File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

State Tax Preparation Free

Free 2006 Tax Software1040nr Ez SoftwareH&r Block At Home FreeFree Tax CalculatorHow Far Back Can You File TaxesHr Block Tax PreparationFiling 1040x Online Free2011 Tax Forms EzAmend Tax Returns1040x Tax FormAmended Tax Return InstructionsUnemployed File TaxesState Income Tax ReturnForm 1040xCan 1040x Filed ElectronicallyEz Tax FormHow Can I File My 2012 Taxes Online For FreeFederal Tax Forms 2011Irs 1040 Ez InstructionsFiling Taxes With UnemploymentIrs Forms 1040x2012 1040 Tax FormsFile My State Taxes For FreeHr Block Tax FilingAmend My Taxes OnlineFree Tax Forms 2011Free E File State TaxesFree Turbotax For StudentsFree Tax Filing 2014Filing State Income Tax ReturnCan I Still File Taxes For 2012File Tax Extension For 2011Free Income Tax PreparationFree Tax Filing 2012Free State Tax E-file2012 Tax Forms OnlineFree 2012 Tax FilingHow To Ammend TaxesIrs Gov E FileFree File

State Tax Preparation Free

State tax preparation free Index C Change in classification Disregarded entity to corporation, Subsequent Elections Disregarded entity to partnership, Change in default classification. State tax preparation free , Subsequent Elections Partnership to corporation, Subsequent Elections Partnership to disregarded entity, Change in default classification. State tax preparation free , Subsequent Elections Recognition of gain or loss, Change in default classification. State tax preparation free , Change in default classification. State tax preparation free , Subsequent Elections Classification as a corporation, LLCs Classified as Corporations Classification as a Disregarded Entity, LLCs Classified as Disregarded Entities Classification as a Partnership, LLCs Classified as Partnerships Classification Election, LLCs Classified as Corporations Classification of an LLC Default classification, Classification of an LLC Elected classification, Classification of an LLC Comments on publication, Comments and suggestions. State tax preparation free E Employer identification number (see Taxpayer identification number) Employment tax, Employment tax and certain excise taxes. State tax preparation free Excise taxes, Employment tax and certain excise taxes. State tax preparation free I Information, How to get more, How To Get More Information S Self-employment tax, Self-employment tax rule for disregarded entity LLCs. State tax preparation free Small Business Administration, Small Business Administration Social security number (see Taxpayer identification number) Subchapter S election, LLCs Classified as Corporations Suggestions for publication, Comments and suggestions. State tax preparation free T Tax help (see Information, How to get more) Taxpayer Advocate, Contacting your Taxpayer Advocate. State tax preparation free Taxpayer identification number, Taxpayer identification number. State tax preparation free Prev  Up     Home   More Online Publications
Print - Click this link to Print this page

Contact Your Local Taxpayer Advocate

The Taxpayer Advocate Service is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Remember, the worst thing you can do is nothing at all.

TAS can help if you can’t resolve your problem with the IRS and:

  • Your problem is causing financial difficulties for you, your family, or your business.
  • You face (or your business is facing) an immediate threat of adverse action.
  • You’ve tried repeatedly to contact the IRS but no one has responded to you, or the IRS hasn’t responded by the date promised.

If you qualify for our help, we’ll do everything we can to get your problem resolved. You'll be assigned to one advocate who will be with you at every turn. Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved.

As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Our tax toolkit can help you understand these rights.
 


Here’s how to reach your local Taxpayer Advocate Service office:

There’s also a list of offices in Publication 1546 ( English, Spanish), Taxpayer Advocate Service–Your Voice at the IRS
 

Virtual Tax Help

Need help but don’t have a Taxpayer Advocate Service office near you?  We have a new option!  TAS now offers help through video conferencing.  

How does this work?

You can go to a location in one of the cities listed below and use high-definition two-way video conferencing to get face-to-face help from a taxpayer advocate in another city.  Similar to talking to a case advocate in person, this allows you to discuss your tax matters in a private setting.

Available cities:

Toll-Free Assistance
You can also call this toll-free number to find out if TAS can help you: 1-877-777-4778 or TTY/TTD: 1-800-829-4059. 

You can file Form 911, Request for Taxpayer Advocate Service Assistance, with the Taxpayer Advocate Service, or ask an IRS employee to complete the form on your behalf. Fax or mail the form to your Local Taxpayer Advocate.

