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Filing Amended Tax Return

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Filing Amended Tax Return

Filing amended tax return 5. Filing amended tax return   Ministers and Church Employees Table of Contents Alternative Limit for Church Employees Changes to Includible Compensation for Most Recent Year of ServiceChanges to Includible Compensation Changes to Years of Service Self-employed ministers and church employees who participate in 403(b) plans generally follow the same rules as other 403(b) plan participants. Filing amended tax return This means that if you are a self-employed minister or a church employee, your MAC generally is the lesser of: Your limit on annual additions, or Your limit on elective deferrals. Filing amended tax return For most ministers and church employees, the limit on annual additions is figured without any changes. Filing amended tax return This means that if you are a minister or church employee, your limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or Your includible compensation for your most recent year of service. Filing amended tax return Although, in general, the same limit applies, church employees can choose an alternative limit and there are changes in how church employees, foreign missionaries, and self-employed ministers figure includible compensation for the most recent year of service. Filing amended tax return This chapter will explain the alternative limit and the changes. Filing amended tax return Who is a church employee?   A church employee is anyone who is an employee of a church or a convention or association of churches, including an employee of a tax-exempt organization controlled by or associated with a church or a convention or association of churches. Filing amended tax return Alternative Limit for Church Employees If you are a church employee, you can choose to use $10,000 a year as your limit on annual additions, even if your annual additions computed under the general rule is less. Filing amended tax return Total contributions over your lifetime under this choice cannot be more than $40,000. Filing amended tax return Changes to Includible Compensation for Most Recent Year of Service There are two types of changes in determining includible compensation for the most recent year of service. Filing amended tax return They are: Changes in how the includible compensation of foreign missionaries and self-employed ministers is figured, and A change to the years that are counted when figuring the most recent year of service for church employees and self-employed ministers. Filing amended tax return Changes to Includible Compensation Includible compensation is figured differently for foreign missionaries and self-employed ministers. Filing amended tax return Foreign missionary. Filing amended tax return   If you are a foreign missionary, your includible compensation includes foreign earned income that may otherwise be excludable from your gross income under section 911. Filing amended tax return   If you are a foreign missionary, and your adjusted gross income is $17,000 or less, contributions to your 403(b) account will not be treated as exceeding the limit on annual additions if the contributions are not in excess of $3,000. Filing amended tax return   You are a foreign missionary if you are either a layperson or a duly ordained, commissioned, or licensed minister of a church and you meet both of the following requirements. Filing amended tax return You are an employee of a church or convention or association of churches. Filing amended tax return You are performing services for the church outside the United States. Filing amended tax return Self-employed minister. Filing amended tax return   If you are a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Filing amended tax return Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deductible portion of your self-employment tax. Filing amended tax return Changes to Years of Service Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your limit on annual additions. Filing amended tax return Church employees. Filing amended tax return   If you are a church employee, treat all of your years of service as an employee of a church or a convention or association of churches as years of service with one employer. Filing amended tax return Self-employed minister. Filing amended tax return   If you are a self-employed minister, your years of service include full and part years during which you were self-employed. Filing amended tax return Prev  Up  Next   Home   More Online Publications
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IRS Advancing E-file Study Key Messages

*Since the publication of Advancing E-file Study Phase 1 and Phase 2, Congress has enacted a law that requires many tax preparers and tax firms to use IRS e-file for individual, trust and estate returns. Starting January 1, 2011, preparers or their firms that anticipate filing 100 or more returns must use e-file. Starting January 1, 2012, preparers or their firms that anticipate filing 11 or more returns must use e-file.

The Advancing E-file Study Phase 1 Report
The Advancing E-file Study Phase 1 Report reflects a major effort to synthesize and analyze all substantial data on the IRS e-file program in one document to help the IRS validate and launch future studies, research, and other activities to meet the goal set by Congress that 80% of individual Federal income tax returns be filed electronically.

Key Findings from the Phase 1 report included:

  • There is no silver bullet. An advancing e-file strategy must take into consideration many complex factors, and there is no quick fix or any single option approach for the IRS to convert remaining paper filers.
  • The IRS cannot meet the goal without help. The multifaceted landscape of the US tax system requires that the IRS rely on strong partnerships with third party partners, stakeholders, and Congress to advance e-file.
  • Technology is secondary to motivating behavior. Even the most innovative technology will not help the IRS achieve the 80% e-file goal unless it is grounded in a thorough understanding of the intricacies of filer behavior — their motivators, concerns, and relative positions on the technology adoption curve.

