covenant not to compete. 2012 form 1040ez   Section 197 intangibles include a covenant not to compete (or similar arrangement) entered into in connection with the acquisition of an interest in a trade or business, or a substantial portion of a trade or business. 2012 form 1040ez An interest in a trade or business includes an interest in a partnership or a corporation engaged in a trade or business. 2012 form 1040ez   An arrangement that requires the former owner to perform services (or to provide property or the use of property) is not similar to a covenant not to compete to the extent the amount paid under the arrangement represents reasonable compensation for those services or for that property or its use. 2012 form 1040ez Franchise, trademark, or trade name. 2012 form 1040ez   A franchise, trademark, or trade name is a section 197 intangible. 2012 form 1040ez You must amortize its purchase or renewal costs, other than certain contingent payments that you can deduct currently. 2012 form 1040ez For information on currently deductible contingent payments, see chapter 11. 2012 form 1040ez Professional sports franchise. 2012 form 1040ez   A franchise engaged in professional sports and any intangible assets acquired in connection with acquiring the franchise (including player contracts) is a section 197 intangible amortizable over a 15-year period. 2012 form 1040ez Contract for the use of, or a term interest in, a section 197 intangible. 2012 form 1040ez   Section 197 intangibles include any right under a license, contract, or other arrangement providing for the use of any section 197 intangible. 2012 form 1040ez It also includes any term interest in any section 197 intangible, whether the interest is outright or in trust. 2012 form 1040ez Assets That Are Not Section 197 Intangibles The following assets are not section 197 intangibles. 2012 form 1040ez Any interest in a corporation, partnership, trust, or estate. 2012 form 1040ez Any interest under an existing futures contract, foreign currency contract, notional principal contract, interest rate swap, or similar financial contract. 2012 form 1040ez Any interest in land. 2012 form 1040ez Most computer software. 2012 form 1040ez (See Computer software , later. 2012 form 1040ez ) Any of the following assets not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2012 form 1040ez An interest in a film, sound recording, video tape, book, or similar property. 2012 form 1040ez A right to receive tangible property or services under a contract or from a governmental agency. 2012 form 1040ez An interest in a patent or copyright. 2012 form 1040ez Certain rights that have a fixed duration or amount. 2012 form 1040ez (See Rights of fixed duration or amount , later. 2012 form 1040ez ) An interest under either of the following. 2012 form 1040ez An existing lease or sublease of tangible property. 2012 form 1040ez A debt that was in existence when the interest was acquired. 2012 form 1040ez A right to service residential mortgages unless the right is acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2012 form 1040ez Certain transaction costs incurred by parties to a corporate organization or reorganization in which any part of a gain or loss is not recognized. 2012 form 1040ez Intangible property that is not amortizable under the rules for section 197 intangibles can be depreciated if it meets certain requirements. 2012 form 1040ez You generally must use the straight line method over its useful life. 2012 form 1040ez For certain intangibles, the depreciation period is specified in the law and regulations. 2012 form 1040ez For example, the depreciation period for computer software that is not a section 197 intangible is generally 36 months. 2012 form 1040ez For more information on depreciating intangible property, see Intangible Property under What Method Can You Use To Depreciate Your Property? in chapter 1 of Publication 946. 2012 form 1040ez Computer software. 2012 form 1040ez   Section 197 intangibles do not include the following types of computer software. 2012 form 1040ez Software that meets all the following requirements. 2012 form 1040ez It is, or has been, readily available for purchase by the general public. 2012 form 1040ez It is subject to a nonexclusive license. 2012 form 1040ez It has not been substantially modified. 2012 form 1040ez This requirement is considered met if the cost of all modifications is not more than the greater of 25% of the price of the publicly available unmodified software or $2,000. 2012 form 1040ez Software that is not acquired in connection with the acquisition of a trade or business or a substantial part of a trade or business. 2012 form 1040ez Computer software defined. 2012 form 1040ez   Computer software includes all programs designed to cause a computer to perform a desired function. 2012 form 1040ez It also includes any database or similar item that is in the public domain and is incidental to the operation of qualifying software. 2012 form 1040ez Rights of fixed duration or amount. 2012 form 1040ez   Section 197 intangibles do not include any right under a contract or from a governmental agency if the right is acquired in the ordinary course of a trade or business (or in an activity engaged in for the production of income) but not as part of a purchase of a trade or business and either: Has a fixed life of less than 15 years, or Is of a fixed amount that, except for the rules for section 197 intangibles, would be recovered under a method similar to the unit-of-production method of cost recovery. 2012 form 1040ez However, this does not apply to the following intangibles. 2012 form 1040ez Goodwill. 2012 form 1040ez Going concern value. 2012 form 1040ez A covenant not to compete. 2012 form 1040ez A franchise, trademark, or trade name. 2012 form 1040ez A customer-related information base, customer-based intangible, or similar item. 2012 form 1040ez Safe Harbor for Creative Property Costs If you are engaged in the trade or business of film production, you may be able to amortize the creative property costs for properties not set for production within 3 years of the first capitalized transaction. 2012 form 1040ez You may amortize these costs ratably over a 15-year period beginning on the first day of the second half of the tax year in which you properly write off the costs for financial accounting purposes. 2012 form 1040ez If, during the 15-year period, you dispose of the creative property rights, you must continue to amortize the costs over the remainder of the 15-year period. 2012 form 1040ez Creative property costs include costs paid or incurred to acquire and develop screenplays, scripts, story outlines, motion picture production rights to books and plays, and other similar properties for purposes of potential future film development, production, and exploitation. 2012 form 1040ez Amortize these costs using the rules of Revenue Procedure 2004-36. 2012 form 1040ez For more information, see Revenue Procedure 2004-36, 2004-24 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 1063, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2004-24_IRB/ar16. 2012 form 1040ez html. 2012 form 1040ez A change in the treatment of creative property costs is a change in method of accounting. 2012 form 1040ez Anti-Churning Rules Anti-churning rules prevent you from amortizing most section 197 intangibles if the transaction in which you acquired them did not result in a significant change in ownership or use. 2012 form 1040ez These rules apply to goodwill and going concern value, and to any other section 197 intangible that is not otherwise depreciable or amortizable. 2012 form 1040ez Under the anti-churning rules, you cannot use 15-year amortization for the intangible if any of the following conditions apply. 2012 form 1040ez You or a related person (defined later) held or used the intangible at any time from July 25, 1991, through August 10, 1993. 2012 form 1040ez You acquired the intangible from a person who held it at any time during the period in (1) and, as part of the transaction, the user did not change. 2012 form 1040ez You granted the right to use the intangible to a person (or a person related to that person) who held or used it at any time during the period in (1). 2012 form 1040ez This applies only if the transaction in which you granted the right and the transaction in which you acquired the intangible are part of a series of related transactions. 2012 form 1040ez See Related person , later, for more information. 2012 form 1040ez Exceptions. 2012 form 1040ez   The anti-churning rules do not apply in the following situations. 2012 form 1040ez You acquired the intangible from a decedent and its basis was stepped up to its fair market value. 2012 form 1040ez The intangible was amortizable as a section 197 intangible by the seller or transferor you acquired it from. 2012 form 1040ez This exception does not apply if the transaction in which you acquired the intangible and the transaction in which the seller or transferor acquired it are part of a series of related transactions. 2012 form 1040ez The gain-recognition exception, discussed later, applies. 2012 form 1040ez Related person. 2012 form 1040ez   For purposes of the anti-churning rules, the following are related persons. 2012 form 1040ez An individual and his or her brothers, sisters, half-brothers, half-sisters, spouse, ancestors (parents, grandparents, etc. 2012 form 1040ez ), and lineal descendants (children, grandchildren, etc. 2012 form 1040ez ). 2012 form 1040ez A corporation and an individual who owns, directly or indirectly, more than 20% of the value of the corporation's outstanding stock. 2012 form 1040ez Two corporations that are members of the same controlled group as defined in section 1563(a) of the Internal Revenue Code, except that “more than 20%” is substituted for “at least 80%” in that definition and the determination is made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. 2012 form 1040ez (For an exception, see section 1. 2012 form 1040ez 197-2(h)(6)(iv) of the regulations. 2012 form 1040ez ) A trust fiduciary and a corporation if more than 20% of the value of the corporation's outstanding stock is owned, directly or indirectly, by or for the trust or grantor of the trust. 2012 form 1040ez The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 2012 form 1040ez The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 2012 form 1040ez The executor and beneficiary of an estate. 2012 form 1040ez A tax-exempt educational or charitable organization and a person who directly or indirectly controls the organization (or whose family members control it). 2012 form 1040ez A corporation and a partnership if the same persons own more than 20% of the value of the outstanding stock of the corporation and more than 20% of the capital or profits interest in the partnership. 2012 form 1040ez Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 20% of the value of the outstanding stock of each corporation. 2012 form 1040ez Two partnerships if the same persons own, directly or indirectly, more than 20% of the capital or profits interests in both partnerships. 2012 form 1040ez A partnership and a person who owns, directly or indirectly, more than 20% of the capital or profits interests in the partnership. 2012 form 1040ez Two persons who are engaged in trades or businesses under common control (as described in section 41(f)(1) of the Internal Revenue Code). 2012 form 1040ez When to determine relationship. 2012 form 1040ez   Persons are treated as related if the relationship existed at the following time. 2012 form 1040ez In the case of a single transaction, immediately before or immediately after the transaction in which the intangible was acquired. 2012 form 1040ez In the case of a series of related transactions (or a series of transactions that comprise a qualified stock purchase under section 338(d)(3) of the Internal Revenue Code), immediately before the earliest transaction or immediately after the last transaction. 2012 form 1040ez Ownership of stock. 2012 form 1040ez   In determining whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. 2012 form 1040ez Rule 1. 2012 form 1040ez   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2012 form 1040ez Rule 2. 2012 form 1040ez   An individual is considered to own the stock directly or indirectly owned by or for his or her family. 2012 form 1040ez Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. 2012 form 1040ez Rule 3. 2012 form 1040ez   An individual owning (other than by applying Rule 2) any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. 2012 form 1040ez Rule 4. 2012 form 1040ez   For purposes of applying Rule 1, 2, or 3, treat stock constructively owned by a person under Rule 1 as actually owned by that person. 2012 form 1040ez Do not treat stock constructively owned by an individual under Rule 2 or 3 as owned by the individual for reapplying Rule 2 or 3 to make another person the constructive owner of the stock. 2012 form 1040ez Gain-recognition exception. 2012 form 1040ez   This exception to the anti-churning rules applies if the person you acquired the intangible from (the transferor) meets both of the following requirements. 2012 form 1040ez That person would not be related to you (as described under Related person , earlier) if the 20% test for ownership of stock and partnership interests were replaced by a 50% test. 2012 form 1040ez That person chose to recognize gain on the disposition of the intangible and pay income tax on the gain at the highest tax rate. 2012 form 1040ez See chapter 2 in Publication 544 for information on making this choice. 