 

 

Page Last Reviewed or Updated: 14-Mar-2014

The State Tax Preparation Free

State tax preparation free 2. State tax preparation free   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. State tax preparation free ” 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. State tax preparation free In many cases, however, losses from tax shelters produce little or no benefit to society, or the tax benefits are exaggerated beyond those intended. State tax preparation free Those cases are called “abusive tax shelters. State tax preparation free ” An investment that is considered a tax shelter is subject to restrictions, including the requirement that it be disclosed, as discussed later. State tax preparation free Topics - This chapter discusses: Abusive Tax Shelters , Rules To Curb Abusive Tax Shelters , Investor Reporting , Penalties , and Whether To Invest . State tax preparation free 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. State tax preparation free Abusive Tax Shelters Abusive tax shelters are marketing schemes involving artificial transactions with little or no economic reality. State tax preparation free 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. State tax preparation free Despite appearances to the contrary, the taxpayer generally risks little. State tax preparation free 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. State tax preparation free 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. State tax preparation free (But see the appraisal requirements discussed under Rules To Curb Abusive Tax Shelters , later. State tax preparation free ) They are commonly marketed in terms of the ratio of tax deductions allegedly available to each dollar invested. State tax preparation free This ratio (or “write-off”) is frequently said to be several times greater than one-to-one. State tax preparation free 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. State tax preparation free However, you should ask the following questions, which might provide a clue to the abusive nature of the plan. State tax preparation free 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. State tax preparation free These provisions include the following. State tax preparation free Disclosure of reportable transactions. State tax preparation free   You must disclose information for each reportable transaction in which you participate. State tax preparation free See Reportable Transaction Disclosure Statement , later. State tax preparation free   Material advisors with respect to any reportable transaction must disclose information about the transaction on Form 8918, Material Advisor Disclosure Statement. State tax preparation free To determine whether you are a material advisor to a transaction, see the Instructions for Form 8918. State tax preparation free   Material advisors will receive a reportable transaction number for the disclosed reportable transaction. State tax preparation free They must provide this number to all persons to whom they acted as a material advisor. State tax preparation free They must provide the number at the time the transaction is entered into. State tax preparation free 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. State tax preparation free For information on penalties for failure to disclose and failure to maintain lists, see Internal Revenue Code sections 6707, 6707A, and 6708. State tax preparation free Requirement to maintain list. State tax preparation free   Material advisors must maintain a list of persons to whom they provide material aid, assistance, or advice on any reportable transaction. State tax preparation free 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. State tax preparation free See Regulations section 301. State tax preparation free 6112-1 for more information (including what information is required to be included on the list). State tax preparation free Confidentiality privilege. State tax preparation free   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. State tax preparation free Appraisal requirement for donated property. State tax preparation free   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. State tax preparation free If you claim a deduction of more than $500,000 for the donated property, you generally must attach the qualified appraisal to your return. State tax preparation free If you file electronically, see Form 8453, U. State tax preparation free S. State tax preparation free Individual Income Tax Transmittal for an IRS e-file Return, and its instructions. State tax preparation free For more information about appraisals, including exceptions, see Publication 561. State tax preparation free Passive activity loss and credit limits. State tax preparation free   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. State tax preparation free For more detailed information about determining and reporting income, losses, and credits from passive activities, see Publication 925. State tax preparation free Interest on penalties. State tax preparation free   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. State tax preparation free Accounting method restriction. State tax preparation free   Tax shelters generally cannot use the cash method of accounting. State tax preparation free Uniform capitalization rules. State tax preparation free   The uniform capitalization rules generally apply to producing property or acquiring it for resale. State tax preparation free Under those rules, the direct cost and part of the indirect cost of the property must be capitalized or included in inventory. State tax preparation free For more information, see Publication 538. State tax preparation free Denial of deduction for interest on an underpayment due to a reportable transaction. State tax preparation free   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. State tax preparation free This rule applies to reportable transactions entered into in tax years beginning after October 22, 2004. State tax preparation free 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. State tax preparation free The guidance is the conclusion of the IRS on how the law is applied to a particular set of facts. State tax preparation free Guidance is published in the Internal Revenue Bulletin for taxpayers' information and also for use by IRS officials. State tax preparation free 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. State tax preparation free 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. State tax preparation free 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. State tax preparation free Investor Reporting You may be required to file a reportable transaction disclosure statement. State tax preparation free Reportable Transaction Disclosure Statement Use Form 8886 to disclose information for each reportable transaction (discussed later) in which you participated. State tax preparation free Generally, you must attach Form 8886 to your return