IRS Advancing e-File Study Phase 1 Executive Summary

IRS Advancing e-File Study Phase 1 Report

The Advancing E-file Study Phase 2 Report
With the Advancing E-file Study Phase 2 Report, the IRS has taken the second step toward defining a strategy and set of options to achieve the 80% e-file goal.

Key findings from the Phase 2 report include:

  • Few of the AES2 Options will produce a significant gain in e-file adoption.
  • Substantial investments in technology, management, and organizational capability are required for the IRS to assume new roles in tax preparation and submission.
  • Efforts to advance e-file must consider the entire tax return preparation and submission experience and evaluate changes in the tax landscape.

IRS Advancing e-File Study Phase 2 Executive Summary

IRS Advancing e-File Study Phase 2 Report


Page Last Reviewed or Updated: 30-Sep-2013

The Filing Amended Tax Return

Filing amended tax return 2. Filing amended tax return   Tax Shelters and Other Reportable Transactions Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Abusive Tax SheltersRules To Curb Abusive Tax Shelters Investor Reporting Penalties Whether To Invest Introduction Investments that yield tax benefits are sometimes called “tax shelters. Filing amended tax return ” In some cases, Congress has concluded that the loss of revenue is an acceptable side effect of special tax provisions designed to encourage taxpayers to make certain types of investments. Filing amended tax return In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. Filing amended tax return Those cases are called “abusive tax shelters. Filing amended tax return ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. Filing amended tax return Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . Filing amended tax return Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 556 Examination of Returns, Appeal Rights, and Claims for Refund 561 Determining the Value of Donated Property 925 Passive Activity and At-Risk Rules Form (and Instructions) 8275 Disclosure Statement 8275-R Regulation Disclosure Statement 8283 Noncash Charitable Contributions 8886 Reportable Transaction Disclosure Statement See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Filing amended tax return Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. Filing amended tax return They often make use of unrealistic allocations, inflated appraisals, losses in connection with nonrecourse loans, mismatching of income and deductions, financing techniques that do not conform to standard commercial business practices, or mischaracterization of the substance of the transaction. Filing amended tax return Despite appearances to the contrary, the taxpayer generally risks little. Filing amended tax return Abusive tax shelters commonly involve package deals designed from the start to generate losses, deductions, or credits that will be far more than present or future investment. Filing amended tax return Or, they may promise investors from the start that future inflated appraisals will enable them, for example, to reap charitable contribution deductions based on those appraisals. Filing amended tax return (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. Filing amended tax return ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. Filing amended tax return This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. Filing amended tax return Because there are many abusive tax shelters, it is not possible to list all the factors you should consider in determining whether an offering is an abusive tax shelter. Filing amended tax return However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. Filing amended tax return Do the tax benefits far outweigh the economic benefits? Is this a transaction you would seriously consider, apart from the tax benefits, if you hoped to make a profit? Do shelter assets really exist and, if so, are they insured for less than their purchase price? Is there a nontax justification for the way profits and losses are allocated to partners? Do the facts and supporting documents make economic sense? In that connection, are there sales and resales of the tax shelter property at ever increasing prices? Does the investment plan involve a gimmick, device, or sham to hide the economic reality of the transaction? Does the promoter offer to backdate documents after the close of the year? Are you instructed to backdate checks covering your investment? Is your debt a real debt or are you assured by the promoter that you will never have to pay it? Does this transaction involve laundering United States source income through foreign corporations incorporated in a tax haven and owned by United States shareholders? Rules To Curb Abusive Tax Shelters Congress has enacted a series of income tax laws designed to halt the growth of abusive tax shelters. Filing amended tax return These provisions include the following. Filing amended tax return Disclosure of reportable transactions. Filing amended tax return   You must disclose information for each reportable transaction in which you participate. Filing amended tax return See Reportable Transaction Disclosure Statement , later. Filing amended tax return   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. Filing amended tax return To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. Filing amended tax return   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. Filing amended tax return They must provide this number to all persons to whom they acted as a material advisor. Filing amended tax return They must provide the number at the time the transaction is entered into. Filing amended tax return If they do not have the number at that time, they must provide it within 60 days from the date the number is mailed to them. Filing amended tax return For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. Filing amended tax return Requirement to maintain list. Filing