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Tax Forms For 2010

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Tax Forms For 2010

Tax forms for 2010 1. Tax forms for 2010   Application, Approval, and Appeal Procedures Table of Contents Introduction Topics - This chapter discusses: Application ProceduresForms Required Required Inclusions Miscellaneous Procedures Rulings and Determination LettersEffective Date of Exemption Revocation or Modification of Exemption Appeal ProceduresAppeals Office Consideration EO Technical Consideration Administrative Remedies Appeal to Courts Group Exemption LetterCentral Organization Application Procedure Keeping the Group Exemption Letter in Force Events Causing Loss of Group Exemption Introduction If your organization is one of the organizations described in this publication and is seeking recognition of tax-exempt status from the IRS, you should follow the procedures described in this chapter and the instructions that accompany the appropriate application forms. Tax forms for 2010 For information on section 501(c)(3) organizations, go to Section 501(c)(3) Organizations chapter 3. Tax forms for 2010 If your organization is seeking exemption under one of the other paragraphs of section 501(c), see chapter 4. Tax forms for 2010 Topics - This chapter discusses: Application procedures that generally apply to all organizations discussed in this publication, including the application forms; Rulings and determination letters (approvals/disapprovals); Appeal procedures available if an adverse determination letter is proposed; and Group exemption letters. Tax forms for 2010 Application Procedures Oral requests for recognition of exemption will not be considered by the IRS. Tax forms for 2010 Your application for tax-exempt status must be in writing using the appropriate forms as discussed below. Tax forms for 2010 Forms Required If your organization is seeking recognition of exemption from federal income tax, it must use a specific application prescribed by the IRS in Revenue Procedure 2013–9, sec. Tax forms for 2010 3. Tax forms for 2010 If your organization is a central organization with exempt status, see Group Exemption Letter , later. Tax forms for 2010 All applications must be signed by an authorized individual. Tax forms for 2010 Form 1023, Application for Recognition of Exemption. Tax forms for 2010   File Form 1023 if you are seeking recognition of exemption under section: 501(c)(3) Corporations, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports, or prevention of cruelty for children or animals, 501(e) Cooperative hospital service organization, 501(f) Cooperative service organization of operating educational organizations, 501(k) Certain organizations providing child care, 501(n) Charitable risk pools, and 501(q) Credit counseling organizations. Tax forms for 2010 Form 1024, Application for Recognition of Exemption Under Section 501(a). Tax forms for 2010    File Form 1024 if you are seeking recognition of exemption under section: 501(c)(2) Title holding corporations, 501(c)(4) Civic leagues, social welfare organizations, 501(c)(5) Labor, agricultural, or horticultural organizations, 501(c)(6) Business leagues, chambers of commerce, etc. Tax forms for 2010 , 501(c)(7) Social clubs, 501(c)(8) Fraternal beneficiary societies, orders, or associations, 501(c)(9) Voluntary employees’ beneficiary associations, 501(c)(10) Domestic fraternal societies, orders, etc. Tax forms for 2010 , 501(c)(12) Benevolent life insurance associations, mutual ditch or irrigation companies, mutual or cooperative telephone companies, 501(c)(13) Cemetery companies, 501(c)(15) Mutual insurance companies or associations, 501(c)(17) Trusts providing for the payment of supplemental unemployment compensation benefits, 501(c)(19) A post, organization, auxiliary unit, etc. Tax forms for 2010 of past or present members of the Armed Forces of the United States, and 501(c)(25) Title holding corporations or trusts. Tax forms for 2010  Form 8718, User Fee for Exempt Organization Determination Letter Request, must also be sent along with Form 1024. Tax forms for 2010 Letter application. Tax forms for 2010   If your organization is seeking recognition of exemption under section 501(c)(11), (14), (16), (18), (21), (22), (23), (26), (27), (28), or (29), submit a letter application with Form 8718. Tax forms for 2010 See Required Inclusions for the information to include with the letter application. Tax forms for 2010 Form 1028. Tax forms for 2010   Use Form 1028 if your organization is a farmers’ cooperative seeking recognition of exemption under section 521. Tax forms for 2010 You must also submit Form 8718. Tax forms for 2010 Form 8871. Tax forms for 2010    Use Form 8871 if you are a political party or campaign committee for a candidate for federal, state or local office seeking to be treated as tax-exempt under section 527. Tax forms for 2010 See