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1040 Ez Tax Return

1040 ez tax return 3. 1040 ez tax return   Section 501(c)(3) Organizations Table of Contents IntroductionChild care organizations. 1040 ez tax return Topics - This chapter discusses: Useful Items - You may want to see: Contributions to 501(c)(3) OrganizationsCertain annuity contracts. 1040 ez tax return Certain contracts held by a charitable remainder trust. 1040 ez tax return Excise Taxes. 1040 ez tax return Indoor tanning services. 1040 ez tax return Application for Recognition of ExemptionPolitical activity. 1040 ez tax return Private delivery service. 1040 ez tax return Amendments to organizing documents required. 1040 ez tax return How to show reasonable action and good faith. 1040 ez tax return Not acting reasonably and in good faith. 1040 ez tax return Prejudicing the interest of the Government. 1040 ez tax return Procedure for requesting extension. 1040 ez tax return More information. 1040 ez tax return Organizations Not Required To File Form 1023 Articles of OrganizationOrganizational Test Dedication and Distribution of Assets Educational Organizations and Private SchoolsEducational Organizations Private Schools Organizations Providing InsuranceCharitable Risk Pools Other Section 501(c)(3) OrganizationsCharitable Organizations Religious Organizations Scientific Organizations Literary Organizations Amateur Athletic Organizations Prevention of Cruelty to Children or Animals Private Foundations and Public CharitiesPrivate Foundations Public Charities Private Operating Foundations Lobbying ExpendituresLobbying expenditures. 1040 ez tax return Grass roots expenditures. 1040 ez tax return Lobbying nontaxable amount. 1040 ez tax return Grass roots nontaxable amount. 1040 ez tax return Organization that no longer qualifies. 1040 ez tax return Tax on organization. 1040 ez tax return Tax on managers. 1040 ez tax return Taxes on organizations. 1040 ez tax return Taxes on managers. 1040 ez tax return Political expenditures. 1040 ez tax return Correction of expenditure. 1040 ez tax return Introduction An organization may qualify for exemption from federal income tax if it is organized and operated exclusively for one or more of the following purposes. 1040 ez tax return Religious. 1040 ez tax return Charitable. 1040 ez tax return Scientific. 1040 ez tax return Testing for public safety. 1040 ez tax return Literary. 1040 ez tax return Educational. 1040 ez tax return Fostering national or international amateur sports competition (but only if none of its activities involve providing athletic facilities or equipment; however, see Amateur Athletic Organizations , later in this chapter). 1040 ez tax return The prevention of cruelty to children or animals. 1040 ez tax return To qualify, the organization must be a corporation, community chest, fund, articles of association, or foundation. 1040 ez tax return A trust is a fund or foundation and will qualify. 1040 ez tax return However, an individual or a partnership will not qualify. 1040 ez tax return Examples. 1040 ez tax return   Qualifying organizations include: Nonprofit old-age homes, Parent-teacher associations, Charitable hospitals or other charitable organizations, Alumni associations, Schools, Chapters of the Red Cross, Boys' or Girls' Clubs, and Churches. 1040 ez tax return Child care organizations. 1040 ez tax return   The term educational purposes includes providing for care of children away from their homes if substantially all the care provided is to enable individuals (the parents) to be gainfully employed and the services are available to the general public. 1040 ez tax return Instrumentalities. 1040 ez tax return   A state or municipal instrumentality may qualify under section 501(c)(3) if it is organized as a separate entity from the governmental unit that created it and if it otherwise meets the organizational and operational tests of section 501(c)(3). 1040 ez tax return Examples of a qualifying instrumentality might include state schools, universities, or hospitals. 1040 ez tax return However, if an organization is an integral part of the local government or possesses governmental powers, it does not qualify for exemption. 1040 ez tax return A state or municipality itself does not qualify for exemption. 1040 ez tax return Topics - This chapter discusses: Contributions to 501(c)(3) organizations, Applications for recognition of exemption, Articles of Organization, Educational organizations and private schools, Organizations providing insurance, Other section 501(c)(3) organizations, Private foundations and public charities, and Lobbying expenditures. 1040 ez tax return Useful Items - You may want to see: Forms (and Instructions) 1023 Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code See chapter 6 for information about getting publications and forms. 1040 ez tax return Contributions to 501(c)(3) Organizations Contributions to domestic organizations described in this chapter, except organizations testing for public safety, are deductible as charitable contributions on the donor's federal income tax return. 1040 ez tax return Fundraising events. 1040 ez tax return   If the donor receives something of value in return for the contribution, a common occurrence with fundraising efforts, part or all of the contribution may not be deductible. 1040 ez tax return This may apply to fundraising activities such as charity balls, bazaars, banquets, auctions, concerts, athletic events, and solicitations for membership or contributions when merchandise or benefits are given in return for payment of a specified minimum contribution. 1040 ez tax return   If the donor receives or expects to receive goods or services in return for a contribution to your organization, the donor cannot deduct any part of the contribution unless the donor intends to, and does, make a payment greater than the fair market value of the goods or services. 1040 ez tax return If a deduction is allowed, the donor can deduct only the part of the contribution, if any, that is more than the fair market value of the goods or services received. 1040 ez tax return You should determine in advance the fair market value of any goods or services to be given to contributors and tell them, when you publicize the fundraising event or solicit their contributions, how much is deductible and how much is for the goods or services. 1040 ez tax return See Disclosure of Quid Pro Quo Contributions in chapter 2. 1040 ez tax return Exemption application not filed. 1040 ez tax return   Donors cannot deduct any charitable contribution to an organization that is required to apply for recognition of exemption but has not done so. 1040 ez tax return Separate fund—contributions that are deductible. 1040 ez tax return   An organization that is exempt from federal income tax other than as an organization described in section 501(c)(3) can, if it desires, establish a fund, separate and apart from its other funds, exclusively for religious, charitable, scientific, literary, or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. 1040 ez tax return   If the fund is organized and operated exclusively for these purposes, it may qualify for exemption as an organization described in section 501(c)(3), and contributions made to it will be deductible as provided by section 170. 1040 ez tax return A fund with these characteristics must be organized in such a manner as to prohibit the use of its funds upon dissolution, or otherwise, for the general purposes of the organization creating it. 1040 ez tax return Personal benefit contracts. 1040 ez tax return   Generally, charitable deductions will not be allowed for a transfer to, or for the use of, a section 501(c)(3) or (c)(4) organization if in connection with the transfer: The organization directly or indirectly pays, or previously paid, a premium on a personal benefit contract for the transferor, or There is an understanding or expectation that anyone will directly or indirectly pay a premium on a personal benefit contract for the transferor. 1040 ez tax return   A personal benefit contract with respect to the transferor is any life insurance, annuity, or endowment contract, if any direct or indirect beneficiary under the contract is the transferor, any member of the transferor's family, or any other person designated by the transferor. 1040 ez tax return Certain annuity contracts. 1040 ez tax return   If an organization incurs an obligation to pay a charitable gift annuity, and the organization purchases an annuity contract to fund the obligation, individuals receiving payments under the charitable gift annuity will not be treated as indirect beneficiaries if the organization owns all of the incidents of ownership under the contract, is entitled to all payments under the contract, and the timing and amount of the payments are substantially the same as the timing and amount of payments to each person under the obligation (as such obligation is in effect at the time of the transfer). 1040 ez tax return Certain contracts held by a charitable remainder trust. 1040 ez tax return   An individual will not be considered an indirect beneficiary under a life insurance, annuity, or endowment contract held by a charitable remainder annuity trust or a charitable remainder unitrust solely by reason of being entitled to the payment if the trust owns all of the incidents of ownership under the contract, and the trust is entitled to all payments under the contract. 1040 ez tax return Excise tax. 1040 ez tax return   If the premiums are paid in connection with a transfer for which a deduction is not allowable under the deduction denial rule, without regard to when the transfer to the charitable organization was made, an excise tax will be applied that is equal to the amount of the premiums paid by the organization on any life insurance, annuity, or endowment contract. 1040 ez tax return The excise tax does not apply if all of the direct and indirect beneficiaries under the contract are organizations. 1040 ez tax return Excise Taxes. 1040 ez tax return   A charitable organization liable for excise taxes must file Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. 1040 ez tax return Generally, the due date for filing Form 4720 occurs on the fifteenth day of the fifth month following the close of the organization's tax year. 1040 ez tax return Indoor tanning services. 1040 ez tax return   If your organization provides an indoor tanning bed service, the ACA imposed a 10% excise tax on services provided after June 30, 2010. 1040 ez tax return For more information, go to IRS. 1040 ez tax return gov and select Affordable Care Act Tax Provisions. 1040 ez tax return Application for Recognition of Exemption This discussion describes certain information to be provided upon application for recognition of exemption by all organizations created for any of the purposes described earlier in this chapter. 1040 ez tax return For example, the application must include a conformed copy of the organization's articles of incorporation, as discussed under Articles of Organization , later in this chapter. 1040 ez tax return See the organization headings that follow for specific information your organization may need to provide. 1040 ez tax return Form 1023. 1040 ez tax return   Your organization must file its application for recognition of exemption on Form 1023. 1040 ez tax return See chapter 1 and the instructions accompanying Form 1023 for the procedures to follow in applying. 1040 ez tax return Some organizations are not required to file Form 1023. 1040 ez tax return See Organizations Not Required To File Form 1023, later. 1040 ez tax return    Additional information to help you complete your application can be found online. 1040 ez tax return Go to Exemption Requirement – Section 501(c)(3) Organizations and select the link at the bottom of the Web page for step by step help with the application process. 1040 ez tax return See Exemption Requirements - Section 501(c)(3) Organizations. 1040 ez tax return   Form 1023 and accompanying statements must show that all of the following are true. 1040 ez tax return The organization is organized exclusively for, and will be operated exclusively for, one or more of the purposes (religious, charitable, etc. 1040 ez tax return ) specified in the introduction to this chapter. 1040 ez tax return No part of the organization's net earnings will inure to the benefit of private shareholders or individuals. 1040 ez tax return You must establish that your organization will not be organized or operated for the benefit of private interests, such as the creator or the creator's family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. 1040 ez tax return The organization will not, as a substantial part of its activities, attempt to influence legislation (unless it elects to come under the provisions allowing certain lobbying expenditures) or participate to any extent in a political campaign for or against any candidate for public office. 1040 ez tax return See Political activity, next, and Lobbying Expenditures , near the end of this chapter. 1040 ez tax return Political activity. 1040 ez tax return   If any of the activities (whether or not substantial) of your organization consist of participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for public office, your organization will not qualify for tax-exempt status under section 501(c)(3). 1040 ez tax return Such participation or intervention includes the publishing or distributing of statements. 1040 ez tax return   Whether your organization is participating or intervening, directly or indirectly, in any political campaign on behalf of (or in opposition to) any candidate for public office depends upon all of the facts and circumstances of each case. 1040 ez tax return Certain voter education activities or public forums conducted in a nonpartisan manner may not be prohibited political activity under section 501(c)(3), while other so-called voter education activities may be prohibited. 1040 ez tax return Effective date of exemption. 1040 ez tax return   Most organizations described in this chapter that were organized after October 9, 1969, will not be treated as tax exempt unless they apply for recognition of exemption by filing Form 1023. 1040 ez tax return These organizations will not be treated as tax exempt for any period before they file Form 1023, unless they file the form within 27 months from the end of the month in which they were organized. 