2012 form 1040ez   If this exception applies, the anti-churning rules apply only to the amount of your adjusted basis in the intangible that is more than the gain recognized by the transferor. 2012 form 1040ez Notification. 2012 form 1040ez   If the person you acquired the intangible from chooses to recognize gain under the rules for this exception, that person must notify you in writing by the due date of the return on which the choice is made. 2012 form 1040ez Anti-abuse rule. 2012 form 1040ez   You cannot amortize any section 197 intangible acquired in a transaction for which the principal purpose was either of the following. 2012 form 1040ez To avoid the requirement that the intangible be acquired after August 10, 1993. 2012 form 1040ez To avoid any of the anti-churning rules. 2012 form 1040ez More information. 2012 form 1040ez   For more information about the anti-churning rules, including additional rules for partnerships, see Regulations section 1. 2012 form 1040ez 197-2(h). 2012 form 1040ez Incorrect Amount of Amortization Deducted If you later discover that you deducted an incorrect amount for amortization for a section 197 intangible in any year, you may be able to make a correction for that year by filing an amended return. 2012 form 1040ez See Amended Return , next. 2012 form 1040ez If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amortization. 2012 form 1040ez See Changing Your Accounting Method , later. 2012 form 1040ez Amended Return If you deducted an incorrect amount for amortization, you can file an amended return to correct the following. 2012 form 1040ez A mathematical error made in any year. 2012 form 1040ez A posting error made in any year. 2012 form 1040ez An amortization deduction for a section 197 intangible for which you have not adopted a method of accounting. 2012 form 1040ez When to file. 2012 form 1040ez   If an amended return is allowed, you must file it by the later of the following dates. 2012 form 1040ez 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. 2012 form 1040ez (A return filed early is considered filed on the due date. 2012 form 1040ez ) 2 years from the time you paid your tax for that year. 2012 form 1040ez Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. 2012 form 1040ez File Form 3115, Application for Change in Accounting Method, to request a change to a permissible method of accounting for amortization. 2012 form 1040ez The following are examples of a change in method of accounting for amortization. 2012 form 1040ez A change in the amortization method, period of recovery, or convention of an amortizable asset. 2012 form 1040ez A change in the accounting for amortizable assets from a single asset account to a multiple asset account (pooling), or vice versa. 2012 form 1040ez A change in the accounting for amortizable assets from one type of multiple asset account to a different type of multiple asset account. 2012 form 1040ez Changes in amortization that are not a change in method of accounting include the following: A change in computing amortization in the tax year in which your use of the asset changes. 2012 form 1040ez An adjustment in the useful life of an amortizable asset. 2012 form 1040ez Generally, the making of a late amortization election or the revocation of a timely valid amortization election. 2012 form 1040ez Any change in the placed-in-service date of an amortizable asset. 2012 form 1040ez See Regulations section 1. 2012 form 1040ez 446-1(e)(2)(ii)(a) for more information and examples. 2012 form 1040ez Automatic approval. 2012 form 1040ez   In some instances, you may be able to get automatic approval from the IRS to change your method of accounting for amortization. 2012 form 1040ez For a list of automatic accounting method changes, see the Instructions for Form 3115. 2012 form 1040ez Also see the Instructions for Form 3115 for more information on getting approval, automatic approval procedures, and a list of exceptions to the automatic approval process. 2012 form 1040ez For more information, see Revenue Procedure 2006-12, as modified by Revenue Procedure 2006-37, and Revenue Procedure 2008-52, as amplified, clarified, and modified by Revenue Procedure 2009-39, as clarified and modified by Revenue Procedure 2011-14, as modified and amplified by Revenue Procedure 2011-22, as modified by Revenue Procedure 2012-39, or any successor. 2012 form 1040ez See Revenue Procedure 2006-12, 2006-3 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 310, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2006-03_IRB/ar14. 2012 form 1040ez html. 2012 form 1040ez  See Revenue Procedure 2006-37, 2006-38 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 499, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2006-38_IRB/ar10. 2012 form 1040ez html. 2012 form 1040ez  See Revenue Procedure 2008-52, 2008-36 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 587, available at www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2008-36_IRB/ar09. 2012 form 1040ez html. 2012 form 1040ez  See Revenue Procedure 2009-39, 2009-38 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 371, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2009-38_IRB/ar08. 2012 form 1040ez html. 2012 form 1040ez  See Revenue Procedure 2011-14, 2011-4 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 330, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2011-04_IRB/ar08. 2012 form 1040ez html. 2012 form 1040ez  See Revenue Procedure 2011-22, 2011-18 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 737, available at  www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2011-18_IRB/ar08. 2012 form 1040ez html. 2012 form 1040ez Also, see Revenue Procedure 2012-39, 2012-41 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 470 available at www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2012-41_IRB/index. 2012 form 1040ez html. 2012 form 1040ez Disposition of Section 197 Intangibles A section 197 intangible is treated as depreciable property used in your trade or business. 2012 form 1040ez If you held the intangible for more than 1 year, any gain on its disposition, up to the amount of allowable amortization, is ordinary income (section 1245 gain). 2012 form 1040ez If multiple section 197 intangibles are disposed of in a single transaction or a series of related transactions, treat all of the section 197 intangibles as if they were a single asset for purposes of determining the amount of gain that is ordinary income. 2012 form 1040ez Any remaining gain, or any loss, is a section 1231 gain or loss. 2012 form 1040ez If you held the intangible 1 year or less, any gain or loss on its disposition is an ordinary gain or loss. 2012 form 1040ez For more information on ordinary or capital gain or loss on business property, see chapter 3 in Publication 544. 2012 form 1040ez Nondeductible loss. 2012 form 1040ez   You cannot deduct any loss on the disposition or worthlessness of a section 197 intangible that you acquired in the same transaction (or series of related transactions) as other section 197 intangibles you still have. 2012 form 1040ez Instead, increase the adjusted basis of each remaining amortizable section 197 intangible by a proportionate part of the nondeductible loss. 2012 form 1040ez Figure the increase by multiplying the nondeductible loss on the disposition of the intangible by the following fraction. 2012 form 1040ez The numerator is the adjusted basis of each remaining intangible on the date of the disposition. 2012 form 1040ez The denominator is the total adjusted bases of all remaining amortizable section 197 intangibles on the date of the disposition. 2012 form 1040ez Covenant not to compete. 2012 form 1040ez   A covenant not to compete, or similar arrangement, is not considered disposed of or worthless before you dispose of your entire interest in the trade or business for which you entered into the covenant. 2012 form 1040ez Nonrecognition transfers. 2012 form 1040ez   If you acquire a section 197 intangible in a nonrecognition transfer, you are treated as the transferor with respect to the part of your adjusted basis in the intangible that is not more than the transferor's adjusted basis. 2012 form 1040ez You amortize this part of the adjusted basis over the intangible's remaining amortization period in the hands of the transferor. 2012 form 1040ez Nonrecognition transfers include transfers to a corporation, partnership contributions and distributions, like-kind exchanges, and involuntary conversions. 2012 form 1040ez   In a like-kind exchange or involuntary conversion of a section 197 intangible, you must continue to amortize the part of your adjusted basis in the acquired intangible that is not more than your adjusted basis in the exchanged or converted intangible over the remaining amortization period of the exchanged or converted intangible. 2012 form 1040ez Amortize over a new 15-year period the part of your adjusted basis in the acquired intangible that is more than your adjusted basis in the exchanged or converted intangible. 2012 form 1040ez Example. 2012 form 1040ez You own a section 197 intangible you have amortized for 4 full years. 2012 form 1040ez It has a remaining unamortized basis of $30,000. 2012 form 1040ez You exchange the asset plus $10,000 for a like-kind section 197 intangible. 2012 form 1040ez The nonrecognition provisions of like-kind exchanges apply. 2012 form 1040ez You amortize $30,000 of the $40,000 adjusted basis of the acquired intangible over the 11 years remaining in the original 15-year amortization period for the transferred asset. 2012 form 1040ez You amortize the other $10,000 of adjusted basis over a new 15-year period. 2012 form 1040ez For more information, see Regulations section 1. 2012 form 1040ez 197-2(g). 2012 form 1040ez Reforestation Costs You can elect to deduct a limited amount of reforestation costs paid or incurred during the tax year. 2012 form 1040ez See Reforestation Costs in chapter 7. 2012 form 1040ez You can elect to amortize the qualifying costs that are not deducted currently over an 84-month period. 2012 form 1040ez There is no limit on the amount of your amortization deduction for reforestation costs paid or incurred during the tax year. 2012 form 1040ez The election to amortize reforestation costs incurred by a partnership, S corporation, or estate must be made by the partnership, corporation, or estate. 2012 form 1040ez A partner, shareholder, or beneficiary cannot make that election. 2012 form 1040ez A partner's or shareholder's share of amortizable costs is figured under the general rules for allocating items of income, loss, deduction, etc. 2012 form 1040ez , of a partnership or S corporation. 2012 form 1040ez The amortizable costs of an estate are divided between the estate and the income beneficiary based on the income of the estate allocable to each. 2012 form 1040ez Qualifying costs. 2012 form 1040ez   Reforestation costs are the direct costs of planting or seeding for forestation or reforestation. 2012 form 1040ez Qualifying costs include only those costs you must capitalize and include in the adjusted basis of the property. 2012 form 1040ez They include costs for the following items. 2012 form 1040ez Site preparation. 2012 form 1040ez Seeds or seedlings. 2012 form 1040ez Labor. 2012 form 1040ez Tools. 2012 form 1040ez Depreciation on equipment used in planting and seeding. 2012 form 1040ez Qualifying costs do not include costs for which the government reimburses you under a cost-sharing program, unless you include the reimbursement in your income. 2012 form 1040ez Qualified timber property. 2012 form 1040ez   Qualified timber property is property that contains trees in significant commercial quantities. 2012 form 1040ez It can be a woodlot or other site that you own or lease. 2012 form 1040ez The property qualifies only if it meets all of the following requirements. 2012 form 1040ez It is located in the United States. 2012 form 1040ez It is held for the growing and cutting of timber you will either use in, or sell for use in, the commercial production of timber products. 2012 form 1040ez It consists of at least one acre planted with tree seedlings in the manner normally used in forestation or reforestation. 2012 form 1040ez Qualified timber property does not include property on which you have planted shelter belts or ornamental trees, such as Christmas trees. 2012 form 1040ez Amortization period. 2012 form 1040ez   The 84-month amortization period starts on the first day of the first month of the second half of the tax year you incur the costs (July 1 for a calendar year taxpayer), regardless of the month you actually incur the costs. 2012 form 1040ez You can claim amortization deductions for no more than 6 months of the first and last (eighth) tax years of the period. 2012 form 1040ez Life tenant and remainderman. 2012 form 1040ez   If one person holds the property for life with the remainder going to another person, the life tenant is entitled to the full amortization for qualifying reforestation costs incurred by the life tenant. 2012 form 1040ez Any remainder interest in the property is ignored for amortization purposes. 2012 form 1040ez Recapture. 2012 form 1040ez   If you dispose of qualified timber property within 10 years after the tax year you incur qualifying reforestation expenses, report any gain as ordinary income up to the amortization you took. 2012 form 1040ez See chapter 3 of Publication 544 for more information. 2012 form 1040ez How to make the election. 2012 form 1040ez   To elect to amortize qualifying reforestation costs, complete Part VI of Form 4562 and attach a statement that contains the following information. 