amended tax return   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. Filing amended tax return The list must be available for inspection by the IRS, and the information required to be included on the list generally must be kept for 7 years. Filing amended tax return See Regulations section 301. Filing amended tax return 6112-1 for more information (including what information is required to be included on the list). Filing amended tax return Confidentiality privilege. Filing amended tax return   The confidentiality privilege between you and a federally authorized tax practitioner does not apply to written communications made after October 21, 2004, regarding the promotion of your direct or indirect participation in any tax shelter. Filing amended tax return Appraisal requirement for donated property. Filing amended tax return   If you claim a deduction of more than $5,000 for an item or group of similar items of donated property, you generally must get a qualified appraisal from a qualified appraiser and complete and attach section B of Form 8283 to your return. Filing amended tax return If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. Filing amended tax return If you file electronically, see Form 8453, U. Filing amended tax return S. Filing amended tax return Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. Filing amended tax return For more information about appraisals, including exceptions, see Publication 561. Filing amended tax return Passive activity loss and credit limits. Filing amended tax return   The passive activity loss and credit rules limit the amount of losses and credits that can be claimed from passive activities and limit the amount that can offset nonpassive income, such as certain portfolio income from investments. Filing amended tax return For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. Filing amended tax return Interest on penalties. Filing amended tax return   If you are assessed an accuracy-related or civil fraud penalty (as discussed under Penalties , later), interest will be imposed on the amount of the penalty from the due date of the return (including any extensions) to the date you pay the penalty. Filing amended tax return Accounting method restriction. Filing amended tax return   Tax shelters generally cannot use the cash method of accounting. Filing amended tax return Uniform capitalization rules. Filing amended tax return   The uniform capitalization rules generally apply to producing property or acquiring it for resale. Filing amended tax return Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. Filing amended tax return For more information, see Publication 538. Filing amended tax return Denial of deduction for interest on an underpayment due to a reportable transaction. Filing amended tax return   You cannot deduct any interest you paid or accrued on any part of an underpayment of tax due to an understatement arising from a reportable transaction (discussed later) if the relevant facts affecting the tax treatment of the item are not adequately disclosed. Filing amended tax return This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. Filing amended tax return Authority for Disallowance of Tax Benefits The IRS has published guidance concluding that the claimed tax benefits of various abusive tax shelters should be disallowed. Filing amended tax return The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. Filing amended tax return Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. Filing amended tax return So, if your return is examined and an abusive tax shelter is identified and challenged, published guidance dealing with that type of shelter, which disallows certain claimed tax shelter benefits, could serve as the basis for the examining official's challenge of the tax benefits you claimed. Filing amended tax return In such a case, the examiner will not compromise even if you or your representative believes you have authority for the positions taken on your tax return. Filing amended tax return The courts have generally been unsympathetic to taxpayers involved in abusive tax shelter schemes and have ruled in favor of the IRS in the majority of the cases in which these shelters have been challenged. Filing amended tax return Investor Reporting You may be required to file a reportable transaction disclosure statement. Filing amended tax return Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. Filing amended tax return Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. Filing amended tax return Under certain circumstances, a transaction must be disclosed within 90 days of the transaction being identified as a listed transaction or a transaction of interest (discussed later). Filing amended tax return In addition, for the first year Form 8886 is attached to your return, you must send a copy of the form to: Internal Revenue Service OTSA Mail Stop 4915 1973 North Rulon White Blvd. Filing amended tax return  Ogden, UT 84404 If you file your return electronically, the copy sent to OTSA must show exactly the same information, word for word, provided with the electronically filed return and it must be provided on the official IRS Form 8886 or an exact copy of the form. Filing amended tax return If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. Filing amended tax return If you fail to file Form 8886 as required or fail to include any required information on the form, you may have to pay a penalty. Filing amended tax return See Penalty for failure to disclose a reportable transaction , later under Penalties. Filing amended tax return The following discussion briefly describes reportable transactions. Filing amended tax return For more details, see the Instructions for Form 8886. Filing amended tax return Reportable transaction. Filing amended tax return   A reportable transaction is any of the following. Filing amended tax return A listed transaction. Filing amended tax return