1040 ez tax return If the organization files the application within this 27-month period, the organization's exemption will be recognized retroactively to the date it was organized. 1040 ez tax return Otherwise, exemption will be recognized only from the date of receipt. 1040 ez tax return The date of receipt is the date of the U. 1040 ez tax return S. 1040 ez tax return postmark on the cover in which an exemption application is mailed or, if no postmark appears on the cover, the date the application is stamped as received by the IRS. 1040 ez tax return Private delivery service. 1040 ez tax return   If a private delivery service designated by the IRS, rather than the U. 1040 ez tax return S. 1040 ez tax return Postal Service, is used to deliver the application, the date of receipt is the date recorded or marked by the private delivery service. 1040 ez tax return The following private delivery services have been designated by the IRS. 1040 ez tax return DHL Express (DHL): DHL “Same Day” Service. 1040 ez tax return Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. 1040 ez tax return United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. 1040 ez tax return M. 1040 ez tax return , UPS Worldwide Express Plus, and UPS Worldwide Express. 1040 ez tax return Amendments to organizing documents required. 1040 ez tax return   If an organization is required to alter its activities or to make substantive amendments to its organizing document, the ruling or determination letter recognizing its exempt status will be effective as of the date the changes are made. 1040 ez tax return If only a nonsubstantive amendment is made, exempt status will be effective as of the date it was organized, if the application was filed within the 15-month period, or the date the application was filed. 1040 ez tax return Extensions of time for filing. 1040 ez tax return   There are two ways organizations seeking exemption can receive an extension of time for filing Form 1023. 1040 ez tax return Automatic 12-month extension. 1040 ez tax return Organizations will receive an automatic 12-month extension if they file an application for recognition of exemption with the IRS within 12 months of the original deadline. 1040 ez tax return To get this extension, an organization must add the following statement at the top of its application: “Filed Pursuant to Section 301. 1040 ez tax return 9100-2. 1040 ez tax return ” Discretionary extensions. 1040 ez tax return An organization that fails to file a Form 1023 within the extended 12-month period will be granted an extension to file if it submits evidence (including affidavits) to establish that: It acted reasonably and in good faith, and Granting a discretionary extension will not prejudice the interests of the government. 1040 ez tax return How to show reasonable action and good faith. 1040 ez tax return   An organization acted reasonably and showed good faith if at least one of the following is true. 1040 ez tax return The organization requests relief before its failure to file is discovered by the IRS. 1040 ez tax return The organization failed to file because of intervening events beyond its control. 1040 ez tax return The organization exercised reasonable diligence (taking into account the complexity of the return or issue and the organization's experience in these matters) but was not aware of the filing requirement. 1040 ez tax return The organization reasonably relied upon the written advice of the IRS. 1040 ez tax return The organization reasonably relied upon the advice of a qualified tax professional who failed to file or advise the organization to file Form 1023. 1040 ez tax return An organization cannot rely on the advice of a tax professional if it knows or should know that he or she is not competent to render advice on filing exemption applications or is not aware of all the relevant facts. 1040 ez tax return Not acting reasonably and in good faith. 1040 ez tax return   An organization has not acted reasonably and in good faith under the following circumstances. 1040 ez tax return It seeks to change a return position for which an accuracy-related penalty has been or could be imposed at the time the relief is requested. 1040 ez tax return It was informed of the requirement to file and related tax consequences, but chose not to file. 1040 ez tax return It uses hindsight in requesting relief. 1040 ez tax return The IRS will not ordinarily grant an extension if specific facts have changed since the due date that makes filing an application advantageous to an organization. 1040 ez tax return Prejudicing the interest of the Government. 1040 ez tax return   Prejudice to the interest of the Government results if granting an extension of time to file to an organization results in a lower total tax liability for the years to which the filing applies than would have been the case if the organization had filed on time. 1040 ez tax return Before granting an extension, the IRS can require the organization requesting it to submit a statement from an independent auditor certifying that no prejudice will result if the extension is granted. 1040 ez tax return The interests of the Government are ordinarily prejudiced if the tax year in which the application should have been filed (or any tax year that would have been affected had the filing been timely) are closed by the statute of limitations before relief is granted. 1040 ez tax return The IRS can condition a grant of relief on the organization providing the IRS with a statement from an independent auditor certifying that the interests of the Government are not prejudiced. 1040 ez tax return Procedure for requesting extension. 1040 ez tax return   To request a discretionary extension, an organization must submit (to the IRS address shown on Form 1023 and Notice 1382) the following. 1040 ez tax return A statement showing the date Form 1023 was required to have been filed and the date it was actually filed. 1040 ez tax return Any documents relevant to the application. 1040 ez tax return An affidavit describing in detail the events that led to the failure to apply and to the discovery of that failure. 1040 ez tax return If the organization relied on a tax professional's advice, the affidavit must describe the engagement and responsibilities of the professional and the extent to which the organization relied on him or her. 1040 ez tax return This affidavit must be accompanied by a dated declaration, signed by an individual who has personal knowledge of the facts and circumstances, who is authorized to act for the organization, which states, “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. 1040 ez tax return ” Detailed affidavits from individuals having knowledge or information about the events that led to the failure to make the application and to the discovery of that failure. 1040 ez tax return This includes the organization's return preparer, and any accountant or attorney, knowledgeable in tax matters, who advised the taxpayer on the application. 1040 ez tax return The affidavits must describe the engagement and responsibilities of the individual and the advice that he or she provided. 1040 ez tax return These affidavits must include the name, current address, and taxpayer identification number of the individual, and be accompanied by a dated declaration, signed by the individual, which states: “Under penalties of perjury, I declare that I have examined this request, including accompanying documents, and, to the best of my knowledge and belief, the request contains all the relevant facts relating to the request, and such facts are true, correct, and complete. 1040 ez tax return ” The organization must state whether the returns for the tax year in which the application should have been filed or any tax years that would have been affected by the application had it been timely made are being examined by the IRS, an appeals office, or a federal court. 1040 ez tax return The organization must notify the IRS office considering the request for relief if the IRS starts an examination of any such return while the organization's request for relief is pending. 1040 ez tax return The organization, if requested, has to submit copies of its tax returns, and copies of the returns of other affected taxpayers. 1040 ez tax return   A request for this relief in connection with an application for exemption does not require payment of an additional user fee. 1040 ez tax return Also, a request for relief under the automatic 12-month extension does not require payment of a user fee. 1040 ez tax return More information. 1040 ez tax return   For more information about these procedures, see Regulations sections 301. 1040 ez tax return 9100-1, 301. 1040 ez tax return 9100-2, 301. 1040 ez tax return 9100-3, Revenue Procedure 2013-4, section 6. 1040 ez tax return 04, 2013-1 I. 1040 ez tax return R. 1040 ez tax return B. 1040 ez tax return 126, and Revenue Procedure 2013-8, 2013-1 I. 1040 ez tax return R. 1040 ez tax return B. 1040 ez tax return 237. 1040 ez tax return See Revenue Procedure 2013-4 and Revenue Procedure 2013-8. 1040 ez tax return Notification from the IRS. 1040 ez tax return   Organizations filing Form 1023 and satisfying all requirements of section 501(c)(3) will be notified of their exempt status in writing. 1040 ez tax return Organizations Not Required To File Form 1023 Some organizations are not required to file Form 1023. 1040 ez tax return These include: Churches, interchurch organizations of local units of a church, conventions or associations of churches, or integrated auxiliaries of a church, such as a men's or women's organization, religious school, mission society, or youth group. 1040 ez tax return Any organization (other than a private foundation) normally having annual gross receipts of not more than $5,000 (see Gross receipts test, later). 1040 ez tax return These organizations are exempt automatically if they meet the requirements of section 501(c)(3). 1040 ez tax return Filing Form 1023 to establish exemption. 1040 ez tax return   If the organization wants to establish its exemption with the IRS and receive a ruling or determination letter recognizing its exempt status, it should file Form 1023. 1040 ez tax return By establishing its exemption, potential contributors are assured by the IRS that contributions will be deductible. 1040 ez tax return A subordinate organization (other than a private foundation) covered by a group exemption letter does not have to submit a Form 1023 for itself. 1040 ez tax return Private foundations. 1040 ez tax return   See Private Foundations and Public Charities, later in this chapter, for more information about the additional notice required from an organization in order for it not to be presumed to be a private foundation and for the additional information required from a private foundation claiming to be an operating foundation. 1040 ez tax return Gross receipts test. 1040 ez tax return   For purposes of the gross receipts test, an organization normally does not have more than $5,000 annually in gross receipts if: During its first tax year the organization received gross receipts of $7,500 or less, During its first 2 years the organization had a total of $12,000 or less in gross receipts, and In the case of an organization that has been in existence for at least 3 years, the total gross receipts received by the organization during the immediately preceding 2 years, plus the current year, are $15,000 or less. 1040 ez tax return   An organization with gross receipts more than the amounts in the gross receipts test, unless otherwise exempt from filing Form 1023, must file a Form 1023 within 90 days after the end of the period in which the amounts are exceeded. 1040 ez tax return For example, an organization's gross receipts for its first tax year were less than $7,500, but at the end of its second tax year its gross receipts for the 2-year period were more than $12,000. 1040 ez tax return The organization must file Form 1023 within 90 days after the end of its second tax year. 1040 ez tax return   If the organization had existed for at least 3 tax years and had met the gross receipts test for all prior tax years but fails to meet the requirement for the current tax year, its tax-exempt status for the prior years will not be lost even if Form 1023 is not filed within 90 days after the close of the current tax year. 1040 ez tax return However, the organization will not be treated as a section 501(c)(3) organization for the period beginning with the current tax year and ending with the filing of Form 1023. 1040 ez tax return Example. 1040 ez tax return   An organization is organized and operated exclusively for charitable purposes and is not a private foundation. 1040 ez tax return It was incorporated on January 1, 2009, and files returns on a calendar-year basis. 1040 ez tax return It did not file a Form 1023. 1040 ez tax return The organization's gross receipts during the years 2009 through 2012 were as follows: 2009 $3,600 2010 2,900 2011 400 2012 12,600   The organization's total gross receipts for 2009, 2010, and 2011 were $6,900. 1040 ez tax return Therefore, it did not have to file Form 1023 and is exempt for those years. 1040 ez tax return However, for 2010, 2011, and 2012 the total gross receipts were $15,900. 1040 ez tax return Therefore, the organization must file Form 1023 within 90 days after the end of its 2012 tax year. 1040 ez tax return If it does not file within this time period, it will not be exempt under section 501(c)(3) for the period beginning with tax year 2012 ending when the Form 1023 is received by the IRS. 1040 ez tax return The organization, however, will not lose its exempt status for the tax years ending before January 1, 2012. 1040 ez tax return   The IRS will consider applying the Commissioner's discretionary authority to extend the time for filing Form 1023. 1040 ez tax return See the procedures for this extension discussed earlier. 1040 ez tax return Articles of Organization Your organization must include a conformed copy of its articles of organization with the application for recognition of exemption. 1040 ez tax return This may be its trust instrument, corporate charter, articles of association, or any other written instrument by which it is created. 1040 ez tax return Organizational Test The articles of organization must limit the organization's purposes to one or more of those described at the beginning of this chapter and must not expressly empower it to engage, other than as an insubstantial part of its activities, in activities that do not further one or more of those purposes. 