2012 form 1040ez A description of the costs and the dates you incurred them. 2012 form 1040ez A description of the type of timber being grown and the purpose for which it is grown. 2012 form 1040ez Attach a separate statement for each property for which you amortize reforestation costs. 2012 form 1040ez   Generally, you must make the election on a timely filed return (including extensions) for the tax year in which you incurred the costs. 2012 form 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 form 1040ez Attach Form 4562 and the statement to the amended return and write “Filed pursuant to section 301. 2012 form 1040ez 9100-2” on Form 4562. 2012 form 1040ez File the amended return at the same address you filed the original return. 2012 form 1040ez Revoking the election. 2012 form 1040ez   You must get IRS approval to revoke your election to amortize qualifying reforestation costs. 2012 form 1040ez Your application to revoke the election must include your name, address, the years for which your election was in effect, and your reason for revoking it. 2012 form 1040ez Please provide your daytime telephone number (optional), in case we need to contact you. 2012 form 1040ez You, or your duly authorized representative, must sign the application and file it at least 90 days before the due date (without extensions) for filing your income tax return for the first tax year for which your election is to end. 2012 form 1040ez    Send the application to: Internal Revenue Service Associate Chief Counsel Passthroughs and Special Industries CC:PSI:6 1111 Constitution Ave. 2012 form 1040ez NW, IR-5300 Washington, DC 20224 Geological and Geophysical Costs You can amortize the cost of geological and geophysical expenses paid or incurred in connection with oil and gas exploration or development within the United States. 2012 form 1040ez These costs can be amortized ratably over a 24-month period beginning on the mid-point of the tax year in which the expenses were paid or incurred. 2012 form 1040ez For major integrated oil companies (as defined in section 167(h)(5)), these costs must be amortized ratably over a 5-year period for costs paid or incurred after May 17, 2006 (a 7-year period for costs paid or incurred after December 19, 2007). 2012 form 1040ez If you retire or abandon the property during the amortization period, no amortization deduction is allowed in the year of retirement or abandonment. 2012 form 1040ez Pollution Control Facilities You can elect to amortize the cost of a certified pollution control facility over 60 months. 2012 form 1040ez However, see Atmospheric pollution control facilities for an exception. 2012 form 1040ez The cost of a pollution control facility that is not eligible for amortization can be depreciated under the regular rules for depreciation. 2012 form 1040ez Also, you can claim a special depreciation allowance on a certified pollution control facility that is qualified property even if you elect to amortize its cost. 2012 form 1040ez You must reduce its cost (amortizable basis) by the amount of any special allowance you claim. 2012 form 1040ez See chapter 3 of Publication 946. 2012 form 1040ez A certified pollution control facility is a new identifiable treatment facility used in connection with a plant or other property in operation before 1976, to reduce or control water or atmospheric pollution or contamination. 2012 form 1040ez The facility must do so by removing, changing, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. 2012 form 1040ez The facility must be certified by state and federal certifying authorities. 2012 form 1040ez The facility must not significantly increase the output or capacity, extend the useful life, or reduce the total operating costs of the plant or other property. 2012 form 1040ez Also, it must not significantly change the nature of the manufacturing or production process or facility. 2012 form 1040ez The federal certifying authority will not certify your property to the extent it appears you will recover (over the property's useful life) all or part of its cost from the profit based on its operation (such as through sales of recovered wastes). 2012 form 1040ez The federal certifying authority will describe the nature of the potential cost recovery. 2012 form 1040ez You must then reduce the amortizable basis of the facility by this potential recovery. 2012 form 1040ez New identifiable treatment facility. 2012 form 1040ez   A new identifiable treatment facility is tangible depreciable property that is identifiable as a treatment facility. 2012 form 1040ez It does not include a building and its structural components unless the building is exclusively a treatment facility. 2012 form 1040ez Atmospheric pollution control facilities. 2012 form 1040ez   Certain atmospheric pollution control facilities can be amortized over 84 months. 2012 form 1040ez To qualify, the following must apply. 2012 form 1040ez The facility must be acquired and placed in service after April 11, 2005. 2012 form 1040ez If acquired, the original use must begin with you after April 11, 2005. 2012 form 1040ez The facility must be used in connection with an electric generation plant or other property placed in operation after December 31, 1975, that is primarily coal fired. 2012 form 1040ez If you construct, reconstruct, or erect the facility, only the basis attributable to the construction, reconstruction, or erection completed after April 11, 2005, qualifies. 2012 form 1040ez Basis reduction for corporations. 2012 form 1040ez   A corporation must reduce the amortizable basis of a pollution control facility by 20% before figuring the amortization deduction. 2012 form 1040ez More information. 2012 form 1040ez   For more information on the amortization of pollution control facilities, see Code sections 169 and 291(c) and the related regulations. 2012 form 1040ez Research and Experimental Costs You can elect to amortize your research and experimental costs, deduct them as current business expenses, or write them off over a 10-year period (see Optional write-off method below). 2012 form 1040ez If you elect to amortize these costs, deduct them in equal amounts over 60 months or more. 2012 form 1040ez The amortization period begins the month you first receive an economic benefit from the costs. 2012 form 1040ez For a definition of “research and experimental costs” and information on deducting them as current business expenses, see chapter 7. 2012 form 1040ez Optional write-off method. 2012 form 1040ez   Rather than amortize these costs or deduct them as a current expense, you have the option of deducting (writing off) research and experimental costs ratably over a 10-year period beginning with the tax year in which you incurred the costs. 2012 form 1040ez For more information, see Optional Write-off of Certain Tax Preferences , later, and section 59(e) of the Internal Revenue Code. 2012 form 1040ez Costs you can amortize. 2012 form 1040ez   You can amortize costs chargeable to a capital account (see chapter 1) if you meet both of the following requirements. 2012 form 1040ez You paid or incurred the costs in your trade or business. 2012 form 1040ez You are not deducting the costs currently. 2012 form 1040ez How to make the election. 2012 form 1040ez   To elect to amortize research and experimental costs, complete Part VI of Form 4562 and attach it to your income tax return. 2012 form 1040ez Generally, you must file the return by the due date (including extensions). 2012 form 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 form 1040ez Attach Form 4562 to the amended return and write “Filed pursuant to section 301. 2012 form 1040ez 9100-2” on Form 4562. 2012 form 1040ez File the amended return at the same address you filed the original return. 2012 form 1040ez   Your election is binding for the year it is made and for all later years unless you obtain approval from the IRS to change to a different method. 2012 form 1040ez Optional Write-off of Certain Tax Preferences You can elect to amortize certain tax preference items over an optional period beginning in the tax year in which you incurred the costs. 2012 form 1040ez If you make this election, there is no AMT adjustment. 2012 form 1040ez The applicable costs and the optional recovery periods are as follows: Circulation costs — 3 years, Intangible drilling and development costs — 60 months, Mining exploration and development costs — 10 years, and Research and experimental costs — 10 years. 2012 form 1040ez How to make the election. 2012 form 1040ez   To elect to amortize qualifying costs over the optional recovery period, complete Part VI of Form 4562 and attach a statement containing the following information to your return for the tax year in which the election begins: Your name, address, and taxpayer identification number; and The type of cost and the specific amount of the cost for which you are making the election. 2012 form 1040ez   Generally, the election must be made on a timely filed return (including extensions) for the tax year in which you incurred the costs. 2012 form 1040ez However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). 2012 form 1040ez Attach Form 4562 to the amended return and write “Filed pursuant to section 301. 2012 form 1040ez 9100-2” on Form 4562. 2012 form 1040ez File the amended return at the same address you filed the original return. 2012 form 1040ez Revoking the election. 2012 form 1040ez   You must obtain consent from the IRS to revoke your election. 2012 form 1040ez Your request to revoke the election must be submitted to the IRS in the form of a letter ruling before the end of the tax year in which the optional recovery period ends. 2012 form 1040ez The request must contain all of the information necessary to demonstrate the rare and unusual circumstances that would justify granting revocation. 2012 form 1040ez If the request for revocation is approved, any unamortized costs are deductible in the year the revocation is effective. 2012 form 1040ez Prev  Up  Next   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The 2012 Form 1040ez

2012 form 1040ez 2. 2012 form 1040ez   Filing Requirements and Required Disclosures Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Annual Information ReturnsSupporting Organization Annual Information Return Unrelated Business Income Tax ReturnEstimated tax. 2012 form 1040ez Employment Tax ReturnsException. 2012 form 1040ez FUTA tax exception. 2012 form 1040ez FICA tax exemption election. 2012 form 1040ez Revoking the election. 2012 form 1040ez Definitions. 2012 form 1040ez Effect on employees. 2012 form 1040ez Political Organization Income Tax ReturnExempt function. 2012 form 1040ez Political organization taxable income. 2012 form 1040ez Separate fund. 2012 form 1040ez Failure to file. 2012 form 1040ez Failure to pay on time. 2012 form 1040ez Reporting Requirements for a Political OrganizationForm 8871 Form 8872 Donee Information ReturnCharitable deduction property. 2012 form 1040ez Publicly traded securities. 2012 form 1040ez Exceptions. 2012 form 1040ez Form 8283. 2012 form 1040ez Information Provided to DonorsDisclosure of Quid Pro Quo Contributions Acknowledgment of Charitable Contributions of $250 or More Acknowledgment of Vehicle Contribution Qualified Intellectual Property Report of Cash Received Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting FormsAnnual Information Return Public Inspection of Exemption Application Political Organization Reporting Forms Required DisclosuresSolicitation of Nondeductible Contributions Sales of Information or Services Available Free From Government Dues Used for Lobbying or Political Activities Prohibited Tax Shelter Transactions Miscellaneous RulesOrganizational Changes and Exempt Status Introduction Most exempt organizations (including private foundations) must file various returns and reports at some time during (or following the close of) their accounting period. 