for each tax year in which you participated in the transaction. State tax preparation free 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). State tax preparation free 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. State tax preparation free  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. State tax preparation free If you use a computer-generated or substitute Form 8886, it must be an exact copy of the official IRS form. State tax preparation free 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. State tax preparation free See Penalty for failure to disclose a reportable transaction , later under Penalties. State tax preparation free The following discussion briefly describes reportable transactions. State tax preparation free For more details, see the Instructions for Form 8886. State tax preparation free Reportable transaction. State tax preparation free   A reportable transaction is any of the following. State tax preparation free A listed transaction. State tax preparation free A confidential transaction. State tax preparation free A transaction with contractual protection. State tax preparation free A loss transaction. State tax preparation free A transaction of interest entered into after November 1, 2006. State tax preparation free Note. State tax preparation free Transactions with a brief asset holding period were removed from the definition of reportable transaction for transactions entered into after August 2, 2007. State tax preparation free Listed transaction. State tax preparation free   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. State tax preparation free These transactions have been identified in notices, regulations, and other published guidance issued by the IRS. State tax preparation free For a list of existing guidance, see Notice 2009-59 in Internal Revenue Bulletin 2009-31, available at www. State tax preparation free irs. State tax preparation free gov/irb/2009-31_IRB/ar07. State tax preparation free html. State tax preparation free Confidential transaction. State tax preparation free   A confidential transaction is offered to you under conditions of confidentiality and for which you have paid an advisor a minimum fee. State tax preparation free 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. State tax preparation free The transaction is treated as confidential even if the conditions of confidentiality are not legally binding on you. State tax preparation free Transaction with contractual protection. State tax preparation free   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. State tax preparation free For information on exceptions, see Revenue Procedure 2007-20 in Internal Revenue Bulletin 2007-7, available at www. State tax preparation free irs. State tax preparation free gov/irb/2007-07_IRB/ar15. State tax preparation free html. State tax preparation free Loss transaction. State tax preparation free   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. State tax preparation free 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. State tax preparation free   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. State tax preparation free 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. State tax preparation free irs. State tax preparation free gov/irb/2004-50_IRB/ar11. State tax preparation free html. State tax preparation free Transaction of interest. State tax preparation free   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. State tax preparation free The IRS has identified the following transactions of interest. State tax preparation free “Toggling” grantor trusts as described in Notice 2007-73, 2007-36 I. State tax preparation free R. State tax preparation free B. State tax preparation free 545, available at www. State tax preparation free irs. State tax preparation free gov/irb/2007-36_IRB/ar20. State tax preparation free html. State tax preparation free Certain transactions involving contributions of a successor member interest in a limited liability company as described in Notice 2007-72, 2007-36 I. State tax preparation free R. State tax preparation free B. State tax preparation free 544, available at www. State tax preparation free irs. State tax preparation free gov/irb/2007-36_IRB/ar19. State tax preparation free html. State tax preparation free 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. State tax preparation free R. State tax preparation free B. State tax preparation free 1194, available at www. State tax preparation free irs. State tax preparation free gov/irb/2008-47_IRB/ar11. State tax preparation free html. State tax preparation free Certain transactions involving a U. State tax preparation free S. State tax preparation free 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. State tax preparation free R. State tax preparation free B. State tax preparation free 312, available at www. State tax preparation free irs. State tax preparation free gov/irb/2009-03_IRB/ar10. State tax preparation free html. State tax preparation free   For updates to this list, go to www. State tax preparation free irs. State tax preparation free gov/Businesses/Corporations/Abusive-Tax-Shelters-and-Transactions. State tax preparation free Penalties Investing in an abusive tax shelter may lead to substantial expenses. State tax preparation free First, the promoter generally charges a substantial fee. State tax preparation free 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. State tax preparation free You may also be subject to the penalty for failure to pay tax. State tax preparation free These penalties are explained in the following paragraphs. State tax preparation free Accuracy-related penalties. State tax preparation free   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). State tax preparation free 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. State tax preparation free Your failure to disclose a reportable transaction is a strong indication that you failed to act in good faith. State tax preparation free   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. State tax preparation free   The 20% penalties do not apply to any underpayment attributable to a reportable transaction understatement subject to an accuracy-related penalty (discussed later). State tax preparation free Negligence or disregard of rules or regulations. State tax preparation free   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. State tax preparation free 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. State tax preparation free    Negligence includes any failure to make a reasonable attempt to comply with the provisions of the Internal Revenue Code. State tax preparation free It also includes any failure to keep adequate books and records. State tax preparation free A return position that has a reasonable basis is not negligence. State tax preparation free   Disregard includes any careless, reckless, or intentional disregard of rules or regulations. State