1040 ez tax return These conditions for exemption are referred to as the organizational test. 1040 ez tax return Section 501(c)(3) is the provision of law that grants exemption to the organizations described in this chapter. 1040 ez tax return Therefore, the organizational test may be met if the purposes stated in the articles of organization are limited in some way by reference to section 501(c)(3). 1040 ez tax return The requirement that your organization's purposes and powers must be limited by the articles of organization is not satisfied if the limit is contained only in the bylaws or other rules or regulations. 1040 ez tax return Moreover, the organizational test is not satisfied by statements of your organization's officers that you intend to operate only for exempt purposes. 1040 ez tax return Also, the test is not satisfied by the fact that your actual operations are for exempt purposes. 1040 ez tax return In interpreting an organization's articles, the law of the state where the organization was created is controlling. 1040 ez tax return If an organization contends that the terms of its articles have a different meaning under state law than their generally accepted meaning, such meaning must be established by a clear and convincing reference to relevant court decisions, opinions of the state attorney general, or other appropriate state authorities. 1040 ez tax return The following are examples illustrating the organizational test. 1040 ez tax return Example 1. 1040 ez tax return Articles of organization state that an organization is formed exclusively for literary and scientific purposes within the meaning of section 501(c)(3). 1040 ez tax return These articles appropriately limit the organization's purposes. 1040 ez tax return The organization meets the organizational test. 1040 ez tax return Example 2. 1040 ez tax return An organization, by the terms of its articles, is formed to engage in research without any further description or limitation. 1040 ez tax return The organization will not be properly limited as to its purposes since all research is not scientific. 1040 ez tax return The organization does not meet the organizational test. 1040 ez tax return Example 3. 1040 ez tax return An organization's articles state that its purpose is to receive contributions and pay them over to organizations that are described in section 501(c)(3) and exempt from taxation under section 501(a). 1040 ez tax return The organization meets the organizational test. 1040 ez tax return Example 4. 1040 ez tax return If a stated purpose in the articles is the conduct of a school of adult education and its manner of operation is described in detail, such a purpose will be satisfactorily limited. 1040 ez tax return Example 5. 1040 ez tax return If the articles state the organization is formed for charitable purposes, without any further description, such language ordinarily will be sufficient since the term charitable has a generally accepted legal meaning. 1040 ez tax return On the other hand, if the purposes are stated to be charitable, philanthropic, and benevolent, the organizational requirement will not be met since the terms philanthropic and benevolent have no generally accepted legal meaning and, therefore, the stated purposes may, under the laws of the state, permit activities that are broader than those intended by the exemption law. 1040 ez tax return Example 6. 1040 ez tax return If the articles state an organization is formed to promote American ideals, or to foster the best interests of the people, or to further the common welfare and well-being of the community, without any limitation or provision restricting such purposes to accomplishment only in a charitable manner, the purposes will not be sufficiently limited. 1040 ez tax return Such purposes are vague and may be accomplished other than in an exempt manner. 1040 ez tax return Example 7. 1040 ez tax return A stated purpose to operate a hospital does not meet the organizational test since it is not necessarily charitable. 1040 ez tax return A hospital may or may not be exempt depending on the manner in which it is operated. 1040 ez tax return Example 8. 1040 ez tax return An organization that is expressly empowered by its articles to carry on social activities will not be sufficiently limited as to its power, even if its articles state that it is organized and will be operated exclusively for charitable purposes. 1040 ez tax return Dedication and Distribution of Assets Assets of an organization must be permanently dedicated to an exempt purpose. 1040 ez tax return This means that should an organization dissolve, its assets must be distributed for an exempt purpose described in this chapter, or to the Federal Government or to a state or local government for a public purpose. 1040 ez tax return If the assets could be distributed to members or private individuals or for any other purpose, the organizational test is not met. 1040 ez tax return Dedication. 1040 ez tax return   To establish that your organization's assets will be permanently dedicated to an exempt purpose, the articles of organization should contain a provision ensuring their distribution for an exempt purpose in the event of dissolution. 1040 ez tax return Although reliance can be placed upon state law to establish permanent dedication of assets for exempt purposes, your organization's application probably can be processed much more rapidly if its articles of organization include a provision ensuring permanent dedication of assets for exempt purposes. 1040 ez tax return Distribution. 1040 ez tax return   Revenue Procedure 82-2, 1982-1 C. 1040 ez tax return B. 1040 ez tax return 367, identifies the states and circumstances in which the IRS will not require an express provision for the distribution of assets upon dissolution in the articles of organization. 1040 ez tax return The procedure also provides a sample of an acceptable dissolution provision for organizations required to have one. 1040 ez tax return   If a named beneficiary is to be the distributee, it must be one that would qualify and would be exempt within the meaning of section 501(c)(3) at the time the dissolution takes place. 1040 ez tax return Since the named beneficiary at the time of dissolution may not be qualified, may not be in existence, or may be unwilling or unable to accept the assets of the dissolving organization, a provision should be made for distribution of the assets for one or more of the purposes specified in this chapter in the event of any such contingency. 1040 ez tax return Sample articles of organization. 1040 ez tax return   See sample articles of organization in the Appendix in the back of this publication. 1040 ez tax return Educational Organizations and Private Schools If your organization wants to obtain recognition of exemption as an educational organization, you must submit complete information as to how your organization carries on or plans to carry on its educational activities, such as by conducting a school, by panels, discussions, lectures, forums, radio and television programs, or through various cultural media such as museums, symphony orchestras, or art exhibits. 1040 ez tax return In each instance, you must explain by whom and where these activities are or will be conducted and the amount of admission fees, if any. 1040 ez tax return You must submit a copy of the pertinent contracts, agreements, publications, programs, etc. 1040 ez tax return If you are organized to conduct a school, you must submit full information regarding your tuition charges, number of faculty members, number of full-time and part-time students enrolled, courses of study and degrees conferred, together with a copy of your school catalog. 1040 ez tax return See also Private Schools , discussed later. 1040 ez tax return Educational Organizations The term educational relates to: The instruction or training of individuals for the purpose of improving or developing their capabilities, or The instruction of the public on subjects useful to individuals and beneficial to the community. 1040 ez tax return Advocacy of a position. 1040 ez tax return   Advocacy of a particular position or viewpoint may be educational if there is a sufficiently full and fair exposition of pertinent facts to permit an individual or the public to form an independent opinion or conclusion. 1040 ez tax return The mere presentation of unsupported opinion is not educational. 1040 ez tax return Method not educational. 1040 ez tax return   The method used by an organization to develop and present its views is a factor in determining if an organization qualifies as educational within the meaning of section 501(c)(3). 1040 ez tax return The following factors may indicate that the method is not educational. 1040 ez tax return The presentation of viewpoints unsupported by facts is a significant part of the organization's communications. 1040 ez tax return The facts that purport to support the viewpoint are distorted. 1040 ez tax return The organization's presentations make substantial use of inflammatory and disparaging terms and express conclusions more on the basis of emotion than of objective evaluations. 1040 ez tax return The approach used is not aimed at developing an understanding on the part of the audience because it does not consider their background or training. 1040 ez tax return   Exceptional circumstances, however, may exist where an organization's advocacy may be educational even if one or more of the factors listed above are present. 1040 ez tax return Qualifying organizations. 1040 ez tax return   The following types of organizations may qualify as educational: An organization, such as a primary or secondary school, a college, or a professional or trade school, that has a regularly scheduled curriculum, a regular faculty, and a regularly enrolled student body in attendance at a place where the educational activities are regularly carried on, An organization whose activities consist of conducting public discussion groups, forums, panels, lectures, or other similar programs, An organization that presents a course of instruction by correspondence or through the use of television or radio, A museum, zoo, planetarium, symphony orchestra, or other similar organization, A nonprofit children's day-care center, and A credit counseling organization. 1040 ez tax return College book stores, cafeterias, restaurants, etc. 1040 ez tax return   These and other on-campus organizations should submit information to show that they are controlled by and operated for the convenience of the faculty and student body or by whom they are controlled and whom they serve. 1040 ez tax return Alumni association. 1040 ez tax return   An alumni association should establish that it is organized to promote the welfare of the university with which it is affiliated, is subject to the control of the university as to its policies and destination of funds, and is operated as an integral part of the university or is otherwise organized to promote the welfare of the college or university. 1040 ez tax return If your association does not have these characteristics, it may still be exempt as a social club if it meets the requirements described in chapter 4, under 501(c)(7) - Social and Recreation Clubs . 1040 ez tax return Athletic organization. 1040 ez tax return   This type of organization must submit evidence that it is engaged in activities such as directing and controlling interscholastic athletic competitions, conducting tournaments, and prescribing eligibility rules for contestants. 1040 ez tax return If it is not so engaged, your organization may be exempt as a social club described in chapter 4. 1040 ez tax return Raising funds to be used for travel and other activities to interview and persuade prospective students with outstanding athletic ability to attend a particular university does not show an exempt purpose. 1040 ez tax return If your organization is not exempt as an educational organization, see Amateur Athletic Organizations , later in this chapter. 1040 ez tax return Private Schools Every private school filing an application for recognition of tax-exempt status must supply the IRS (on Schedule B, Form 1023) with the following information. 1040 ez tax return The racial composition of the student body, and of the faculty and administrative staff, as of the current academic year. 1040 ez tax return (This information also must be projected, so far as may be feasible, for the next academic year. 1040 ez tax return ) The amount of scholarship and loan funds, if any, awarded to students enrolled and the racial composition of students who have received the awards. 1040 ez tax return A list of the school's incorporators, founders, board members, and donors of land or buildings, whether individuals or organizations. 1040 ez tax return A statement indicating whether any of the organizations described in item (3) above have an objective of maintaining segregated public or private school education at the time the application is filed and, if so, whether any of the individuals described in item (3) are officers or active members of those organizations at the time the application is filed. 1040 ez tax return The public school district and county in which the school is located. 1040 ez tax return How to determine racial composition. 1040 ez tax return   The racial composition of the student body, faculty, and administrative staff can be an estimate based on the best information readily available to the school, without requiring student applicants, students, faculty, or administrative staff to submit to the school information that the school otherwise does not require. 1040 ez tax return Nevertheless, a statement of the method by which the racial composition was determined must be supplied. 1040 ez tax return The identity of individual students or members of the faculty and administrative staff should not be included with this information. 1040 ez tax return   A school that is a state or municipal instrumentality (see Instrumentalities , near the beginning of this chapter), whether or not it qualifies for exemption under section 501(c)(3), is not considered to be a private school for purposes of the following discussion. 1040 ez tax return Racially Nondiscriminatory Policy To qualify as an organization exempt from federal income tax, a private school must include a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy as to students and that it does not discriminate against applicants and students on the basis of race, color, or national or ethnic origin. 