2012 form 1040ez Topics - This chapter discusses: Annual information returns Unrelated business income tax return Employment tax returns Political organization income tax return Reporting requirements for a political organization Donee information return Information provided to donors Report of cash received Public inspection of exemption applications, annual returns, and political organizations reporting forms Required disclosures Miscellaneous rules Useful Items - You may want to see: Publication 15 Circular E, Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 598 Tax on Unrelated Business Income of Exempt Organizations Form (and Instructions) 941 Employer's Quarterly Federal Tax Return 990 Return of Organization Exempt From Income Tax 990-EZ Short Form Return of Organization Exempt From Income Tax Schedule A (Form 990 or 990-EZ) Public Charity Status and Public Support Schedule B (Form 990, 990-EZ, or 990-PF) Schedule of Contributors Schedule C (Form 990 or 990-EZ) Political Campaign and Lobbying Activities Schedule D (Form 990) Supplemental Financial Statements Schedule E (Form 990 or 990-EZ) Schools Schedule F (Form 990) Statement of Activities Outside the United States Schedule G (Form 990 or 990-EZ) Supplemental Information Regarding Fundraising or Gaming Activities Schedule H (Form 990) Hospitals Schedule I (Form 990) Grants and Other Assistance to Organizations, Governments, and Individuals in the United States Schedule J (Form 990) Compensation Information Schedule K (Form 990) Supplemental Information on Tax-Exempt Bonds Schedule L (Form 990 or 990-EZ) Transactions With Interested Persons Schedule M (Form 990) Noncash Contributions Schedule N (Form 990 or 990-EZ) Liquidation, Termination, Dissolution, or Significant Disposition of Assets Schedule O (Form 990 or 990-EZ) Supplemental Information to Form 990 Schedule R (Form 990) Related Organizations and Unrelated Partnerships 990-PF Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation 990-BL Information and Initial Excise Tax Return for Black Lung Benefit Trusts and Certain Related Persons 990-T Exempt Organization Business Income Tax Return 990-W Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations 1120-POL U. 2012 form 1040ez S. 2012 form 1040ez Income Tax Return for Certain Political Organizations 4720 Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code 5768 Election/Revocation of Election by an Eligible Section 501(c)(3) Organization To Make Expenditures To Influence Legislation 6069 Return of Excise Tax on Excess Contributions to Black Lung Benefit Trust Under Section 4953 and Computation of Section 192 Deduction 7004 Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns 8274 Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption from Employer Social Security and Medicare Taxes 8282 Donee Information Return 8300 Report of Cash Payments Over $10,000 Received in a Trade or Business 8453-X Political Organization Declaration for Electronic Filing of Notice of Section 527 Status 8822-B Change of Address-Business 8868 Application for Extension of Time to File an Exempt Organization Return 8870 Information Return for Transfers Associated with Certain Personal Benefits Contracts 8871 Political Organization Notice of Section 527 Status 8872 Political Organization Report of Contributions and Expenditures 8886-T Disclosure by Tax-Exempt Entity Regarding Prohibited Tax Shelter Transaction 8899 Notice of Income from Donated Intellectual Property 8940 Request for Miscellaneous Determination See chapter 6 for information about getting these publications and forms. 2012 form 1040ez Annual Information Returns Every organization exempt from federal income tax under section 501(a) must file an Annual Exempt Organization Return except: A church, an interchurch organization of local units of a church, a convention or association of churches, An integrated auxiliary of a church, A church-affiliated organization that is exclusively engaged in managing funds or maintaining retirement programs, A school below college level affiliated with a church or operated by a religious order, Church-affiliated mission societies if more than half of their activities are conducted in, or are directed at persons in, foreign countries, An exclusively religious activity of any religious order, A state institution, the income of which is excluded from gross income under section 115, A corporation described in section 501(c)(1) that is organized under an Act of Congress, an instrumentality of the United States, and is exempt from Federal income taxes, A stock bonus, pension, or profit-sharing trust that qualifies under section 401 (required to file Form 5500, Annual Return/Report of Employee Benefit Plan), A religious or apostolic organization described in section 501(d) (required to file Form 1065, U. 2012 form 1040ez S. 2012 form 1040ez Return of Partnership Income), A governmental unit or an affiliate of a governmental unit that meets the requirements of Revenue Procedure 95-48, 1995-2 C. 2012 form 1040ez B. 2012 form 1040ez 418, www. 2012 form 1040ez irs. 2012 form 1040ez gov/pub/irs-tege/rp1995-48. 2012 form 1040ez pdf, A private foundation described in section 501(c)(3) and exempt under section 501(a) (required to file Form 990-PF, Return of Private Foundation), A political organization that is a state or local committee of a political party, a political committee of a state or local candidate, a caucus or association of state or local officials, or required to report under the Federal Election Campaign Act of 1971 as a political committee, An exempt organization (other than a private foundation) that normally has annual gross receipts of $50,000 or less, or A foreign organization, or an organization located in a U. 2012 form 1040ez S. 2012 form 1040ez possession, that normally has annual gross receipts from sources within the United States of $50,000 or less. 2012 form 1040ez Supporting Organization Annual Information Return For tax years ending after August 17, 2006, all section 509(a)(3) supporting organizations are required to file Form 990 or 990-EZ with the IRS regardless of the organization's gross receipts, unless it qualifies as one of the following: An integrated auxiliary of a church; The exclusively religious activities of a religious order; or An organization, the gross receipts of which are normally not more than $5,000, that supports a section 509(a)(3) religious order. 2012 form 1040ez If the organization is described in item (3) above, then it must submit Form 990-N (e-Postcard) unless it voluntarily files Form 990 or 990-EZ. 2012 form 1040ez On its annual information return, at Part I, Schedule A (Form 990 or 990-EZ) a supporting organization must: List the section 509(a)(3) organizations to which it provides support, Indicate whether it is a Type I, Type II, or Type III supporting organization, and Certify that the organization is not controlled directly or indirectly by disqualified persons (other than by foundation managers and other than one or more publicly supported organizations). 2012 form 1040ez Annual Electronic Filing Requirement for Small Tax-Exempt Organizations Small tax-exempt organizations with annual gross receipts normally $50,000 or less must submit Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, with the IRS each year, if they choose not to file a Form 990 or 990-EZ. 2012 form 1040ez Form 990-N requires the following information: The organization's legal name, and mailing address; Any name under which it operates and does business; Its Internet website address (if any); Its taxpayer identification number; The name and address of a principal officer; Organization's annual tax period; Verification that the organization's annual gross receipts are normally $50,000 or less; and Notification if the organization has terminated. 2012 form 1040ez Form 990-N is due by the 15th day of the fifth month after the close of the tax year. 2012 form 1040ez For tax years beginning after December 31, 2006, any organization that fails to meet its annual reporting requirement for 3 consecutive years will automatically lose its tax-exempt status. 2012 form 1040ez To regain its exempt status an organization will have to reapply for recognition as a tax-exempt organization. 2012 form 1040ez Exceptions. 2012 form 1040ez   This filing requirement does not apply to: Churches, their integrated auxiliaries, and conventions or associations of churches; Organizations that are included in a group return; Private foundations required to file Form 990-PF; and Section 509(a)(3) supporting organizations required to file Form 990 or Form 990-EZ. 2012 form 1040ez Forms 990 and 990-EZ Exempt organizations, other than private foundations, must file their annual information returns on Form 990 or 990-EZ, unless excepted from filing or allowed to submit Form 990-N, described earlier. 2012 form 1040ez Generally, political organizations with gross receipts of $25,000 ($100,000 for a qualified state or local political organization (QSLPO)) or more for the tax year are required to file Form 990 or 990-EZ unless specifically excepted from filing the annual return. 2012 form 1040ez The following political organizations are not required to file Form 990 or Form 990-EZ. 2012 form 1040ez A state or local committee of a political party. 2012 form 1040ez A political committee of a state or local candidate. 2012 form 1040ez A caucus or association of state or local officials. 2012 form 1040ez A political organization that is required to report as a political committee under the Federal Election Campaign Act. 2012 form 1040ez A 501(c) organization that has expenditures for influencing or attempting to influence the selection, nomination, election, or appointment of any individual for a federal, state, or local public office. 2012 form 1040ez Form 990-EZ. 2012 form 1040ez   This is a shortened version of Form 990. 2012 form 1040ez It is designed for use by small exempt organizations and nonexempt charitable trusts. 2012 form 1040ez   Beginning in tax year 2010, an organization can file either Form 990 or 990-EZ if it meets the following: Its gross receipts during the year are less than $200,000. 2012 form 1040ez Its total assets (line 25, column (B) of Form 990-EZ) at the end of the year are less than $500,000. 2012 form 1040ez If your organization does not meet either of these conditions, you cannot file Form 990-EZ. 2012 form 1040ez Instead you must file Form 990. 2012 form 1040ez Group return. 2012 form 1040ez   A group return on Form 990 may be filed by a central, parent, or like organization for two or more local organizations, none of which is a private foundation. 2012 form 1040ez This return is in addition to the central organization's separate annual return if it must file a return. 2012 form 1040ez It cannot be included in the group return. 2012 form 1040ez See the instructions for Form 990 for the conditions under which this procedure may be used. 2012 form 1040ez    In any year that an organization is properly included as a subordinate organization on a group return, it should not file its own Form 990. 2012 form 1040ez Schedule A (Form 990 or 990-EZ). 2012 form 1040ez   Organizations, other than private foundations, that are described in section 501(c)(3) and that are otherwise required to file Form 990 or 990-EZ must also complete Schedule A of that form. 2012 form 1040ez Schedule B (Form 990, Form 990-EZ, or 990-PF). 2012 form 1040ez   Organizations that file Form 990 or 990-EZ use this schedule to provide required information regarding their contributors. 2012 form 1040ez Schedule O (Form 990). 2012 form 1040ez   Organizations that file Form 990 must use this schedule to provide required additional information or if additional space is needed. 2012 form 1040ez   Other schedules may be required to be filed with Form 990 or 990-EZ. 2012 form 1040ez See the instructions for Form 990 or the instructions for Form 990-EZ for more information. 2012 form 1040ez Report significant new or changed program services and changes to organizational documents. 2012 form 1040ez    An organization should report new significant program services or significant changes in how it conducts program services, and significant changes to its organizational documents, on its Form 990 rather than in a letter to EO Determinations. 2012 form 1040ez EO Determinations no longer issues letters confirming the tax-exempt status of organizations that report new services or significant changes, or changes to organizational documents. 2012 form 1040ez See Miscellaneous Rules, Organization Changes and Exempt Status, later. 2012 form 1040ez Form 990-PF All private foundations exempt under section 501(c)(3) must file Form 990-PF. 2012 form 1040ez These organizations are discussed in chapter 3. 2012 form 1040ez Electronic Filing You may be required to file Form 990, Form 990-EZ, or Form 990-PF, and related forms, schedules, and attachments electronically. 2012 form 1040ez If an organization is required to file a return electronically but does not, the organization is considered to have not filed its return. 2012 form 1040ez See Regulations section 301. 2012 form 1040ez 6033-4 for more information. 2012 form 1040ez The IRS may waive the requirement to file electronically in cases of undue hardship. 2012 form 1040ez For information on filing a waiver, see Notice 2010-13, 2010-4 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 327, available at www. 2012 form 1040ez irs. 2012 form 1040ez gov/ir/2010-04_IRSB/ar14. 2012 form 1040ez html. 2012 form 1040ez Form 990. 2012 form 1040ez   An organization is required to file Form 990 electronically if it files at least 250 returns during the calendar year and has total assets of $10 million or more at the end of the tax year. 2012 form 1040ez Form 990-PF. 2012 form 1040ez   An organization is required to file Form 990-PF electronically if it files at least 250 returns during the calendar year. 2012 form 1040ez Due Date Forms 990, 990-EZ, or 990-PF must be filed by the 15th day of the fifth month after the end of your organization's accounting period. 2012 form 1040ez Thus, for a calendar year taxpayer, Forms 990, 990-EZ, or 990-PF is due May 15 of the following year. 2012 form 1040ez Extension of time to file. 2012 form 1040ez   Use Form 8868 to request an automatic 3-month extension of time to file Forms 990, 990-EZ, or 990-PF and also to apply for an additional (not automatic) 3-month extension if needed. 2012 form 1040ez   Do not apply for both the automatic 3-month extension and the additional 3-month extension at the same time. 2012 form 1040ez For more information, see Form 8868 and its instructions. 2012 form 1040ez   When filing Form 8868 for an automatic 3-month extension, neither a signature, nor an explanation is required. 2012 form 1040ez However, when filing Form 8868 for an additional 3-month extension, both a signature and an explanation are required. 2012 form 1040ez Application for exemption pending. 2012 form 1040ez   An organization that claims to be exempt under section 501(a) but has not established its exempt status by the due date for filing an information return must complete and file Form 990, 990-EZ, 990–N or 990-PF (if it considers itself a private foundation), unless the organization is exempt from Form 990-series filing requirements. 