tax preparation free   The penalty for disregard of rules and regulations can be avoided if all the following are true. State tax preparation free You keep adequate books and records. State tax preparation free You have a reasonable basis for your position on the tax issue. State tax preparation free You make an adequate disclosure of your position. State tax preparation free Use Form 8275 to make your disclosure and attach it to your return. State tax preparation free To disclose a position contrary to a regulation, use Form 8275-R. State tax preparation free Use Form 8886 to disclose a reportable transaction (discussed earlier). State tax preparation free Substantial understatement of tax. State tax preparation free   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. State tax preparation free 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. State tax preparation free 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. State tax preparation free   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. State tax preparation free In that way, you can avoid the substantial understatement penalty if you have a reasonable basis for your position on the tax issue. State tax preparation free Disclosure of the tax shelter item on a tax return does not reduce the amount of the understatement. State tax preparation free   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. State tax preparation free 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. State tax preparation free Substantial valuation misstatement. State tax preparation free   In general, you are liable for a 20% penalty for a substantial valuation misstatement if all the following are true. State tax preparation free The value or adjusted basis of any property claimed on the return is 150% or more of the correct amount. State tax preparation free You underpaid your tax by more than $5,000 because of the misstatement. State tax preparation free You cannot establish that you had reasonable cause for the underpayment and that you acted in good faith. State tax preparation free   You may be assessed a penalty of 40% for a gross valuation misstatement. State tax preparation free 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. State tax preparation free The penalty rate is also 40% if the property's correct value or adjusted basis is zero. State tax preparation free Transaction lacking economic substance. State tax preparation free   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. State tax preparation free 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. State tax preparation free   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. State tax preparation free   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. State tax preparation free   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. State tax preparation free Relevant facts include any facts affecting the tax treatment of the transaction. State tax preparation free    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. State tax preparation free Undisclosed foreign financial asset understatement. State tax preparation free   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. State tax preparation free 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. State tax preparation free The penalty applies to any part of an underpayment related to the following undisclosed foreign financial assets. State tax preparation free Any foreign business you control, reportable on Form 5471, Information Return of U. State tax preparation free S. State tax preparation free Persons With Respect To Certain Foreign Corporations, or Form 8865, Return of U. State tax preparation free S. State tax preparation free Persons With Respect to Certain Foreign Partnerships. State tax preparation free Certain transfers of property to a foreign corporation or partnership, reportable on Form 926, Return by a U. State tax preparation free S. State tax preparation free Transferor of Property to a Foreign Corporation, or certain distributions to a foreign person, reportable on Form 8865. State tax preparation free Your ownership interest in certain foreign financial assets, temporarily reportable on Form 8275 or 8275-R. State tax preparation free    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. State tax preparation free See the Instructions for Form 8938 for details. State tax preparation free    Your acquisition, disposition, or substantial change in ownership interest in a foreign partnership, reportable on Form 8865. State tax preparation free 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. State tax preparation free Penalty for incorrect appraisals. State tax preparation free   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. State tax preparation free For details on the penalty amount and exceptions, see Publication 561. State tax preparation free Penalty for failure to disclose a reportable transaction. State tax preparation free   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). State tax preparation free For an individual, the minimum penalty is $5,000 and the maximum is $10,000 (or $100,000 for a listed transaction). State tax preparation free This penalty is in addition to any other penalty that may be imposed. State tax preparation free   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. State tax preparation free For information on rescission, see Revenue Procedure 2007-21 in Internal Revenue Bulletin 2007-9 available at www. State tax preparation free irs. State tax preparation free gov/irb/2007-09_IRB/ar12. State tax preparation free html. State tax preparation free Accuracy-related penalty for a reportable transaction understatement. State tax preparation free   If you have a reportable transaction understatement, you may have to pay a penalty equal to 20% of the amount of that understatement. State tax preparation free 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. State tax preparation free The penalty is 30% rather than 20% for the part of any reportable transaction understatement if the transaction was not properly disclosed. State tax preparation free You may not have to pay the 20% penalty if you meet the strengthened reasonable cause and good faith exception. State tax preparation free 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. State tax preparation free   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. State tax preparation free Civil fraud penalty. State tax preparation free   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. State tax preparation free Joint return. State tax preparation free   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. State tax preparation free Failure to pay tax. State tax preparation free   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. State tax preparation free 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. State tax preparation free Prev  Up  Next   Home   More Online Publications