1040 ez tax return Also, the school must circulate information that clearly states the school's admission policies. 1040 ez tax return A racially nondiscriminatory policy toward students means that the school admits the students of any race to all the rights, privileges, programs, and activities generally accorded or made available to students at that school and that the school does not discriminate on the basis of race in administering its educational policies, admission policies, scholarship and loan programs, and athletic and other school-administered programs. 1040 ez tax return The IRS considers discrimination on the basis of race to include discrimination on the basis of color or national or ethnic origin. 1040 ez tax return The existence of a racially discriminatory policy with respect to the employment of faculty and administrative staff is indicative of a racially discriminatory policy as to students. 1040 ez tax return Conversely, the absence of racial discrimination in the employment of faculty and administrative staff is indicative of a racially nondiscriminatory policy as to students. 1040 ez tax return A policy of a school that favors racial minority groups with respect to admissions, facilities and programs, and financial assistance is not discrimination on the basis of race when the purpose and effect of this policy is to promote establishing and maintaining the school's nondiscriminatory policy. 1040 ez tax return A school that selects students on the basis of membership in a religious denomination or unit is not discriminating if membership in the denomination or unit is open to all on a racially nondiscriminatory basis. 1040 ez tax return Policy statement. 1040 ez tax return   The school must include a statement of its racially nondiscriminatory policy in all its brochures and catalogs dealing with student admissions, programs, and scholarships. 1040 ez tax return Also, the school must include a reference to its racially nondiscriminatory policy in other written advertising that it uses to inform prospective students of its programs. 1040 ez tax return Publicity requirement. 1040 ez tax return   The school must make its racially nondiscriminatory policy known to all segments of the general community served by the school. 1040 ez tax return Selective communication of a racially nondiscriminatory policy that a school provides solely to leaders of racial groups will not be considered an effective means of communication to make the policy known to all segments of the community. 1040 ez tax return To satisfy this requirement, the school must use one of the following two methods. 1040 ez tax return Method one. 1040 ez tax return   The school can publish a notice of its racially nondiscriminatory policy in a newspaper of general circulation that serves all racial segments of the community. 1040 ez tax return Such publication must be repeated at least once annually during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. 1040 ez tax return When more than one community is served by a school, the school can publish the notice in those newspapers that are reasonably likely to be read by all racial segments in the communities that the school serves. 1040 ez tax return If this method is used, the notice must meet the following printing requirements. 1040 ez tax return It must appear in a section of the newspaper likely to be read by prospective students and their families. 1040 ez tax return It must occupy at least 3 column inches. 1040 ez tax return It must have its title printed in at least 12 point bold face type. 1040 ez tax return It must have the remaining text printed in at least 8 point type. 1040 ez tax return The following is an acceptable example of the notice:   NOTICE OF NONDISCRIMINATORY POLICY AS TO STUDENTS     The M School admits students of any race, color, national and ethnic origin to all the rights, privileges, programs, and activities generally accorded or made available to students at the school. 1040 ez tax return It does not discriminate on the basis of race, color, national and ethnic origin in administration of its educational policies, admissions policies, scholarship and loan programs, and athletic and other school-administered programs. 1040 ez tax return   Method two. 1040 ez tax return   The school can use the broadcast media to publicize its racially nondiscriminatory policy if this use makes the policy known to all segments of the general community the school serves. 1040 ez tax return If the school uses this method, it must provide documentation showing that the means by which this policy was communicated to all segments of the general community was reasonably expected to be effective. 1040 ez tax return In this case, appropriate documentation would include copies of the tapes or scripts used and records showing that there was an adequate number of announcements. 1040 ez tax return The documentation also would include proof that these announcements were made during hours when they were likely to be communicated to all segments of the general community, that they were long enough to convey the message clearly, and that they were broadcast on radio or television stations likely to be listened to by substantial numbers of members of all racial segments of the general community. 1040 ez tax return Announcements must be made during the period of the school's solicitation for students or, in the absence of a solicitation program, during the school's registration period. 1040 ez tax return Exceptions. 1040 ez tax return   The publicity requirements will not apply in the following situations. 1040 ez tax return First, if for the preceding 3 years the enrollment of a parochial or other church-related school consists of students at least 75% of whom are members of the sponsoring religious denomination or unit, the school can make known its racially nondiscriminatory policy in whatever newspapers or circulars the religious denomination or unit uses in the communities from which the students are drawn. 1040 ez tax return These newspapers and circulars can be distributed by a particular religious denomination or unit or by an association that represents a number of religious organizations of the same denomination. 1040 ez tax return If, however, the school advertises in newspapers of general circulation in the community or communities from which its students are drawn and the second exception (discussed next) does not apply to the school, then it must comply with either of the publicity requirements explained earlier. 1040 ez tax return Second, if a school customarily draws a substantial percentage of its students nationwide, worldwide, from a large geographic section or sections of the United States, or from local communities, and if the school follows a racially nondiscriminatory policy as to its students, the school may satisfy the publicity requirement by complying with the instructions explained earlier under Policy statement . 1040 ez tax return   The school can demonstrate that it follows a racially nondiscriminatory policy either by showing that it currently enrolls students of racial minority groups in meaningful numbers or, except for local community schools, when minority students are not enrolled in meaningful numbers, that its promotional activities and recruiting efforts in each geographic area were reasonably designed to inform students of all racial segments in the general communities within the area of the availability of the school. 1040 ez tax return The question as to whether a school demonstrates such a policy satisfactorily will be determined on the basis of the facts and circumstances of each case. 1040 ez tax return   The IRS recognizes that the failure by a school drawing its students from local communities to enroll racial minority group students may not necessarily indicate the absence of a racially nondiscriminatory policy when there are relatively few or no such students in these communities. 1040 ez tax return Actual enrollment is, however, a meaningful indication of a racially nondiscriminatory policy in a community in which a public school or schools became subject to a desegregation order of a federal court or are otherwise expressly obligated to implement a desegregation plan under the terms of any written contract or other commitment to which any federal agency was a party. 1040 ez tax return   The IRS encourages schools to satisfy the publicity requirement by using either of the methods described earlier, even though a school considers itself to be within one of the Exceptions. 1040 ez tax return The IRS believes that these publicity requirements are the most effective methods to make known a school's racially nondiscriminatory policy. 1040 ez tax return In this regard, it is each school's responsibility to determine whether either of the exceptions applies. 1040 ez tax return Such responsibility will prepare the school, if it is audited by the IRS, to demonstrate that the failure to publish its racially nondiscriminatory policy in accordance with either one of the publicity requirements was justified by one of the exceptions. 1040 ez tax return Also, a school must be prepared to demonstrate that it has publicly disavowed or repudiated any statements purported to have been made on its behalf (after November 6, 1975) that are contrary to its publicity of a racially nondiscriminatory policy as to students, to the extent that the school or its principal official was aware of these statements. 1040 ez tax return Facilities and programs. 1040 ez tax return   A school must be able to show that all of its programs and facilities are operated in a racially nondiscriminatory manner. 1040 ez tax return Scholarship and loan programs. 1040 ez tax return   As a general rule, all scholarship or other comparable benefits obtainable at the school must be offered on a racially nondiscriminatory basis. 1040 ez tax return This must be known throughout the general community being served by the school and should be referred to in its publicity. 1040 ez tax return Financial assistance programs, as well as scholarships and loans made under financial assistance programs, that favor members of one or more racial minority groups and that do not significantly detract from or are designed to promote a school's racially nondiscriminatory policy will not adversely affect the school's exempt status. 1040 ez tax return Certification. 1040 ez tax return   An individual authorized to take official action on behalf of a school that claims to be racially nondiscriminatory as to students must certify annually, under penalties of perjury, on Schedule E (Form 990 or 990-EZ) or Form 5578, Annual Certification of Racial Nondiscrimination for a Private School Exempt From Federal Income Tax, whichever applies, that to the best of his or her knowledge and belief the school has satisfied all requirements that apply, as previously explained. 1040 ez tax return   Failure to comply with the guidelines ordinarily will result in the proposed revocation of the exempt status of a school. 1040 ez tax return Recordkeeping requirements. 1040 ez tax return With certain exceptions, given later, each exempt private school must maintain the following records for a minimum period of 3 years, beginning with the year after the year of compilation or acquisition. 1040 ez tax return Records indicating the racial composition of the student body, faculty, and administrative staff for each academic year. 1040 ez tax return Records sufficient to document that scholarship and other financial assistance is awarded on a racially nondiscriminatory basis. 1040 ez tax return Copies of all materials used by or on behalf of the school to solicit contributions. 1040 ez tax return Copies of all brochures, catalogs, and advertising dealing with student admissions, programs, and scholarships. 1040 ez tax return (Schools advertising nationally or in a large geographic segment or segments of the United States need only maintain a record sufficient to indicate when and in what publications their advertisements were placed. 1040 ez tax return ) The racial composition of the student body, faculty, and administrative staff can be determined in the same manner as that described at the beginning of this section. 1040 ez tax return However, a school cannot discontinue maintaining a system of records that reflect the racial composition of its students, faculty, and administrative staff used on November 6, 1975, unless it substitutes a different system that compiles substantially the same information, without advance approval of the IRS. 1040 ez tax return The IRS does not require that a school release any personally identifiable records or personal information except in accordance with the requirements of the Family Educational Rights and Privacy Act of 1974. 1040 ez tax return Similarly, the IRS does not require a school to keep records prohibited under state or federal law. 1040 ez tax return Exceptions. 1040 ez tax return   The school does not have to independently maintain these records for IRS use if both of the following are true. 1040 ez tax return Substantially the same information has been included in a report or reports filed with an agency or agencies of federal, state, or local governments, and this information is current within 1 year. 1040 ez tax return The school maintains copies of these reports from which this information is readily obtainable. 1040 ez tax return If these reports do not include all of the information required, as discussed earlier, records providing such remaining information must be maintained by the school for IRS use. 1040 ez tax return Failure to maintain records. 1040 ez tax return   Failure to maintain or to produce the required records and information, upon proper request, will create a presumption that the organization has failed to comply with these guidelines. 1040 ez tax return Organizations Providing Insurance An organization described in sections 501(c)(3) or 501(c)(4) may be exempt from tax only if no substantial part of its activities consists of providing commercial-type insurance. 