2012 form 1040ez If the organization's application is pending with the IRS, it must so indicate on Forms 990, 990-EZ, or 990-PF (whichever applies) by checking the application pending block at the top of page 1 of the return. 2012 form 1040ez For more information on the filing requirements, see the Instructions for Forms 990, 990-EZ, and 990-PF. 2012 form 1040ez State reporting requirements. 2012 form 1040ez   Copies of Forms 990, 990-EZ, or 990-PF may be used to satisfy state reporting requirements. 2012 form 1040ez See the instructions for those forms. 2012 form 1040ez Form 8870. 2012 form 1040ez   Organizations that filed a Form 990, 990-EZ, or 990-PF, and paid premiums or received transfers on certain life insurance, annuity, and endowment contracts (personal benefit contracts), must file Form 8870. 2012 form 1040ez For more information, see Form 8870 and the instructions for that form. 2012 form 1040ez Automatic Revocation If the organization fails to file a Form 990, 990-EZ, or 990-PF, or fails to submit a Form 990-N, as required, for 3 consecutive years, it will automatically lose its tax-exempt status by operation of law. 2012 form 1040ez The list of organizations whose tax-exempt status has been automatically revoked is available on IRS. 2012 form 1040ez gov. 2012 form 1040ez This list (Auto-Revocation List) may be viewed and searched on Exempt Organizations Select Check. 2012 form 1040ez The Auto-Revocation List includes each organization's name, Employer Identification Number (EIN) and last known address. 2012 form 1040ez It also includes the effective date of the automatic revocation and the date it was posted to the list. 2012 form 1040ez The IRS updates the list monthly to include additional organizations that lose their tax-exempt status. 2012 form 1040ez Tax Effect of Loss of Tax-Exempt Status If your organization’s tax-exempt status is automatically revoked, you may be required to file one of the following federal income tax returns and pay any applicable income taxes: Form 1120, U. 2012 form 1040ez S. 2012 form 1040ez Corporation Income Tax Return, due by the 15th day of the 3rd month after the end of your organization’s tax year, or Form 1041, U. 2012 form 1040ez S. 2012 form 1040ez Income Tax Return for Estates and Trusts, due by the 15th day of the 4th month after the end of your organization’s tax year. 2012 form 1040ez In addition, a section 501(c)(3) organization that loses its tax-exempt status cannot receive tax-deductible contributions and will not be identified in the IRS Business Master File extract as eligible to received tax-deductible contributions, or be included in Exempt Organizations Select Check (Pub 78 database). 2012 form 1040ez An organization whose exemption was automatically revoked must apply for tax exemption in order to regain its tax exemption (even if it was not originally required to apply). 2012 form 1040ez In some situations, an organization may be able to obtain exemption retroactive to its date of revocation. 2012 form 1040ez For more information about automatic revocation, go to IRS. 2012 form 1040ez gov and select Charities & Non-Profits and then select Revoked? Reinstated? Learn More. 2012 form 1040ez Penalties Penalties for failure to file. 2012 form 1040ez   Generally, an exempt organization that fails to file a required return must pay a penalty of $20 a day for each day the failure continues. 2012 form 1040ez The same penalty will apply if the organization does not give all the information required on the return or does not give the correct information. 2012 form 1040ez Maximum penalty. 2012 form 1040ez   The maximum penalty for any one return is the smaller of $10,000 or 5% of the organization's gross receipts for the year. 2012 form 1040ez Organization with gross receipts over $1 million. 2012 form 1040ez   For an organization that has gross receipts of over $1 million for the year, the penalty is $100 a day up to a maximum of $50,000. 2012 form 1040ez Managers. 2012 form 1040ez   If the organization is subject to this penalty, the IRS may specify a date by which the return or correct information must be supplied by the organization. 2012 form 1040ez Failure to comply with this demand will result in a penalty imposed upon the manager of the organization, or upon any other person responsible for filing a correct return. 2012 form 1040ez The penalty is $10 a day for each day that a return is not filed after the period given for filing. 2012 form 1040ez The maximum penalty imposed on all persons with respect to any one return is $5,000. 2012 form 1040ez Exception for reasonable cause. 2012 form 1040ez   No penalty will be imposed if reasonable cause for failure to file timely can be shown. 2012 form 1040ez Unrelated Business Income Tax Return Even though your organization is recognized as tax exempt, it still may be liable for tax on its unrelated business income. 2012 form 1040ez Unrelated business income is income from a trade or business, regularly carried on, that is not substantially related to the charitable, educational, or other purpose that is the basis for the organization's exemption. 2012 form 1040ez If your organization has $1,000 or more of unrelated business income, you must file Form 990-T in addition to your required annual information return. 2012 form 1040ez Estimated tax. 2012 form 1040ez   Quarterly estimated tax payments are due if your organization expects to owe $500 or more in tax including unrelated business income. 2012 form 1040ez Use Form 990-W to figure your organization's estimated tax payments. 2012 form 1040ez Travel tour programs. 2012 form 1040ez   Travel tour activities that are a trade or business are an unrelated trade or business if the activities are not substantially related to the purpose to which tax exemption was granted to the organization. 2012 form 1040ez   Whether travel tour activities conducted by an organization are substantially related to the organization's tax exempt purpose is determined by looking at all the relevant facts and circumstances, including, but not limited to, how a travel tour is developed, promoted, and operated. 2012 form 1040ez Example. 2012 form 1040ez ABC, a university alumni association, is tax exempt as an educational organization under section 501(c)(3). 2012 form 1040ez As part of its activities, ABC operates a travel tour program. 2012 form 1040ez The program is open to all current members of ABC and their guests. 2012 form 1040ez ABC works with travel agents to schedule approximately ten tours annually to various destinations around the world. 2012 form 1040ez Members of ABC pay $1,000 to XYZ Travel Agency to participate in a tour. 2012 form 1040ez XYZ pays ABC a per person fee for each participant. 2012 form 1040ez Although the literature advertising the tours encourages ABC members to continue their lifelong learning by joining the tours, and a faculty member of ABC's related university frequently joins the tour as a guest of the alumni association, none of the tours include any scheduled instruction or curriculum related to the destinations being visited. 2012 form 1040ez The travel tours made available to ABC's members do not contribute importantly to the accomplishment of ABC's educational purpose. 2012 form 1040ez Rather, ABC's program is designed to generate revenues for ABC by regularly offering its members travel services. 2012 form 1040ez Therefore, ABC's tour program is an unrelated trade or business. 2012 form 1040ez For additional information on unrelated business income, see Publication 598 and the Instructions for Form 990-T. 2012 form 1040ez Employment Tax Returns Every employer, including an organization exempt from federal income tax, who pays wages to employees is responsible for withholding, depositing, paying, and reporting federal income tax, social security and Medicare (FICA) taxes, and federal unemployment tax (FUTA), unless that employer is specifically excepted by law from those requirements, or if the taxes clearly do not apply. 2012 form 1040ez For more information, obtain a copy of Publication 15, which summarizes the responsibilities of an employer, Publication 15-A, Publication 15-B, and Form 941. 2012 form 1040ez Small Business Health Care Tax Credit. 2012 form 1040ez   If your small tax-exempt organization provides health care coverage for your workers you may qualify for the small business health care tax credit. 2012 form 1040ez Go to IRS. 2012 form 1040ez gov and select Affordable Care Act Tax Provisions for more details. 2012 form 1040ez See Small Business Health Care Tax Credit at www. 2012 form 1040ez irs. 2012 form 1040ez gov/newsroom/article/0,,id=223666,00. 2012 form 1040ez html. 2012 form 1040ez Expanded Work Opportunity Tax Credit Available for Hiring Qualified Veterans. 2012 form 1040ez   The VOW to Hire Heroes Act of 2011 made changes to the Work Opportunity Tax Credit (WOTC). 2012 form 1040ez The Act added two new categories to the existing qualified veteran targeted group and made the WOTC available to certain tax-exempt employers as a credit against the employer's share of social security tax. 2012 form 1040ez The Act allows employers to claim the WOTC for veterans certified as qualified veterans and who begin work before January 1, 2013. 2012 form 1040ez This tax credit was extended through December 31, 2013, under the American Taxpayer Relief Act, passed on January 1, 2013. 2012 form 1040ez   The credit can be as high as $6,240 for qualified tax-exempt organizations. 2012 form 1040ez The amount of the credit depends on a number of factors, including the length of the veteran’s unemployment before hire, the number of hours the veteran works, and the veteran’s first-year wages. 2012 form 1040ez The amount of the credit for qualified tax-exempt organizations may not exceed the organization's employer social security tax for the period for which the credit is claimed. 2012 form 1040ez   All employers must obtain certification that an individual is a member of the targeted group, before the employer may claim the credit. 2012 form 1040ez The process for certifying veterans for this credit is the same for all employers. 2012 form 1040ez For more information, see Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit and the instructions to Form 8850. 2012 form 1040ez Notice 2012-13, 2012-9 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 421, also provides additional guidance on submission Form 8850. 2012 form 1040ez   Organizations described in section 501(c) and exempt from taxation under section 501(a) may claim the credit for qualified veterans who begin work on or after Nov. 2012 form 1040ez 22, 2011, and before January 1, 2013. 2012 form 1040ez After the required certification is secured, tax-exempt employers claim the credit against the employer social security tax by separately filing Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans, Form 5884-C. 2012 form 1040ez File Form 5884-C after filing the related employment tax return for the employment tax period for which the credit is claimed. 2012 form 1040ez It is recommended that qualified tax-exempt employers do not reduce their required deposits in anticipation of any credit as the forms are processed separately. 2012 form 1040ez In addition to Form 5884-C and its instructions, tax-exempt employers should see Notice 2012-13 and the Frequently Asked Questions & Answers for more details for claiming the credit. 2012 form 1040ez Trust fund recovery penalty. 2012 form 1040ez   If any person required to collect, truthfully account for, and pay over any of these taxes willfully fails to satisfy any of these requirements or willfully tries in any way to evade or defeat any of them, that person will be subject to a penalty. 2012 form 1040ez The penalty is equal to the tax evaded, not collected, or not accounted for and paid over. 2012 form 1040ez The term person includes: An officer or employee of a corporation, or A member or employee of a partnership. 2012 form 1040ez Exception. 2012 form 1040ez   The penalty is not imposed on any unpaid volunteer director or member of a board of trustees of an exempt organization if the unpaid volunteer serves solely in an honorary capacity, does not participate in the day-to-day or financial operations of the organization, and does not have actual knowledge of the failure on which the penalty is imposed. 2012 form 1040ez   This exception does not apply if it results in no one being liable for the penalty. 2012 form 1040ez FICA and FUTA tax exceptions. 2012 form 1040ez   Payments for services performed by a minister of a church in the exercise of the ministry, or a member of a religious order performing duties required by the order, are generally not subject to FICA or FUTA taxes. 2012 form 1040ez FUTA tax exception. 2012 form 1040ez   Payments for services performed by an employee of a religious, charitable, educational, or other organization described in section 501(c)(3) that are generally subject to FICA taxes if the payments are $100 or more for the year, are not subject to FUTA taxes. 2012 form 1040ez FICA tax exemption election. 2012 form 1040ez   Churches and qualified church-controlled organizations can elect exemption from employer FICA taxes by filing Form 8274. 2012 form 1040ez   To elect the exemption, Form 8274 must be filed before the first date on which a quarterly employment tax return would otherwise be due from the electing organization. 2012 form 1040ez The organization can make the election only if it is opposed for religious reasons to the payment of FICA taxes. 2012 form 1040ez   The election applies to payments for services of current and future employees other than services performed in an unrelated trade or business. 2012 form 1040ez Revoking the election. 