A confidential transaction. Filing amended tax return A transaction with contractual protection. Filing amended tax return A loss transaction. Filing amended tax return A transaction of interest entered into after November 1, 2006. Filing amended tax return Note. Filing amended tax return Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. Filing amended tax return Listed transaction. Filing amended tax return   A listed transaction is the same as, or substantially similar to, one of the types of transactions the IRS has determined to be a tax-avoidance transaction. Filing amended tax return These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. Filing amended tax return For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2009-31_IRB/ar07. Filing amended tax return html. Filing amended tax return Confidential transaction. Filing amended tax return   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. Filing amended tax return A transaction is offered under conditions of confidentiality if the advisor who is paid the fee places a limit on your disclosure of the tax treatment or tax structure of the transaction and the limit protects the confidentiality of the advisor's tax strategies. Filing amended tax return The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. Filing amended tax return Transaction with contractual protection. Filing amended tax return   Generally, a transaction with contractual protection is one in which you or a related party has the right to a full or partial refund of fees if all or part of the intended tax consequences of the transaction are not sustained, or a transaction for which the fees are contingent on your realizing the tax benefits from the transaction. Filing amended tax return For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2007-07_IRB/ar15. Filing amended tax return html. Filing amended tax return Loss transaction. Filing amended tax return   For individuals, a loss transaction is one that results in a deductible loss if the gross amount of the loss is at least $2 million in a single tax year or $4 million in any combination of tax years. Filing amended tax return A loss from a foreign currency transaction under Internal Revenue Code section 988 is a loss transaction if the gross amount of the loss is at least $50,000 in a single tax year, whether or not the loss flows through from an S corporation or partnership. Filing amended tax return   Certain losses (such as losses from casualties, thefts, and condemnations) are excepted from this category and do not have to be reported on Form 8886. Filing amended tax return For information on other exceptions, see Revenue Procedure 2004-66 in Internal Revenue Bulletin 2004-50, as modified and superseded by Revenue Procedure 2013-11, (or future published guidance) available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2004-50_IRB/ar11. Filing amended tax return html. Filing amended tax return Transaction of interest. Filing amended tax return   A transaction of interest is a transaction entered into after November 1, 2006, that is the same as, or substantially similar to, one of the types of transactions that the IRS has identified by notice, regulation, or other form of published guidance as a transaction of interest. Filing amended tax return The IRS has identified the following transactions of interest. Filing amended tax return “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. Filing amended tax return R. Filing amended tax return B. Filing amended tax return 545, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2007-36_IRB/ar20. Filing amended tax return html. Filing amended tax return Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. Filing amended tax return R. Filing amended tax return B. Filing amended tax return 544, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2007-36_IRB/ar19. Filing amended tax return html. Filing amended tax return Certain transactions involving the sale or other disposition of all interests in a charitable remainder trust and claiming little or no taxable gain as described in Notice 2008-99, 2008-47 I. Filing amended tax return R. Filing amended tax return B. Filing amended tax return 1194, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2008-47_IRB/ar11. Filing amended tax return html. Filing amended tax return Certain transactions involving a U. Filing amended tax return S. Filing amended tax return taxpayer owning controlled foreign corporations (CFCs) that hold stock of a lower-tier CFC through a domestic partnership to avoid reporting income as described in Notice 2009-7, 2009-3 I. Filing amended tax return R. Filing amended tax return B. Filing amended tax return 312, available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2009-03_IRB/ar10. Filing amended tax return html. Filing amended tax return   For updates to this list, go to www. Filing amended tax return irs. Filing amended tax return gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. Filing amended tax return Penalties Investing in an abusive tax shelter may lead to substantial expenses. Filing amended tax return First, the promoter generally charges a substantial fee. Filing amended tax return If your return is examined by the IRS and a tax deficiency is determined, you will be faced with payment of more tax, interest on the underpayment, possibly a 20%, 30%, or even 40% accuracy-related penalty, or a 75% civil fraud penalty. Filing amended tax return You may also be subject to the penalty for failure to pay tax. Filing amended tax return These penalties are explained in the following paragraphs. Filing amended tax return Accuracy-related penalties. Filing amended tax return   An accuracy-related penalty of 20% can be imposed for underpayments of tax due to: Negligence or disregard of rules or regulations, Substantial understatement of tax, Substantial valuation misstatement (increased to 40% for gross valuation