1040 ez tax return However, this rule does not apply to state-sponsored organizations described in sections 501(c)(26) or 501(c)(27), which are discussed in chapter 4, or to charitable risk pools, discussed next. 1040 ez tax return Charitable Risk Pools A charitable risk pool is treated as organized and operated exclusively for charitable purposes if it: Is organized and operated only to pool insurable risks of its members (not including risks related to medical malpractice) and to provide information to its members about loss control and risk management, Consists only of members that are section 501(c)(3) organizations exempt from tax under section 501(a), Is organized under state law authorizing this type of risk pooling, Is exempt from state income tax (or will be after qualifying as a section 501(c)(3) organization), Has obtained at least $1,000,000 in startup capital from nonmember charitable organizations, Is controlled by a board of directors elected by its members, and Is organized under documents requiring that: Each member be a section 501(c)(3) organization exempt from tax under section 501(a), Each member that receives a final determination that it no longer qualifies under section 501(c)(3) notify the pool immediately, and Each insurance policy issued by the pool provide that it will not cover events occurring after a final determination described in (b). 1040 ez tax return Other Section 501(c)(3) Organizations In addition to the information required for all organizations, as described earlier, you should include any other information described in this section. 1040 ez tax return Charitable Organizations If your organization is applying for recognition of exemption as a charitable organization, it must show that it is organized and operated for purposes that are beneficial to the public interest. 1040 ez tax return Some examples of this type of organization are those organized for: Relief of the poor, the distressed, or the underprivileged, Advancement of religion, Advancement of education or science, Erection or maintenance of public buildings, monuments, or works, Lessening the burdens of government, Lessening of neighborhood tensions, Elimination of prejudice and discrimination, Defense of human and civil rights secured by law, and Combating community deterioration and juvenile delinquency. 1040 ez tax return The rest of this section contains a description of the information to be provided by certain specific organizations. 1040 ez tax return This information is in addition to the required inclusions described in chapter 1, and other statements requested on Form 1023. 1040 ez tax return Each of the following organizations must submit the information described. 1040 ez tax return Charitable organization supporting education. 1040 ez tax return   Submit information showing how your organization supports education — for example, contributes to an existing educational institution, endows a professorial chair, contributes toward paying teachers' salaries, or contributes to an educational institution to enable it to carry on research. 1040 ez tax return Scholarships. 1040 ez tax return   If the organization awards or plans to award scholarships, complete Schedule H of Form 1023. 1040 ez tax return Also, submit the following: Criteria used for selecting recipients, including the rules of eligibility. 1040 ez tax return How and by whom the recipients are or will be selected. 1040 ez tax return If awards are or will be made directly to individuals, whether information is required assuring that the student remains in school. 1040 ez tax return If awards are or will be made to recipients of a particular class, for example, children of employees of a particular employer— Whether any preference is or will be accorded an applicant by reason of the parent's position, length of employment, or salary, Whether as a condition of the award the recipient must upon graduation accept employment with the company, and Whether the award will be continued even if the parent's employment ends. 1040 ez tax return A copy of the scholarship application form and any brochures or literature describing the scholarship program. 1040 ez tax return Hospital. 1040 ez tax return   If you are organized to operate a charitable hospital, complete and attach Section I of Schedule C, Form 1023. 1040 ez tax return   If your hospital was transferred to you from proprietary ownership, complete and attach Schedule G of Form 1023. 1040 ez tax return You must attach a list showing: The names of the active and courtesy staff members of the proprietary hospital, as well as the names of your medical staff members after the transfer to nonprofit ownership, and The names of any doctors who continued to lease office space in the hospital after its transfer to nonprofit ownership and the amount of rent paid. 1040 ez tax return Submit also an appraisal showing the fair rental value of the rented space. 1040 ez tax return Clinic. 1040 ez tax return   If you are organized to operate a clinic, attach a statement including: A description of the facilities and services, To whom the services are offered, such as the public at large or a specific group, How charges are determined, such as on a profit basis, to recover costs, or at less than cost, By whom administered and controlled, Whether any of the professional staff (that is, those who perform or will perform the clinical services) also serve or will serve in an administrative capacity, and How compensation paid the professional staff is or will be determined. 1040 ez tax return Home for the aged. 1040 ez tax return   If you are organized to operate a home for the aged, complete and attach Schedule F of Form 1023 and required attachments. 1040 ez tax return Community nursing bureau. 1040 ez tax return   If you provide a nursing register or community nursing bureau, provide information showing that your organization will be operated as a community project and will receive its primary support from public contributions to maintain a nonprofit register of qualified nursing personnel, including graduate nurses, unregistered nursing school graduates, licensed attendants and practical nurses for the benefit of hospitals, health agencies, doctors, and individuals. 1040 ez tax return Organization providing loans. 1040 ez tax return   If you make, or will make, loans for charitable and educational purposes, submit the following information. 1040 ez tax return An explanation of the circumstances under which such loans are, or will be, made. 1040 ez tax return Criteria for selection, including the rules of eligibility. 1040 ez tax return How and by whom the recipients are or will be selected. 1040 ez tax return Manner of repayment of the loan. 1040 ez tax return Security required, if any. 1040 ez tax return Interest charged, if any, and when payable. 1040 ez tax return Copies in duplicate of the loan application and any brochures or literature describing the loan program. 1040 ez tax return Public-interest law firms. 1040 ez tax return   If your organization was formed to litigate in the public interest (as opposed to providing legal services to the poor), such as in the area of protection of the environment, you should submit the following information. 1040 ez tax return How the litigation can reasonably be said to be representative of a broad public interest rather than a private one. 1040 ez tax return Whether the organization will accept fees for its services. 1040 ez tax return A description of the cases litigated or to be litigated and how they benefit the public generally. 1040 ez tax return Whether the policies and program of the organization are the responsibility of a board or committee representative of the public interest, which is neither controlled by employees or persons who litigate on behalf of the organization nor by any organization that is not itself an organization described in this chapter. 1040 ez tax return Whether the organization is operated, through sharing of office space or otherwise, in a way to create identification or confusion with a particular private law firm. 1040 ez tax return Whether there is an arrangement to provide, directly or indirectly, a deduction for the cost of litigation that is for the private benefit of the donor. 1040 ez tax return Acceptance of attorneys' fees. 1040 ez tax return   A nonprofit public-interest law firm can accept attorneys' fees in public-interest cases if the fees are paid directly by its clients and the fees are not more than the actual costs incurred in the case. 1040 ez tax return Upon undertaking a representation, the organization cannot withdraw from the case because the litigant is unable to pay the fee. 1040 ez tax return   Firms can accept fees awarded or approved by a court or an administrative agency and paid by an opposing party if the firms do not use the likelihood or probability of fee awards as a consideration in the selection of cases. 1040 ez tax return All fee awards must be paid to the organization and not to its individual staff attorneys. 1040 ez tax return Instead, a public-interest law firm can reasonably compensate its staff attorneys, but only on a straight salary basis. 1040 ez tax return Private attorneys, whose services are retained by the firm to assist it in particular cases, can be compensated by the firm, but only on a fixed fee or salary basis. 1040 ez tax return   The total amount of all attorneys' fees (court awarded and those received from clients) must not be more than 50% of the total cost of operations of the organization's legal functions, calculated over a 5-year period. 1040 ez tax return   If, in order to carry out its program, an organization violates applicable canons of ethics, disrupts the judicial system, or engages in any illegal action, the organization will jeopardize its exemption. 1040 ez tax return Religious Organizations To determine whether an organization meets the religious purposes test of section 501(c)(3), the IRS maintains two basic guidelines. 1040 ez tax return That the particular religious beliefs of the organization are truly and sincerely held. 1040 ez tax return That the practices and rituals associated with the organization's religious belief or creed are not illegal or contrary to clearly defined public policy. 1040 ez tax return Therefore, your group (or organization) may not qualify for treatment as an exempt religious organization for tax purposes if its actions, as contrasted with its beliefs, are contrary to well established and clearly defined public policy. 1040 ez tax return If there is a clear showing that the beliefs (or doctrines) are sincerely held by those professing them, the IRS will not question the religious nature of those beliefs. 1040 ez tax return Churches. 1040 ez tax return   Although a church, its integrated auxiliaries, or a convention or association of churches is not required to file Form 1023 to be exempt from federal income tax or to receive tax deductible contributions, the organization may find it advantageous to obtain recognition of exemption. 1040 ez tax return In this event, you should submit information showing that your organization is a church, synagogue, association or convention of churches, religious order, or religious organization that is an integral part of a church, and that it is engaged in carrying out the function of a church. 1040 ez tax return   In determining whether an admittedly religious organization is also a church, the IRS does not accept every assertion that the organization is a church. 1040 ez tax return Because beliefs and practices vary so widely, there is no single definition of the word church for tax purposes. 1040 ez tax return The IRS considers the facts and circumstances of each organization applying for church status. 1040 ez tax return Convention or association of churches. 1040 ez tax return   Any organization that is otherwise a convention or association of churches will not fail to qualify as a church merely because the membership of the organization includes individuals as well as churches or because the individuals have voting rights in the organization. 1040 ez tax return Integrated auxiliaries. 1040 ez tax return   An organization is an integrated auxiliary of a church if all the following are true. 1040 ez tax return The organization is described both in sections 501(c)(3) and 509(a)(1), 509(a)(2), or 509(a)(3). 1040 ez tax return It is affiliated with a church or a convention or association of churches. 1040 ez tax return It is internally supported. 1040 ez tax return An organization is internally supported unless both of the following are true. 1040 ez tax return It offers admissions, goods, services, or facilities for sale, other than on an incidental basis, to the general public (except goods, services, or facilities sold at a nominal charge or for a small part of the cost). 1040 ez tax return It normally gets more than 50% of its support from a combination of governmental sources, public solicitation of contributions, and receipts from the sale of admissions, goods, performance of services, or furnishing of facilities in activities that are not unrelated trades or businesses. 1040 ez tax return Special rule. 1040 ez tax return   Men's and women's organizations, seminaries, mission societies, and youth groups that satisfy (1) and (2) shown earlier are integrated auxiliaries of a church even if they are not internally supported. 1040 ez tax return   In order for an organization (including a church and religious organization) to qualify for tax exemption, no part of its net earnings can inure to any individual. 1040 ez tax return   Although an individual is entitled to a charitable deduction for contributions to a church, the assignment or similar transfer of compensation for personal services to a church generally does not relieve a taxpayer of federal income tax liability on the compensation, regardless of the motivation behind the transfer. 1040 ez tax return Scientific Organizations You must show that your organization's research will be carried on in the public interest. 1040 ez tax return Scientific research will be considered to be in the public interest if the results of the research (including any patents, copyrights, processes, or formulas) are made available to the public on a nondiscriminatory basis; if the research is performed for the United States or a state, county, or municipal government; or if the research is carried on for one of the following purposes. 1040 ez tax return Aiding in the scientific education of college or university students. 1040 ez tax return Obtaining scientific information that is published in a treatise, thesis, trade publication, or in any other form th
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Know the Facts