2012 form 1040ez   The election can be revoked by the IRS if the organization fails to file Form W-2, Wage and Tax Statement, for 2 years and fails to furnish certain information upon request by the IRS. 2012 form 1040ez Such revocation will apply retroactively to the beginning of the 2-year period. 2012 form 1040ez Definitions. 2012 form 1040ez   For purposes of this election, the term church means a church, a convention or association of churches, or an elementary or secondary school that is controlled, operated, or principally supported by a church or by a convention or association of churches. 2012 form 1040ez   The term qualified church-controlled organization means any church-controlled section 501(c)(3) tax-exempt organization, other than an organization that both: Offers goods, services, or facilities for sale, other than on an incidental basis, to the general public at other than a nominal charge that is substantially less than the cost of providing such goods, services, or facilities, and Normally receives more than 25% of its support from the sum of governmental sources and receipts from admissions, sales of merchandise, performance of services, or furnishing of facilities, in activities that are not unrelated trades or businesses. 2012 form 1040ez Effect on employees. 2012 form 1040ez   If a church or qualified church-controlled organization has made an election, payment for services performed for that church or organization, other than in an unrelated trade or business, will not be subject to FICA taxes. 2012 form 1040ez However, the employee, unless otherwise exempt, will be subject to self-employment tax on the income. 2012 form 1040ez The tax applies to income of $108. 2012 form 1040ez 28 or more for the tax year from that church or organization, and no deductions for trade or business expenses are allowed against this self-employment income. 2012 form 1040ez   Schedule SE (Form 1040), Self-Employment Tax, should be attached to the employee's income tax return. 2012 form 1040ez Political Organization Income Tax Return Generally, a political organization is treated as an organization exempt from tax. 2012 form 1040ez Certain political organizations, however, must file an annual income tax return, Form 1120-POL, U. 2012 form 1040ez S. 2012 form 1040ez Income Tax Return for Certain Political Organizations, for any year they have political organization taxable income in excess of the $100 specific deduction allowed under section 527. 2012 form 1040ez A political organization that has $25,000 ($100,000 for a qualified state or local political organization) or more in gross receipts for the tax year must file Form 990 or Form 990-EZ (and Schedule B of the form), unless excepted. 2012 form 1040ez See Forms 990 and 990-EZ , earlier. 2012 form 1040ez Political organization. 2012 form 1040ez   A political organization is a party, committee, association, fund, or other organization (whether or not incorporated) organized and operated primarily for the purpose of directly or indirectly accepting contributions or making expenditures, or both, for an exempt function. 2012 form 1040ez Exempt function. 2012 form 1040ez   An exempt function means influencing or attempting to influence the selection, nomination, election, or appointment of any individual to any federal, state, local public office or office in a political organization, or the election of the Presidential or Vice Presidential electors, whether or not such individual or electors are selected, nominated, elected, or appointed. 2012 form 1040ez It also includes certain office expenses of a holder of public office or an office in a political organization. 2012 form 1040ez Certain political organizations are required to notify the IRS that they are section 527 organizations. 2012 form 1040ez These organizations must use Form 8871. 2012 form 1040ez Some of these section 527 organizations must use Form 8872 to file periodic reports with the IRS disclosing their contributions and expenditures. 2012 form 1040ez For a discussion on these forms, see Reporting Requirements for a Political Organization, later. 2012 form 1040ez Political organization taxable income. 2012 form 1040ez   Political organization taxable income is the excess of: Gross income for the tax year (excluding exempt function income) minus Deductions directly connected with the earning of gross income. 2012 form 1040ez To figure taxable income, allow for a $100 specific deduction, but do not allow for the net operating loss deduction, the dividends-received deduction, and other special deductions for corporations. 2012 form 1040ez Exempt organization not a political organization. 2012 form 1040ez   An organization exempt under section 501(c) that spends any amount for an exempt function must file Form 1120-POL for any year which it has political taxable income. 2012 form 1040ez These organizations must include in gross income the lesser of: The total amount of its exempt function expenditures, or The organization's net investment income. 2012 form 1040ez Separate fund. 2012 form 1040ez   A section 501(c) organization can set up a separate segregated fund that will be treated as an independent political organization. 2012 form 1040ez The earnings and expenditures made by the separate fund will not be attributed to the section 501(c) organization. 2012 form 1040ez Section 501(c)(3) organizations are precluded from, and may suffer loss of exemption for, engaging in any political campaign on behalf of, or in opposition to, any candidate for public office. 2012 form 1040ez Due date. 2012 form 1040ez   Form 1120-POL is due by the 15th day of the 3rd month after the end of the tax year. 2012 form 1040ez Thus, for a calendar year taxpayer, Form 1120-POL is due on March 15 of the following year. 2012 form 1040ez If any due date falls on a Saturday, Sunday, or legal holiday, the organization can file the return on the next business day. 2012 form 1040ez    Form 1120-POL is not required of an exempt organization that makes expenditures for political purposes if its gross income does not exceed its directly connected deductions by more than $100 for the tax year. 2012 form 1040ez Extension of time to file. 2012 form 1040ez    Use Form 7004 to request an automatic 6-month extension of time to file Form 1120-POL. 2012 form 1040ez The extension will be granted if you complete Form 7004 properly, make a proper estimate of the tax (if applicable), file Form 1120-POL by the due date, and pay any tax due. 2012 form 1040ez Failure to file. 2012 form 1040ez   A political organization that fails to file Form 1120-POL is subject to a penalty equal to 5% of the tax due for each month (or partial month) the return is late up to a maximum of 25% of the tax due, unless the organization shows the failure was due to reasonable cause. 2012 form 1040ez For more information about filing Form 1120-POL, refer to the instructions accompanying the form. 2012 form 1040ez Failure to pay on time. 2012 form 1040ez   An organization that does not pay the tax when due generally may have to pay a penalty of 1/2 of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. 2012 form 1040ez The penalty will not be imposed if the organization can show that the failure to pay on time was due to reasonable cause. 2012 form 1040ez Reporting Requirements for a Political Organization Certain political organizations are required to notify the IRS that the organization is to be treated as a section 527 political organization. 2012 form 1040ez The organization is also required to periodically report certain contributions received and expenditures made by the organization. 2012 form 1040ez To notify the IRS of section 527 treatment, an organization must file Form 8871. 2012 form 1040ez To report contributions and expenditures, certain tax-exempt political organizations must file Form 8872. 2012 form 1040ez Form 8871 A political organization must electronically file Form 8871 to notify the IRS that it is to be treated as a section 527 organization. 2012 form 1040ez However, an organization is not required to file Form 8871 if: It reasonably expects its annual gross receipts to always be less than $25,000. 2012 form 1040ez It is a political committee required to report under the Federal Election Campaign Act of 1971 (FECA) (2 U. 2012 form 1040ez S. 2012 form 1040ez C. 2012 form 1040ez 431(4)). 2012 form 1040ez It is a state or local candidate committee. 2012 form 1040ez It is a state or local committee of a political party. 2012 form 1040ez It is a section 501(c) organization that has made an “exempt function expenditure. 2012 form 1040ez ” All other political organizations are required to file Form 8871. 2012 form 1040ez An organization must provide on Form 8871: Its name and address (including any business address, if different) and its electronic mailing address; Its purpose; The names and addresses of its officers, highly compensated employees, contact person, custodian of records, and members of its board of directors; The name and address of, and relationship to, any related entities (within the meaning of section 168(h)(4)); and Whether it intends to claim an exemption from filing Form 8872, Form 990, or Form 990-EZ. 2012 form 1040ez Employer identification number. 2012 form 1040ez   If your organization needs an EIN, you can apply for one: Online—Click on the Employer ID Numbers (EINs) link at www. 2012 form 1040ez IRS. 2012 form 1040ez gov/businesses/small. 2012 form 1040ez By telephone at 1-800-829-4933 from 7:00 a. 2012 form 1040ez m. 2012 form 1040ez to 10:00 p. 2012 form 1040ez m. 2012 form 1040ez in the organization's local time zone. 2012 form 1040ez By mailing or faxing Form SS-4. 2012 form 1040ez   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. 2012 form 1040ez Due dates. 2012 form 1040ez   The initial Form 8871 must be filed within 24 hours of the date on which the organization was established. 2012 form 1040ez If there is a material change, an amended Form 8871 must be filed within 30 days of the material change. 2012 form 1040ez When the organization terminates its existence, it must file a final Form 8871 within 30 days of termination. 2012 form 1040ez   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. 2012 form 1040ez How to file. 2012 form 1040ez   An organization must file Form 8871 electronically via the IRS Internet website at www. 2012 form 1040ez IRS. 2012 form 1040ez gov/polorgs (Keyword: political orgs). 2012 form 1040ez Form 8453-X, Political Organization Declaration for Electronic Filing of Notice of Section 527 Status. 2012 form 1040ez   After electronically submitting Form 8871, the political organization must print, sign, and mail Form 8453-X to the IRS. 2012 form 1040ez Upon receipt of the Form 8453-X, the IRS will send the organization a username and password that must be used to file an amended or final Form 8871 or to electronically file Form 8872. 2012 form 1040ez Penalties Failure to file. 2012 form 1040ez   An organization that is required to file Form 8871, but fails to do so on a timely basis, will not be treated as a tax-exempt section 527 organization for any period before the date Form 8871 is filed. 2012 form 1040ez Also, the taxable income of the organization for that period will include its exempt function income (including contributions received, membership dues, and political fundraising receipts) minus any deductions directly connected with the production of that income. 2012 form 1040ez   Failure to file an amended Form 8871 will cause the organization not to be treated as a tax-exempt section 527 organization. 2012 form 1040ez If an organization is treated as not being a tax-exempt section 527 organization, the taxable income of the organization will be determined by considering any exempt function income and deductions during the period beginning on the date of the material change and ending on the date that the amended Form 8871 is filed. 2012 form 1040ez    The tax is computed by multiplying the organization's taxable income by the highest corporate tax rate. 2012 form 1040ez Fraudulent returns. 2012 form 1040ez   Any individual or corporation that willfully delivers or discloses to the IRS any list, return, account, statement or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation) or imprisoned for not more than 1 year or both. 2012 form 1040ez Waiver of penalties. 2012 form 1040ez   The IRS may waive any additional tax assessed on an organization for failure to file Form 8871 if the failure was due to reasonable cause and not willful neglect. 2012 form 1040ez Additional information. 2012 form 1040ez   For more information on Form 8871, see the form and its instructions. 2012 form 1040ez For a discussion on the public inspection requirements for the form, see Public Inspection of Exemption Applications, Annual Returns, and Political Organization Reporting Forms , later. 2012 form 1040ez Form 8872 Every tax-exempt section 527 political organization that accepts a contribution or makes an expenditure, for an exempt function during the calendar year, must file Form 8872 except: A political organization that is not required to file Form 8871 (discussed earlier). 2012 form 1040ez A political organization that is subject to tax on its income because it did not file or amend Form 8871. 2012 form 1040ez A qualified state or local political organization (QSLPO), discussed below. 2012 form 1040ez All other tax-exempt section 527 organizations that accept contributions or make expenditures for an exempt function are required to file Form 8872. 2012 form 1040ez Qualified state or local political organization. 