misstatement), Transaction lacking economic substance (increased to 40% for undisclosed transaction lacking economic substance), or Undisclosed foreign financial asset understatement (40% in all cases). Filing amended tax return Except for a transaction lacking economic substance, this penalty will not be imposed if you can show you had reasonable cause for any understatement of tax and that you acted in good faith. Filing amended tax return Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. Filing amended tax return   If you are charged an accuracy-related penalty, interest will be imposed on the amount of the penalty from the due date of the return (including extensions) to the date you pay the penalty. Filing amended tax return   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). Filing amended tax return Negligence or disregard of rules or regulations. Filing amended tax return   The penalty for negligence or disregard of rules or regulations is imposed only on the part of the underpayment due to negligence or disregard of rules or regulations. Filing amended tax return The penalty will not be charged if you can show you had reasonable cause for understating your tax and that you acted in good faith. Filing amended tax return    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. Filing amended tax return It also includes any failure to keep adequate books and records. Filing amended tax return A return position that has a reasonable basis is not negligence. Filing amended tax return   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. Filing amended tax return   The penalty for disregard of rules and regulations can be avoided if all the following are true. Filing amended tax return You keep adequate books and records. Filing amended tax return You have a reasonable basis for your position on the tax issue. Filing amended tax return You make an adequate disclosure of your position. Filing amended tax return Use Form 8275 to make your disclosure and attach it to your return. Filing amended tax return To disclose a position contrary to a regulation, use Form 8275-R. Filing amended tax return Use Form 8886 to disclose a reportable transaction (discussed earlier). Filing amended tax return Substantial understatement of tax. Filing amended tax return   An understatement is considered to be substantial if it is more than the greater of: 10% of the tax required to be shown on the return, or $5,000. Filing amended tax return An “understatement” is the amount of tax required to be shown on your return for a tax year minus the amount of tax shown on the return, reduced by any rebates. Filing amended tax return The term “rebate” generally means a decrease in the tax shown on your original return as the result of your filing an amended return or claim for refund. Filing amended tax return   For items other than tax shelters, you can file Form 8275 or Form 8275-R to disclose items that could cause a substantial understatement of income tax. Filing amended tax return In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. Filing amended tax return Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. Filing amended tax return   Also, the understatement penalty will not be imposed if you can show there was reasonable cause for the underpayment caused by the understatement and that you acted in good faith. Filing amended tax return An important factor in establishing reasonable cause and good faith will be the extent of your effort to determine your proper tax liability under the law. Filing amended tax return Substantial valuation misstatement. Filing amended tax return   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. Filing amended tax return The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. Filing amended tax return You underpaid your tax by more than $5,000 because of the misstatement. Filing amended tax return You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. Filing amended tax return   You may be assessed a penalty of 40% for a gross valuation misstatement. Filing amended tax return If you misstate the value or the adjusted basis of property by 200% or more of the amount determined to be correct, you will be assessed a penalty of 40%, instead of 20%, of the amount you underpaid because of the gross valuation misstatement. Filing amended tax return The penalty rate is also 40% if the property's correct value or adjusted basis is zero. Filing amended tax return Transaction lacking economic substance. Filing amended tax return   The economic substance doctrine only applies to an individual that entered into a transaction in connection with a trade or business or an activity engaged in for the production of income. Filing amended tax return For transactions entered into after March 30, 2010, a transaction has economic substance for you as an individual taxpayer only if: The transaction changes your economic position in a meaningful way (apart from federal income tax effects), or You have a substantial purpose (apart from federal income tax effects) for entering into the transaction. Filing amended tax return   For purposes of determining whether economic substance exists, a transaction's profit potential will only be taken into account if the present value of the reasonably expected pre-tax profit from the transaction is substantial compared to the present value of the expected net tax benefits that would be allowed if the transaction were respected. Filing amended tax return   If any part of your underpayment is due to any disallowance of claimed tax benefits by reason of a transaction lacking economic substance or failing to meet the requirements of any similar rule of law, that part of your underpayment will be subject to the 20% accuracy-related penalty even if you had a reasonable cause and acted in good faith concerning that part. Filing amended tax return   Additionally, the penalty increases to 40% if you do not adequately disclose