When you borrow money to buy a car or truck, the lender can take your vehicle back if you miss a payment or in some other way violate the contract. You should also be aware that the lender:

  • Can repossess with cause without advance notice;
  • Can insist you pay off the entire loan balance in order to get the repossessed vehicle back;
  • Can sell the vehicle at auction;
  • Might be able to sue you for the difference between the vehicle's auction price and what you owe
  • Cannot break into your home or physically threaten someone while taking the vehicle

If you know you're going to be late with a payment, talk to the lender to try to work things out. If you and the lender reach an agreement, be sure you get the agreement in writing. Contact your state or local consumer protection office to find out whether your state gives you any additional rights.

Beware of Car Title Loans

Chances are you have seen or heard an ad for a car title loan to help you make ends meet. In a title loan, a consumer in need of quick cash uses the car title as collateral for a short term loan. No job or postdated checks are required. Sounds simple enough, right? Wrong.

What the title lenders don't say in their ads is that you have to turn over your car title and keys when you get the loan. They'll loan you a small fraction of the car value at sky high interest rates- as much as 25% for one month (300% APR) !!! At the end of the month you are expected to pay the whole amount back, plus the interest.

If you can't pay the loan there are only two options. You could roll the loan over for another month, with more fees and interest. However, as the loan amount increases, it becomes almost impossible to repay the debt. The other option is for the lender to repossess your car. Unfortunately, there is no federal regulation of title loans now, but some states have put some rules in place to regulate the interest charged by these lenders.

The 1040 Ez Tax Return

1040 ez tax return Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. 1040 ez tax return S. 1040 ez tax return Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. 1040 ez tax return Full-time student. 1040 ez tax return Adjusted gross income. 1040 ez tax return More information. 1040 ez tax return Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). 1040 ez tax return Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. 1040 ez tax return Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. 1040 ez tax return You are a member of a religious order who has taken a vow of poverty. 1040 ez tax return You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. 1040 ez tax return See Exemption From Self-Employment (SE) Tax , later. 1040 ez tax return You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. 1040 ez tax return For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. 1040 ez tax return Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. 1040 ez tax return See Ministerial Services , later. 1040 ez tax return Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. 1040 ez tax return However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. 1040 ez tax return For the specific services covered, see Ministerial Services , later. 1040 ez tax return Ministers defined. 1040 ez tax return   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. 1040 ez tax return Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. 1040 ez tax return   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. 1040 ez tax return Employment status for other tax purposes. 1040 ez tax return   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. 1040 ez tax return For income tax or retirement plan purposes, your income earned as an employee will be considered wages. 1040 ez tax return Common-law employee. 1040 ez tax return   Under common-law rules, you are considered either an employee or a self-employed person. 1040 ez tax return Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. 1040 ez tax return For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. 1040 ez tax return   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. 1040 ez tax return However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. 1040 ez tax return Example. 1040 ez tax return A church hires and pays you a salary to perform ministerial services subject to its control. 1040 ez tax return Under the common-law rules, you are an employee of the church while performing those services. 1040 ez tax return Form SS-8. 1040 ez tax return   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. 1040 ez tax return Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. 1040 ez tax return See Ministerial Services , later. 1040 ez tax return However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. 1040 ez tax return Vow of poverty. 1040 ez tax return   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. 1040 ez tax return You do not need to request a separate exemption. 1040 ez tax return For income tax purposes, the earnings are tax free to you. 1040 ez tax return Your earnings are considered the income of the religious order. 1040 ez tax return Services covered under FICA at the election of the order. 1040 ez tax return   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. 1040 ez tax return Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. 1040 ez tax return   The order or subdivision elects coverage by filing Form SS-16. 1040 ez tax return The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. 1040 ez tax return If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. 1040 ez tax return You do not pay any of the FICA tax. 1040 ez tax return Services performed outside the order. 1040 ez tax return   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. 1040 ez tax return   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. 1040 ez tax return You may, however, be able to take a charitable deduction for the amount you turn over to the order. 1040 ez tax return See Publication 526, Charitable Contributions. 1040 ez tax return Rulings. 1040 ez tax return   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. 1040 ez tax return To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. 1040 ez tax return R. 1040 ez tax return B. 1040 ez tax return 1, available at www. 1040 ez tax return irs. 1040 ez tax return gov/irb/2014-1_IRB/ar05. 1040 ez tax return html. 1040 ez tax return Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. 1040 ez tax return However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. 1040 ez tax return Practitioners. 1040 ez tax return   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. 1040 ez tax return State law specifically exempts Christian Science practitioners from licensing requirements. 1040 ez tax return   Some Christian Science practitioners also are Christian Science teachers or lecturers. 1040 ez tax return Income from teaching or lecturing is considered the same as income from their work as practitioners. 1040 ez tax return Readers. 1040 ez tax return   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. 1040 ez tax return Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. 1040 ez tax return Some exceptions are discussed next. 1040 ez tax return Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. 1040 ez tax return If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. 1040 ez tax return Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. 1040 ez tax return 28 during the tax year. 1040 ez tax return However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. 1040 ez tax return Churches and church organizations make this election by filing two copies of Form 8274. 1040 ez tax return For more information about making this election, see Form 8274. 1040 ez tax return Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. 1040 ez tax return This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. 1040 ez tax return Make this choice by filing Form 4029. 1040 ez tax return See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. 1040 ez tax return U. 1040 ez tax return S. 1040 ez tax return Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. 1040 ez tax return Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. 1040 ez tax return S. 1040 ez tax return social security system. 1040 ez tax return To determine your alien status, see Publication 519, U. 1040 ez tax return S. 1040 ez tax return Tax Guide for Aliens. 1040 ez tax return Residents of Puerto Rico, the U. 1040 ez tax return S. 1040 ez tax return Virgin Islands, Guam, the CNMI, and American Samoa. 1040 ez tax return   If you are a resident of one of these U. 1040 ez tax return S. 1040 ez tax return possessions but not a U. 1040 ez tax return S. 1040 ez tax return citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. 1040 ez tax return For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. 1040 ez tax return Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. 1040 ez tax return Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. 1040 ez tax return Even if you have an exemption, only the income you receive for performing ministerial services is exempt. 1040 ez tax return The exemption does not apply to any other income. 1040 ez tax return The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. 1040 ez tax return Ministers Most services you perform as a minister, priest, rabbi, etc. 1040 ez tax return , are ministerial services. 1040 ez tax return These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. 1040 ez tax return You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. 1040 ez tax return A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. 1040 ez tax return Services for nonreligious organizations. 1040 ez tax return   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. 1040 ez tax return Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. 1040 ez tax return   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. 1040 ez tax return Services that are not part of your ministry. 1040 ez tax return   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. 1040 ez tax return The following are not ministerial services. 1040 ez tax return Services you perform for nonreligious organizations other than the services stated above. 1040 ez tax return Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. 1040 ez tax return These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. 1040 ez tax return (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. 1040 ez tax return ) Services you perform in a government-owned and operated hospital. 1040 ez tax return (These services are considered performed by a government employee, not by a minister as part of the ministry. 1040 ez tax return ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. 1040 ez tax return Books or articles. 1040 ez tax return   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. 1040 ez tax return   This rule also applies to members of religious orders and to Christian Science practitioners and readers. 1040 ez tax return Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. 1040 ez tax return The services are considered ministerial because you perform them as an agent of the order. 1040 ez tax return For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. 1040 ez tax return However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. 1040 ez tax return Effect of employee status. 1040 ez tax return   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. 1040 ez tax return In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. 1040 ez tax return This result is true even if you have taken a vow of poverty. 1040 ez tax return Example. 1040 ez tax return Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. 1040 ez tax return They renounce all claims to their earnings. 1040 ez tax return The earnings belong to the order. 1040 ez tax return Pat is a licensed attorney. 1040 ez tax return The superiors of the order instructed her to get a job with a law firm. 1040 ez tax return Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. 1040 ez tax return Chris is a secretary. 1040 ez tax return The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. 1040 ez tax return Chris took the job and gave all his earnings to the order. 1040 ez tax return Pat's services are not duties required by the order. 1040 ez tax return Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. 1040 ez tax return Chris' services are duties required by the order. 1040 ez tax return He is acting as an agent of the order and not as an employee of a third party. 1040 ez tax return He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. 1040 ez tax return Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. 1040 ez tax return Amounts you receive for performing these services are generally subject to SE tax. 1040 ez tax return You may request an exemption from SE tax, discussed next, which applies only to those services. 1040 ez tax return Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. 1040 ez tax return Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. 1040 ez tax return They do not have to request the exemption. 1040 ez tax return Who cannot be exempt. 1040 ez tax return   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. 1040 ez tax return These elections are irrevocable. 1040 ez tax return You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. 1040 ez tax return You elected before 1968 to be covered under social security for your ministerial services. 1040 ez tax return Requesting exemption. 1040 ez tax return    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. 1040 ez tax return More detailed explanations follow. 1040 ez tax return If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. 1040 ez tax return It does not apply to any other self-employment income. 1040 ez tax return Table 2. 1040 ez tax return The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. 1040 ez tax return You file Form 4361, described below under Requesting Exemption—Form 4361 . 1040 ez tax return You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. 1040 ez tax return You file for other than economic reasons. 1040 ez tax return You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). 1040 ez tax return This requirement does not apply to Christian Science practitioners or readers. 1040 ez tax return You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. 1040 ez tax return You establish that the organization is a church or a convention or association of churches. 1040 ez tax return You did not make an election discussed earlier under Who cannot be exempt . 1040 ez tax return You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. 