2012 form 1040ez   A state or local political organization may be a QSLPO if: All of its political activities relate solely to state or local public office (or office in a state or local political organization). 2012 form 1040ez It is subject to a state law that requires it to report (and it does report) to a state agency information about contributions and expenditures that is similar to the information that the organization would otherwise be required to report to the IRS. 2012 form 1040ez The state agency and the organization make the reports publicly available. 2012 form 1040ez No federal candidate or office holder: Controls or materially participates in the direction of the organization, Solicits contributions for the organization, or Directs the disbursements of the organization. 2012 form 1040ez Information required on Form 8872. 2012 form 1040ez   If an organization pays an individual $500 or more for the calendar year, the organization is required to disclose the individual's name, address, occupation, employer, amount of the expense, the date the expense was paid, and the purpose of the expense on Form 8872. 2012 form 1040ez   If an organization receives contributions of $200 or more from one contributor for the calendar year, the organization must disclose the donor's name, address, occupation, employer, and the date the contributions were made. 2012 form 1040ez   For additional information that is required, see Form 8872. 2012 form 1040ez Due dates. 2012 form 1040ez   The due dates for filing Form 8872 vary depending on whether the form is due for a reporting period that occurs during a calendar year in which a regularly scheduled election is held, or any other calendar year (a nonelection year). 2012 form 1040ez   If the due date falls on a Saturday, Sunday, or legal holiday, the organization can file on the next business day. 2012 form 1040ez Election year filing. 2012 form 1040ez    In election years, Form 8872 must be filed on either a quarterly or a monthly basis. 2012 form 1040ez Both a pre-election report and a post-election report are also required to be filed in an election year. 2012 form 1040ez An election year is any year in which a regularly scheduled general election for federal office is held (an even-numbered year). 2012 form 1040ez Nonelection year filing. 2012 form 1040ez    In nonelection years, the form must be filed on a semiannual or monthly basis. 2012 form 1040ez A complete listing of these filing periods are in the Form 8872 Instructions. 2012 form 1040ez A nonelection year is any odd-numbered year. 2012 form 1040ez How to file. 2012 form 1040ez   Form 8872 can be filed either electronically or by mail. 2012 form 1040ez However, organizations that have, or expect to have, contributions or expenditures of $50,000 or more for the year must file electronically. 2012 form 1040ez    To file by mail, send Form 8872 to the:   Department of the Treasury Internal Revenue Service Center Ogden, UT 84201-0027 Electronic filing. 2012 form 1040ez   File electronically via the IRS internet website at www. 2012 form 1040ez IRS. 2012 form 1040ez gov/polorgs. 2012 form 1040ez You will need a user ID and password to electronically file Form 8872. 2012 form 1040ez Organizations that have completed the electronic filing of Form 8871 and submitted a completed and signed Form 8453-X will receive a username and password in the mail. 2012 form 1040ez   Organizations that have completed the electronic filing of Form 8871, but have not received their user ID and password can request one by writing to the following address: Internal Revenue Service Attn: Request for 8872 Password Mail Stop 6273 Ogden, UT 84201 Lost username and password. 2012 form 1040ez   If you have forgotten or misplaced the username and password issued to your organization after you filed your initial Form 8871, send a letter requesting a new username and password to the address under Electronic filing. 2012 form 1040ez You can also fax your request to (801) 620-3249. 2012 form 1040ez It may take 3-6 weeks for your new username and password to arrive, as they will be mailed to the organization. 2012 form 1040ez Penalty A penalty will be imposed if the organization is required to file Form 8872 and it: Fails to file the form by the due date, or Files the form but fails to report all of the information required or reports incorrect information. 2012 form 1040ez The penalty is 35% of the total amount of contributions and expenditures to which a failure relates. 2012 form 1040ez Fraudulent returns. 2012 form 1040ez   Any individual or corporation that willfully delivers or discloses any list, return, account, statement, or other document known to be fraudulent or false as to any material matter will be fined not more than $10,000 ($50,000 in the case of a corporation), or imprisoned for not more than 1 year, or both. 2012 form 1040ez Waiver of penalties. 2012 form 1040ez   The IRS may waive any additional tax assessed on an organization for failure to file Form 8872 if the failure was due to reasonable cause and not willful neglect. 2012 form 1040ez Donee Information Return Dispositions of donated property. 2012 form 1040ez   If an organization receives charitable deduction property and within three years sells, exchanges, or otherwise disposes of the property, the organization must file Form 8282, Donee Information Return. 2012 form 1040ez However, an organization is not required to file Form 8282 if: The property is valued at $500 or less, or The property is consumed or distributed for charitable purposes. 2012 form 1040ez   Form 8282 must be filed with the IRS within 125 days after the disposition. 2012 form 1040ez Additionally, a copy of Form 8282 must be given to the donor. 2012 form 1040ez If the organization fails to file the required information return, penalties may apply. 2012 form 1040ez Charitable deduction property. 2012 form 1040ez   This is any property (other than money or publicly traded securities) for which the donee organization signed an appraisal summary or Form 8283, Noncash Charitable Contributions. 2012 form 1040ez Publicly traded securities. 2012 form 1040ez   These are securities for which market quotations are readily available on an established securities market as of the date of the contribution. 2012 form 1040ez Appraisal summary. 2012 form 1040ez   If the value of the donated property exceeds $5,000, the donor must get a qualified appraisal for contributions of property, see the Exceptions. 2012 form 1040ez below. 2012 form 1040ez Exceptions. 2012 form 1040ez   A written appraisal is not needed if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane), if your deduction for the vehicle is limited to the gross proceeds from its sale, Intellectual property, Certain securities considered to have market quotations readily available (see Regulations section 1. 2012 form 1040ez 170A-13(c)(7)(xi)(B)), Inventory and other property donated by a corporation that are qualified contributions for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A), or Any donation of stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2012 form 1040ez   The donee organization is not a qualified appraiser for the purpose of valuing the donated property. 2012 form 1040ez For more information, get Publication 561, Determining the Value of Donated Property. 2012 form 1040ez Form 8283. 2012 form 1040ez   For noncash donations over $5,000, the donor must attach Form 8283 to the tax return to support the charitable deduction. 2012 form 1040ez The donee must sign Part IV of Section B, Form 8283 unless publicly traded securities are donated. 2012 form 1040ez The person who signs for the donee must be an official authorized to sign the donee's tax or information returns, or a person specifically authorized to sign by that official. 2012 form 1040ez The signature does not represent concurrence in the appraised value of the contributed property. 2012 form 1040ez A signed acknowledgment represents receipt of the property described on Form 8283 on the date specified on the form. 2012 form 1040ez The signature also indicates knowledge of the information reporting requirements on dispositions, as previously discussed. 2012 form 1040ez A copy of Form 8283 must be given to the donee. 2012 form 1040ez Information Provided to Donors In some situations, a donor must obtain certain information from a donee organization to obtain a deduction for a charitable contribution. 2012 form 1040ez In other situations, the donee organization is required to provide information to the donor. 2012 form 1040ez A charitable organization must give a donor a disclosure statement for a quid pro quo contribution over $75. 2012 form 1040ez (See Disclosure statement. 2012 form 1040ez later. 2012 form 1040ez ) This is a payment a donor makes to a charity partly as a contribution and partly for goods or services. 2012 form 1040ez See Quid pro quo contribution below for an example. 2012 form 1040ez Failure to make the required disclosure may result in a penalty to the organization. 2012 form 1040ez A donor cannot deduct a charitable contribution of $250 or more unless the donor has a written acknowledgment from the charitable organization. 2012 form 1040ez In certain circumstances, an organization may be able to meet both of these requirements with the same written document. 2012 form 1040ez Disclosure of Quid Pro Quo Contributions A charitable organization must provide a written disclosure statement to donors of a quid pro quo contribution over $75. 2012 form 1040ez Quid pro quo contribution. 2012 form 1040ez   A contribution made by a donor in exchange for goods or services is known as a quid pro quo contribution. 2012 form 1040ez Your charitable organization must provide the donor a written statement informing the donor of the fair market value of the items or services it provided in exchange for the contribution. 2012 form 1040ez Generally, a written statement is required for each payment, whenever the contribution portion is over $75. 2012 form 1040ez Example. 2012 form 1040ez If a donor gives your charity $100 and receives a concert ticket valued at $40, the donor has made a quid pro quo contribution. 2012 form 1040ez In this example, the charitable part of the payment is $60. 2012 form 1040ez Even though the deductible part of the payment is not more than $75, a written statement must be filed because the total payment is more than $75. 2012 form 1040ez If your organization fails to disclose quid pro quo contributions, the organization may be subject to a penalty. 2012 form 1040ez Disclosure statement. 2012 form 1040ez   The required written disclosure statement must: Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of any money (and the value of any property other than money) contributed by the donor over the fair market value of goods or services provided by the charity, and Provide the donor with a good faith estimate of the fair market value of the goods or services that the donor received. 2012 form 1040ez The charity must furnish the statement in connection with either the solicitation or the receipt of the quid pro quo contribution. 2012 form 1040ez If the disclosure statement is furnished in connection with a particular solicitation, it is not necessary for the organization to provide another statement when it actually receives the contribution. 2012 form 1040ez   No disclosure statement is required if any of the following are true. 2012 form 1040ez The goods or services given to a donor have insubstantial value as described in Revenue Procedure 90-12, 1990-1 C. 2012 form 1040ez B. 2012 form 1040ez 471, Revenue Procedure 90-12, and Revenue Procedure 92-49, 1992-1 C. 2012 form 1040ez B. 2012 form 1040ez 507 (as adjusted for inflation), Revenue Procedure 92-49. 2012 form 1040ez There is no donative element involved in a particular transaction with a charity (for example, there is generally no donative element involved in a visitor's purchase from a museum gift shop). 2012 form 1040ez There is only an intangible religious benefit provided to the donor. 2012 form 1040ez The intangible religious benefit must be provided to the donor by an organization organized exclusively for religious purposes, and must be of a type that generally is not sold in a commercial transaction outside the donative context. 2012 form 1040ez For example, a donor who, for a payment, is granted admission to a religious ceremony for which there is no admission charge is provided an intangible religious benefit. 2012 form 1040ez A donor is not provided intangible religious benefits for payments made for tuition for education leading to a recognized degree, travel services, or consumer goods. 2012 form 1040ez The donor makes a payment of $75 or less per year and receives only annual membership benefits that consist of: Any rights or privileges (other than the right to purchase tickets for college athletic events) that the taxpayer can exercise often during the membership period, such as free or discounted admissions or parking or preferred access to goods or services, or Admission to events that are open only to members and the cost per person of which is within the limits for low-cost articles described in Revenue Procedure 90-12 (as adjusted for inflation), Revenue Procedure 90-12. 2012 form 1040ez Good faith estimate of fair market value (FMV). 2012 form 1040ez   An organization can use any reasonable method to estimate the FMV of goods or services it provided to a donor, as long as it applies the method in good faith. 2012 form 1040ez   The organization can estimate the FMV of goods or services that generally are not commercially available by using the FMV of similar or comparable goods or services. 