on your return or in a statement attached to your return the relevant facts affecting the tax treatment of a transaction that lacks economic substance. Filing amended tax return Relevant facts include any facts affecting the tax treatment of the transaction. Filing amended tax return    Any excessive amount of an erroneous claim for an income tax refund or credit (other than a refund or credit related to the earned income credit) that results from a transaction found to be lacking economic substance will not be treated as having a reasonable basis and could be subject to a 20% penalty. Filing amended tax return Undisclosed foreign financial asset understatement. Filing amended tax return   For tax years beginning after March 18, 2010, you may be liable for a 40% penalty for an understatement of your tax liability due to an undisclosed foreign financial asset. Filing amended tax return An undisclosed foreign financial asset is any asset for which an information return, required to be provided under Internal Revenue Code section 6038, 6038B, 6038D, 6046A, or 6048 for any taxable year, is not provided. Filing amended tax return The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. Filing amended tax return Any foreign business you control, reportable on Form 5471, Information Return of U. Filing amended tax return S. Filing amended tax return Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. Filing amended tax return S. Filing amended tax return Persons With Respect to Certain Foreign Partnerships. Filing amended tax return Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. Filing amended tax return S. Filing amended tax return Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. Filing amended tax return Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. Filing amended tax return    Instead of, or in addition to, Form 8275 or 8275-R, you may have to file Form 8938, Statement of Specified Foreign Financial Assets, with your tax return. Filing amended tax return See the Instructions for Form 8938 for details. Filing amended tax return    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. Filing amended tax return Creation or transfer of money or property to certain foreign trusts, reportable on Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts. Filing amended tax return Penalty for incorrect appraisals. Filing amended tax return   The person who prepares an appraisal of the value of property may have to pay a penalty if: He or she knows, or reasonably should have known, that the appraisal would be used in connection with a return or claim for refund; and The claimed value of the property on a return or claim for refund based on that appraisal results in a substantial valuation misstatement or a gross valuation misstatement as discussed earlier. Filing amended tax return For details on the penalty amount and exceptions, see Publication 561. Filing amended tax return Penalty for failure to disclose a reportable transaction. Filing amended tax return   If you fail to include any required information regarding a reportable transaction (discussed earlier) on a return or statement, you may have to pay a penalty of 75% of the decrease in tax shown on your return as a result of such transaction (or that would have resulted if the transaction were respected for federal tax purposes). Filing amended tax return For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). Filing amended tax return This penalty is in addition to any other penalty that may be imposed. Filing amended tax return   The IRS may rescind or abate the penalty for failing to disclose a reportable transaction under certain limited circumstances but cannot rescind the penalty for failing to disclose a listed transaction. Filing amended tax return For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. Filing amended tax return irs. Filing amended tax return gov/irb/2007-09_IRB/ar12. Filing amended tax return html. Filing amended tax return Accuracy-related penalty for a reportable transaction understatement. Filing amended tax return   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. Filing amended tax return This applies to any item due to a listed transaction or other reportable transaction with a significant purpose of avoiding or evading federal income tax. Filing amended tax return The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. Filing amended tax return You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. Filing amended tax return The reasonable cause and good faith exception does not apply to any part of a reportable transaction understatement attributable to one or more transactions that lack economic substance. Filing amended tax return   This penalty does not apply to the part of an understatement on which the fraud penalty, gross valuation misstatement penalty, or penalty for nondisclosure of noneconomic substance transactions is imposed. Filing amended tax return Civil fraud penalty. Filing amended tax return   If any underpayment of tax on your return is due to fraud, a penalty of 75% of the underpayment will be added to your tax. Filing amended tax return Joint return. Filing amended tax return   The fraud penalty on a joint return applies to a spouse only if some part of the underpayment is due to the fraud of that spouse. Filing amended tax return Failure to pay tax. Filing amended tax return   If a deficiency is assessed and is not paid within 10 days of the demand for payment, an investor can be penalized with up to a 25% addition to tax if the failure to pay continues. Filing amended tax return Whether To Invest In light of the adverse tax consequences and the substantial amount of penalties and interest that will result if the claimed tax benefits are disallowed, you should consider tax shelter investments carefully and seek competent legal and financial advice. Filing amended tax return Prev  Up  Next   Home   More Online Publications