1040 ez tax return Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. 1040 ez tax return The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. 1040 ez tax return If it is approved, keep the approved copy of Form 4361 in your permanent records. 1040 ez tax return When to file. 1040 ez tax return   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. 1040 ez tax return You have net earnings from self-employment of at least $400. 1040 ez tax return Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. 1040 ez tax return The 2 years do not have to be consecutive tax years. 1040 ez tax return    The approval process can take some time, so you should file Form 4361 as soon as possible. 1040 ez tax return Example 1. 1040 ez tax return Rev. 1040 ez tax return Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. 1040 ez tax return He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. 1040 ez tax return However, if Rev. 1040 ez tax return Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. 1040 ez tax return Example 2. 1040 ez tax return Rev. 1040 ez tax return Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. 1040 ez tax return She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. 1040 ez tax return However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. 1040 ez tax return Example 3. 1040 ez tax return In 2011, Rev. 1040 ez tax return David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. 1040 ez tax return In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. 1040 ez tax return Therefore, he had no net self-employment earnings as a minister in 2012. 1040 ez tax return Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. 1040 ez tax return In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. 1040 ez tax return Rev. 1040 ez tax return Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. 1040 ez tax return Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. 1040 ez tax return Death of individual. 1040 ez tax return   The right to file an application for exemption ends with an individual's death. 1040 ez tax return A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. 1040 ez tax return Effective date of exemption. 1040 ez tax return   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. 1040 ez tax return Once the exemption is approved, it is irrevocable. 1040 ez tax return Example. 1040 ez tax return Rev. 1040 ez tax return Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. 1040 ez tax return She files an application for exemption on February 20, 2014. 1040 ez tax return If an exemption is granted, it is effective for 2010 and the following years. 1040 ez tax return Refunds of SE tax. 1040 ez tax return   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. 1040 ez tax return Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. 1040 ez tax return A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. 1040 ez tax return   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. 1040 ez tax return Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. 1040 ez tax return Exception. 1040 ez tax return   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. 1040 ez tax return However, if you pay your benefits back, you may be considered for exemption. 1040 ez tax return Contact your local Social Security Administration office to find out the amount you must pay back. 1040 ez tax return Eligibility requirements. 1040 ez tax return   To claim this exemption from SE tax, all the following requirements must be met. 1040 ez tax return You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . 1040 ez tax return As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. 1040 ez tax return You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. 1040 ez tax return The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. 1040 ez tax return Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. 1040 ez tax return The sect or division must complete part of the form. 1040 ez tax return The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. 1040 ez tax return If it is approved, keep the approved copy of Form 4029 in your permanent records. 1040 ez tax return When to file. 1040 ez tax return   You can file Form 4029 at any time. 1040 ez tax return   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. 1040 ez tax return See Effective date of exemption next for information on when the newly approved exemption would become effective. 1040 ez tax return    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. 1040 ez tax return Effective date of exemption. 1040 ez tax return   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. 1040 ez tax return (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. 1040 ez tax return )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. 1040 ez tax return You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. 1040 ez tax return The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. 1040 ez tax return Refunds of SE tax paid. 1040 ez tax return    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. 1040 ez tax return For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. 1040 ez tax return Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. 1040 ez tax return Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. 1040 ez tax return A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. 1040 ez tax return If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. 1040 ez tax return Information for employers. 1040 ez tax return   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. 1040 ez tax return   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. 1040 ez tax return Form W-2. 1040 ez tax return   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. 1040 ez tax return ” Do not make any entries in boxes 3, 4, 5, or 6. 1040 ez tax return Forms 941, 943, and 944. 1040 ez tax return   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. 1040 ez tax return Instead, follow the instructions given below. 1040 ez tax return Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. 1040 ez tax return Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. 1040 ez tax return Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. 1040 ez tax return Effective date. 1040 ez tax return   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. 1040 ez tax return The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. 1040 ez tax return Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. 1040 ez tax return Regular method. 1040 ez tax return Nonfarm optional method. 1040 ez tax return You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. 1040 ez tax return Blank worksheets are in the back of this publication, after the Comprehensive Example. 1040 ez tax return Regular Method Most people use the regular method. 1040 ez tax return Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. 1040 ez tax return Then, subtract your allowable business deductions and multiply the difference by 92. 1040 ez tax return 35% (. 1040 ez tax return 9235). 1040 ez tax return Use Schedule SE (Form 1040) to figure your net earnings and SE tax. 1040 ez tax return If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. 1040 ez tax return 35% (. 1040 ez tax return 9235). 1040 ez tax return Do not reduce your wages by any business deductions when making this computation. 1040 ez tax return Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. 1040 ez tax return If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. 1040 ez tax return Amounts included in gross income. 1040 ez tax return   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. 1040 ez tax return , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. 1040 ez tax return This amount is also subject to income tax. 1040 ez tax return   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. 1040 ez tax return Example. 1040 ez tax return Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. 1040 ez tax return The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. 1040 ez tax return His church owns a parsonage that has a fair rental value of $12,000 per year. 1040 ez tax return The church gives Pastor Adams the use of the parsonage. 1040 ez tax return He is not exempt from SE tax. 1040 ez tax return He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. 1040 ez tax return The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. 1040 ez tax return Overseas duty. 1040 ez tax return   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. 1040 ez tax return S. 1040 ez tax return citizen or resident alien serving abroad and living in a foreign country. 1040 ez tax return   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. 1040 ez tax return Example. 1040 ez tax return Diane Jones was the minister of a U. 1040 ez tax return S. 1040 ez tax return church in Mexico. 1040 ez tax return She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. 1040 ez tax return The United States does not have a social security agreement with Mexico, so Mrs. 1040 ez tax return Jones is subject to U. 1040 ez tax return S. 1040 ez tax return SE tax and must include $35,000 when figuring net earnings from self-employment. 1040 ez tax return Specified U. 1040 ez tax return S. 1040 ez tax return possessions. 1040 ez tax return    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. 1040 ez tax return Also see Residents of Puerto Rico, the U. 1040 ez tax return S. 1040 ez tax return Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. 1040 ez tax return S. 1040 ez tax return Citizens and Resident and Nonresident Aliens. 1040 ez tax return Amounts not included in gross income. 1040 ez tax return   Do not include the following amounts in gross income when figuring your net earnings from self-employment. 1040 ez tax return Offerings that others made to the church. 1040 ez tax return Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. 1040 ez tax return Pension payments or retirement allowances you receive for your past ministerial services. 1040 ez tax return The rental value of a parsonage or a parsonage allowance provided to you after you retire. 1040 ez tax return Allowable deductions. 1040 ez tax return   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. 1040 ez tax return These are ministerial expenses you incurred while working other than as a common-law employee of the church. 1040 ez tax return They include expenses incurred in performing marriages and baptisms, and in delivering speeches. 1040 ez tax return Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. 1040 ez tax return   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . 1040 ez tax return Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. 1040 ez tax return Do not complete Schedule C or C-EZ (Form 1040). 1040 ez tax return However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. 1040 ez tax return Employee reimbursement arrangements. 1040 ez tax return   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. 1040 ez tax return Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. 1040 ez tax return Accountable plans. 1040 ez tax return   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. 1040 ez tax return Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. 1040 ez tax return You must adequately account to your employer for these expenses within a reasonable period of time. 1040 ez tax return You must return any excess reimbursement or allowance within a reasonable period of time. 1040 ez tax return   The reimbursement is not reported on your Form W-2. 1040 ez tax return Generally, if your expenses equal your reimbursement, you have no deduction. 1040 ez tax return If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. 1040 ez tax return Nonaccountable plan. 1040 ez tax return   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. 1040 ez tax return In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. 1040 ez tax return Excess reimbursements you fail to return to your employer. 1040 ez tax return Reimbursement of nondeductible expenses related to your employer's business. 1040 ez tax return   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. 1040 ez tax return Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. 1040 ez tax return   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040 ez tax return Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. 1040 ez tax return If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. 1040 ez tax return Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. 1040 ez tax return The tax rate for the social security part is 12. 1040 ez tax return 4%. 1040 ez tax return In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. 1040 ez tax return This tax rate is 2. 1040 ez tax return 9%. 1040 ez tax return The combined self-employment tax rate is 15. 1040 ez tax return 3%. 1040 ez tax return Additional Medicare Tax. 1040 ez tax return   Beginning in 2013, a 0. 1040 ez tax return 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. 1040 ez tax return Medicare wages and self-employment income are combined to determine if income exceeds the threshold. 1040 ez tax return A self-employment loss is not considered for purposes of this tax. 1040 ez tax return RRTA compensation is separately compared to the threshold. 1040 ez tax return For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. 1040 ez tax return Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. 1040 ez tax return In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. 1040 ez tax return You may use the nonfarm optional method if you meet all the following tests. 1040 ez tax return You are self-employed on a regular basis. 1040 ez tax return You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. 1040 ez tax return The net earnings can be from either farm or nonfarm earnings or both. 1040 ez tax return You have used this method less than 5 prior years. 1040 ez tax return (There is a 5-year lifetime limit. 1040 ez tax return ) The years do not have to be consecutive. 1040 ez tax return Your net nonfarm profits were: Less than $5,024, and Less than 72. 1040 ez tax return 189% of your gross nonfarm income. 1040 ez tax return If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. 1040 ez tax return Table 3. 1040 ez tax return Figuring Nonfarm Net Earnings IF your gross nonfarm income is . 1040 ez tax return . 1040 ez tax return . 1040 ez tax return THEN your net earnings are equal to . 1040 ez tax return . 1040 ez tax return . 1040 ez tax return $6,960 or less Two-thirds of your gross nonfarm income. 