2012 form 1040ez Goods or services may be similar or comparable even if they do not have the unique qualities of the goods or services being valued. 2012 form 1040ez Example 1. 2012 form 1040ez A charity provides a 1-hour tennis lesson with a tennis professional for the first $500 payment it receives. 2012 form 1040ez The tennis professional provides 1-hour lessons on a commercial basis for $100. 2012 form 1040ez A good faith estimate of the lesson's FMV is $100. 2012 form 1040ez Example 2. 2012 form 1040ez For a payment of $50,000, a museum allows a donor to hold a private event in a room of the museum. 2012 form 1040ez A good faith estimate of the FMV of the right to hold the event in the museum can be made by using the cost of renting a hotel ballroom with a capacity, amenities, and atmosphere comparable to the museum room, even though the hotel ballroom lacks the unique art displayed in the museum room. 2012 form 1040ez If the hotel ballroom rents for $2,500, a good faith estimate of the FMV of the right to hold the event in the museum is $2,500. 2012 form 1040ez Example 3. 2012 form 1040ez For a payment of $1,000, a charity provides an evening tour of a museum conducted by a well-known artist. 2012 form 1040ez The artist does not provide tours on a commercial basis. 2012 form 1040ez Tours of the museum normally are free to the public. 2012 form 1040ez A good faith estimate of the FMV of the evening museum tour is $0 even though it is conducted by the artist. 2012 form 1040ez Penalty for failure to disclose. 2012 form 1040ez   A penalty is imposed on a charity that does not make the required disclosure of a quid pro quo contribution of more than $75. 2012 form 1040ez The penalty is $10 per contribution, not to exceed $5,000 per fundraising event or mailing. 2012 form 1040ez The charity can avoid the penalty if it can show that the failure was due to reasonable cause. 2012 form 1040ez Acknowledgment of Charitable Contributions of $250 or More A donor can deduct a charitable contribution of $250 or more only if the donor has a written acknowledgment from the charitable organization. 2012 form 1040ez The donor must get the acknowledgment by the earlier of: The date the donor files the original return for the year the contribution is made, or The due date, including extensions, for filing the return. 2012 form 1040ez The donor is responsible for requesting and obtaining the written acknowledgment from the donee. 2012 form 1040ez A charitable organization that receives a payment made as a contribution is treated as the donee organization for this purpose even if the organization (according to the donor's instructions or otherwise) distributes the amount received to one or more charities. 2012 form 1040ez Quid pro quo contribution. 2012 form 1040ez   If the donee provides goods or services to the donor in exchange for the contribution (a quid pro quo contribution), the acknowledgment must include a good faith estimate of the value of the goods or services. 2012 form 1040ez See Disclosure of Quid Pro Quo Contributions earlier. 2012 form 1040ez Form of acknowledgment. 2012 form 1040ez   Although there is no prescribed format for the written acknowledgment, it must provide enough information to substantiate the amount of the contribution. 2012 form 1040ez For more information, see IRS Publication 1771, Charitable Contributions – Substantiation and Disclosure Requirements. 2012 form 1040ez Cash contributions. 2012 form 1040ez   To deduct a contribution of cash, a check, or other monetary gift (regardless of the amount), a donor must maintain a bank record or a written communication from the donee organization showing the donee's name, date, and amount of the contribution. 2012 form 1040ez In the case of a lump-sum contribution (rather than a contribution by payroll deduction) made through the Combined Federal Campaign or a similar program such as a United Way Campaign, the written communication must include the name of the donee organization that is the ultimate recipient of the charitable contribution. 2012 form 1040ez Contributions by payroll deduction. 2012 form 1040ez   An organization may substantiate an employee's contribution by deduction from its payroll by: A pay stub, Form W-2, or other document showing a contribution to a donee organization, together with A pledge card or other document from the donee organization that shows its name. 2012 form 1040ez   For contributions of $250 or more, the document must state that the donee organization provides no goods or services for any payroll contributions. 2012 form 1040ez The amount withheld from each payment of wages to a taxpayer is treated as a separate contribution. 2012 form 1040ez Acknowledgment of Vehicle Contribution If an exempt organization receives a contribution of a qualified vehicle with a claimed value of more than $500, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. 2012 form 1040ez The donee organization can use a completed Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, for the contemporaneous written acknowledgment. 2012 form 1040ez See section 3. 2012 form 1040ez 03 of Notice 2005-44 for guidance on the information that must be included in a contemporaneous written acknowledgment and the deadline for furnishing the acknowledgment to the donor. 2012 form 1040ez Any donee organization that provides a contemporaneous written acknowledgment to a donor is required to report to the IRS the information contained in the acknowledgment. 2012 form 1040ez The report is due by February 28 (March 31 if filing electronically) of the year following the year in which the donee organization provides the acknowledgment to the donor. 2012 form 1040ez The organization must file the report on Copy A of Form 1098-C. 2012 form 1040ez An organization that files Form 1098-C on paper should send it with Form 1096, Annual Summary and Transmittal of U. 2012 form 1040ez S. 2012 form 1040ez Information Returns. 2012 form 1040ez See the Instructions for Form 1096 for the correct filing location. 2012 form 1040ez An organization that is required to file 250 or more Forms 1098-C during the calendar year must file the forms electronically or magnetically. 2012 form 1040ez Specifications for filing Form 1098-C electronically or magnetically can be found in Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically at www. 2012 form 1040ez IRS. 2012 form 1040ez gov/pub/irs-pdf/p1220. 2012 form 1040ez pdf. 2012 form 1040ez Acknowledgment For a contribution of a qualified vehicle with a claimed value of $500 or less, do not file Form 1098-C. 2012 form 1040ez However, you can use it as the contemporaneous written acknowledgment under section 170(f)(8) by providing the donor with Copy C only. 2012 form 1040ez See the Instructions for Form 1098-C. 2012 form 1040ez Generally, the organization should complete Form 1098-C as the written acknowledgment to the donor and the IRS. 2012 form 1040ez The contents of the acknowledgment depend upon whether the organization: Sells a qualified vehicle without any significant intervening use or material improvement, Intends to make a significant intervening use of or material improvement to a qualified vehicle prior to sale, or Sells a qualified vehicle to a needy individual at a price significantly below fair market value, or a gratuitous transfer to a needy individual in direct furtherance of a charitable purpose of the organization of relieving the poor and distressed or the underprivileged who are in need of a means of transportation. 2012 form 1040ez For more information on the acknowledgment, see Notice 2005-44, 2005-25 I. 2012 form 1040ez R. 2012 form 1040ez B. 2012 form 1040ez 1287, at www. 2012 form 1040ez irs. 2012 form 1040ez gov/irb/2005-25_IRB/2005-25_IRB/ar09. 2012 form 1040ez html. 2012 form 1040ez Material improvements or significant intervening use. 2012 form 1040ez   To constitute significant intervening use, the organization must actually use the vehicle to substantially further the organization's regularly conducted activities, and the use must be significant, not incidental. 2012 form 1040ez Factors in determining whether a use is a significant intervening use depend on the nature, extent, frequency, and duration. 2012 form 1040ez For this purpose, use includes providing transportation on a regular basis for a significant period of time or significant use directly related to training in vehicle repair. 2012 form 1040ez Use does not include the use of a vehicle to provide training in business skills, such as marketing or sales. 2012 form 1040ez Examples of significant use include: Driving a vehicle every day for 1 year to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. 2012 form 1040ez Driving a vehicle for 10,000 miles over a 1-year period to deliver meals to needy individuals, if delivering meals is an activity regularly conducted by the organization. 2012 form 1040ez   Material improvements include major repairs and additions that improve the condition of the vehicle in a manner that significantly increases the value. 2012 form 1040ez To be a material improvement, the improvement cannot be funded by an additional payment to the organization from the donor of the vehicle. 2012 form 1040ez Material improvements do not include cleaning, minor repairs, routine maintenance, painting, removal of dents or scratches, cleaning or repair of upholstery, and installation of theft deterrent devices. 2012 form 1040ez Penalties. 2012 form 1040ez   If your charitable organization receives contributions of used motor vehicles, boats, and airplanes valued over $500 it may be subject to a penalty if it knowingly: Fails to furnish an acknowledgement in a timely manner, showing the required information, or Furnishes a false or fraudulent acknowledgement of the contribution. 2012 form 1040ez    Other penalties may apply. 2012 form 1040ez See Part O in the 2012 General Instructions for Certain Information Returns. 2012 form 1040ez   An acknowledgment containing a certification will be presumed to be false or fraudulent if the qualified vehicle is sold to a buyer other than a needy individual without a significant intervening use or material improvement within 6 months of the date of the contribution. 2012 form 1040ez   If a charity sells a donated vehicle at auction, the IRS will not accept as substantiation an acknowledgment from the charity stating that the vehicle is to be transferred to a needy individual for significantly below fair market value. 2012 form 1040ez Vehicles sold at auction are not sold at prices significantly below fair market value, and the IRS will not treat vehicles sold at auction as qualifying for this exception. 2012 form 1040ez   The penalty for a false or fraudulent acknowledgment where the donee certifies that the vehicle will not be transferred for money, other property, or services before completion of material improvements or significant intervening use or the donee certifies that the vehicle is to be transferred to a needy individual for significantly below fair market value in furtherance of the donee's charitable purpose is the larger of $5,000 or the claimed value of the vehicle multiplied by 39. 2012 form 1040ez 6%. 2012 form 1040ez   The penalty for an acknowledgment relating to a qualified vehicle being sold in an arm's length transaction to an unrelated party is the larger of the gross proceeds from the sale or the sales price stated in the acknowledgment multiplied by 39. 2012 form 1040ez 6%. 2012 form 1040ez Qualified Intellectual Property A taxpayer who contributes qualified intellectual property to a charity may be entitled to a charitable deduction, in addition to any initial deduction allowed in the year of contribution. 2012 form 1040ez The additional deduction is based on a specified percentage of the qualified donee income with respect to the qualified intellectual property. 2012 form 1040ez To qualify for the additional charitable deduction, the donor must provide notice to the donee at the time of the contribution that the donor intends to treat the contribution as qualified intellectual property contribution for purposes of sections 170(m) and 6050L. 2012 form 1040ez Every donee organization described in section 170(c) (except a private foundation as defined in section 509(a) that is not described in section 170(b)(1)(F)) that receives or accrues net income from a charitable gift of qualified intellectual property must file Form 8899. 2012 form 1040ez Form 8899. 2012 form 1040ez   Form 8899, Notice of Income From Donated Intellectual Property, is used by a donee to report net income from qualified intellectual property to the donor of the property and to the IRS and is due by the last day of the first full month following the close of the donee’s tax year. 2012 form 1040ez This form must be filed for each tax year of the donee in which the donated property produces net income, but only if all or part of that tax year occurs during the 10-year period beginning on the date of the contribution and that tax year does not begin after the expiration of the legal life of the donated property. 2012 form 1040ez Qualified donee income. 2012 form 1040ez   Qualified donee income is any net income received by or accrued to the donee that is properly allocable to the qualified intellectual property for the tax year of the donee which ends within or with the tax year of the donor. 2012 form 1040ez Income is not treated as allocated to qualified intellectual property if it is received or accrued after the earlier of the expiration of the legal life of the qualified intellectual property, or the 10-year period beginning with the date of