1040 ez tax return More than $6,960 $4,640. 1040 ez tax return Actual net earnings. 1040 ez tax return   Multiply your total earnings subject to SE tax by 92. 1040 ez tax return 35% (. 1040 ez tax return 9235) to get actual net earnings. 1040 ez tax return Actual net earnings are equivalent to net earnings under the “Regular Method. 1040 ez tax return ” More information. 1040 ez tax return   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. 1040 ez tax return Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. 1040 ez tax return Note. 1040 ez tax return For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. 1040 ez tax return Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. 1040 ez tax return Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. 1040 ez tax return , in addition to your salary. 1040 ez tax return If the offering is made to the religious institution, it is not taxable to you. 1040 ez tax return Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. 1040 ez tax return However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. 1040 ez tax return For more information, see Publication 526. 1040 ez tax return Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. 1040 ez tax return Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. 1040 ez tax return This exclusion applies only for income tax purposes. 1040 ez tax return It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. 1040 ez tax return Designation requirement. 1040 ez tax return   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. 1040 ez tax return It must designate a definite amount. 1040 ez tax return It cannot determine the amount of the housing allowance at a later date. 1040 ez tax return If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. 1040 ez tax return   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. 1040 ez tax return The local congregation must officially designate the part of your salary that is a housing allowance. 1040 ez tax return However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. 1040 ez tax return Rental allowances. 1040 ez tax return   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. 1040 ez tax return   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. 1040 ez tax return Fair rental value of parsonage. 1040 ez tax return   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. 1040 ez tax return However, the exclusion cannot be more than the reasonable pay for your services. 1040 ez tax return If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. 1040 ez tax return Example. 1040 ez tax return Rev. 1040 ez tax return Joanna Baker is a full-time minister. 1040 ez tax return The church allows her to use a parsonage that has an annual fair rental value of $24,000. 1040 ez tax return The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. 1040 ez tax return Her actual utility costs during the year were $7,000. 1040 ez tax return For income tax purposes, Rev. 1040 ez tax return Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). 1040 ez tax return She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). 1040 ez tax return Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). 1040 ez tax return Home ownership. 1040 ez tax return   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. 1040 ez tax return Excess rental allowance. 1040 ez tax return   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. 1040 ez tax return   Include in the total on Form 1040, line 7. 1040 ez tax return On the dotted line next to line 7, enter “Excess allowance” and the amount. 1040 ez tax return You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. 1040 ez tax return However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). 1040 ez tax return Retired ministers. 1040 ez tax return   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. 1040 ez tax return However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. 1040 ez tax return Teachers or administrators. 1040 ez tax return   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. 1040 ez tax return However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. 1040 ez tax return    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. 1040 ez tax return In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. 1040 ez tax return   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. 1040 ez tax return Theological students. 1040 ez tax return   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. 1040 ez tax return Traveling evangelists. 1040 ez tax return   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. 1040 ez tax return You are an ordained minister. 1040 ez tax return You perform ministerial services at churches located away from your community. 1040 ez tax return You actually use the rental allowance to maintain your permanent home. 1040 ez tax return Cantors. 1040 ez tax return   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. 1040 ez tax return Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. 1040 ez tax return See Members of Religious Orders , earlier, under Social Security Coverage. 1040 ez tax return Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. 1040 ez tax return S. 1040 ez tax return possession. 1040 ez tax return Publication 54 discusses the foreign earned income exclusion. 1040 ez tax return Publication 570, Tax Guide for Individuals With Income From U. 1040 ez tax return S. 1040 ez tax return Possessions, covers the rules for taxpayers with income from U. 1040 ez tax return S. 1040 ez tax return possessions. 1040 ez tax return You can get these free publications from the Internal Revenue Service at IRS. 1040 ez tax return gov or from most U. 1040 ez tax return S. 1040 ez tax return Embassies or consulates. 1040 ez tax return Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. 1040 ez tax return Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. 1040 ez tax return You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). 1040 ez tax return You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. 1040 ez tax return See Publication 529 for more information on this limit. 1040 ez tax return However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). 1040 ez tax return Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. 1040 ez tax return You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. 1040 ez tax return Exception. 1040 ez tax return   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. 1040 ez tax return Figuring the allocation. 1040 ez tax return   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. 1040 ez tax return    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. 1040 ez tax return Example. 1040 ez tax return Rev. 1040 ez tax return Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. 1040 ez tax return He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. 1040 ez tax return $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. 1040 ez tax return Rev. 1040 ez tax return Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. 1040 ez tax return Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. 1040 ez tax return   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. 1040 ez tax return The statement must contain all of the following information. 1040 ez tax return A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. 1040 ez tax return ) plus the amount. 1040 ez tax return A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. 1040 ez tax return A list of each item of otherwise deductible ministerial expenses plus the amount. 1040 ez tax return How you figured the nondeductible part of your otherwise deductible expenses. 1040 ez tax return A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. 1040 ez tax return   See the attachments prepared for the Comprehensive Example , later. 1040 ez tax return Following the example, you will find blank worksheets for your own use. 1040 ez tax return Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. 1040 ez tax return If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. 1040 ez tax return See the Instructions for Form 1040 to figure your deduction. 1040 ez tax return The following special rules apply to the self-employed health insurance deduction. 1040 ez tax return You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. 1040 ez tax return You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. 1040 ez tax return The deduction cannot exceed your net earnings from the business under which the insurance plan is established. 1040 ez tax return Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. 1040 ez tax return More information. 1040 ez tax return   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. 1040 ez tax return Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. 1040 ez tax return This is an income tax deduction only, on Form 1040, line 27. 1040 ez tax return Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. 1040 ez tax return Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. 1040 ez tax return You must pay the tax as you earn or receive income during the year. 1040 ez tax return An employee usually has income tax withheld from his or her wages or salary. 1040 ez tax return However, your salary is not subject to federal income tax withholding if both of the following conditions apply. 1040 ez tax return You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. 1040 ez tax return Your salary is for ministerial services (see Ministerial Services , earlier). 1040 ez tax return If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. 1040 ez tax return You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. 1040 ez tax return Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. 1040 ez tax return Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. 1040 ez tax return See Form 1040-ES for the different payment methods. 1040 ez tax return The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. 1040 ez tax return For more information, see chapter 2 of Publication 505. 1040 ez tax return If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. 1040 ez tax return Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. 1040 ez tax return Table 4. 1040 ez tax return 2013 Filing Requirements for Most Taxpayers IF your filing status is . 1040 ez tax return . 1040 ez tax return . 1040 ez tax return AND at the end of 2013 you were* . 1040 ez tax return . 1040 ez tax return . 1040 ez tax return THEN file a return if your gross income** was at least . 1040 ez tax return . 1040 ez tax return . 1040 ez tax return single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. 1040 ez tax return ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). 1040 ez tax return Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). 1040 ez tax return If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. 1040 ez tax return Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). 1040 ez tax return Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. 1040 ez tax return But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. 1040 ez tax return *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. 1040 ez tax return Additional requirements. 1040 ez tax return   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. 1040 ez tax return 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). 1040 ez tax return Self-employment tax. 1040 ez tax return   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. 1040 ez tax return   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. 1040 ez tax return You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). 1040 ez tax return You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. 1040 ez tax return However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). 1040 ez tax return Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. 1040 ez tax return Note. 1040 ez tax return For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. 1040 ez tax return You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. 1040 ez tax return Exemption from SE tax. 1040 ez tax return   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). 1040 ez tax return Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. 1040 ez tax return However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. 1040 ez tax return    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). 1040 ez tax return Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. 1040 ez tax return More information. 1040 ez tax return   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. 1040 ez tax return Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. 1040 ez tax return You generally can deduct your contributions to the plan. 1040 ez tax return Your contributions and the earnings on them are not taxed until they are distributed. 1040 ez tax return Retirement plans for the self-employed. 1040 ez tax return   To set up one of the following plans you must be self-employed. 1040 ez tax return SEP (simplified employee pension) plan. 1040 ez tax return SIMPLE (savings incentive match plan for employees) plan. 1040 ez tax return Qualified retirement plan (also called a Keogh or H. 1040 ez tax return R. 1040 ez tax return 10 plan). 1040 ez tax return   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. 1040 ez tax return See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. 1040 ez tax return This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. 1040 ez tax return   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. 1040 ez tax return You are not a self-employed person for purposes of setting up a retirement plan. 1040 ez tax return This result is true even if your salary is subject to SE tax. 1040 ez tax return   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. 1040 ez tax return   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). 1040 ez tax return Individual retirement arrangements (IRAs). 1040 ez tax return   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. 1040 ez tax return Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). 1040 ez tax return   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. 1040 ez tax return You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. 1040 ez tax return   If you contribute to a traditional IRA, your contribution may be deductible. 1040 ez tax return However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). 1040 ez tax return   For more information on IRAs, see Publication 590. 1040 ez tax return Tax-sheltered annuity plans. 1040 ez tax return   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. 1040 ez tax return For more