Political Organization Income Tax Return , later. Tax forms for 2010    Some organizations do not have to use specific application forms. Tax forms for 2010 The application your organization must use is specified in the chapter in this publication dealing with your kind of organization. Tax forms for 2010 It is also shown in the Organization Reference Chart, later. Tax forms for 2010 Power of attorney. Tax forms for 2010   If your organization expects to be represented by an individual such as an attorney, CPA, officer or other person authorized to practice before the IRS, whether in person or by correspondence, you must file a Form 2848 with your exemption application. Tax forms for 2010 The power of attorney must specifically authorize an individual to represent your organization. Tax forms for 2010 You cannot name an organization, firm, etc. Tax forms for 2010 as your representative. Tax forms for 2010 Form 2848, Power of Attorney and Declaration of Representative, can be used for this purpose. Tax forms for 2010 The categories of individuals who can represent you before the IRS are listed on the form. Tax forms for 2010 Non-exemption for terrorist organizations. Tax forms for 2010   An organization that is identified or designated as a terrorist organization within the meaning of section 501(p)(2) is not eligible to apply for recognition of exemption. Tax forms for 2010 User fee. Tax forms for 2010   The law requires the payment of a user fee for determination letter requests such as your application for recognition of tax-exempt status. Tax forms for 2010 If you are filing Form 1023, user fee information is included in Part XI. Tax forms for 2010 If you are required to apply for recognition of exemption by submitting Form 1024, a letter application, etc. Tax forms for 2010 and you must pay a user fee, you should use Form 8718 to figure the amount of your user fee and to pay it. Tax forms for 2010 Your payment must accompany your request. Tax forms for 2010 The IRS will not process a request unless the fee has been paid. Tax forms for 2010    For the current user fee amount and processing time for applications go to IRS. Tax forms for 2010 gov and select “Charities and Non-Profits” from the buttons near the top. Tax forms for 2010 Then select the underlined link “How to Apply To Be Tax-Exempt” for the latest user fees or I want to check the status of my application for more information. Tax forms for 2010 You can also call 1-877-829-5500. Tax forms for 2010 Required Inclusions Employer identification number (EIN). Tax forms for 2010   Every exempt organization must have an EIN, whether or not it has any employees. Tax forms for 2010 An EIN is required before an exemption application is submitted. Tax forms for 2010 Information on how to apply for an EIN by using one of the following methods can be found at Employer ID Numbers (EIN): Online— This is the preferred method for requesting an EIN. Tax forms for 2010 The EIN is issued immediately once the application information is validated. Tax forms for 2010 By telephone at 1-800-829-4933, from 7:00 a. Tax forms for 2010 m. Tax forms for 2010 to 7:00 p. Tax forms for 2010 m. Tax forms for 2010 local time, Monday through Friday. Tax forms for 2010 The EIN is provided over the phone to an authorized individual. Tax forms for 2010 By mailing or faxing Form SS-4, Application for Employer Identification Number. Tax forms for 2010 If the faxed Form SS-4 includes the taxpayer's fax number, a fax will be sent back with the EIN within four (4) business days. Tax forms for 2010    Use only one method for each entity so you do not receive more than one EIN for an entity. Tax forms for 2010   If you previously applied for an EIN and have not yet received it, or you are unsure whether you have an EIN, please call our toll-free customer account services number, 1-877-829-5500, for assistance. Tax forms for 2010 Organizing documents. Tax forms for 2010   Your application should include a copy of the organizing or enabling document that is signed by a principal officer or is accompanied by a written declaration signed by an authorized individual certifying that the document is a complete and accurate copy of the original or meets the requirements of a conformed copy. Tax forms for 2010   If your organizing or enabling document are articles of incorporation, include evidence that it was filed and approved by a state official. Tax forms for 2010 (For example, a stamped “Filed” copy dated by the Secretary of State is prima facie evidence that it was filed and approved by a state official. Tax forms for 2010 ) A copy of the articles of incorporation can also be submitted with a written declaration signed by an authorized individual indicating the copy is complete and was filed and approved by the state, including the date filed. Tax forms for 2010 Bylaws. Tax forms for 2010   Bylaws alone are not organizing documents. Tax forms for 2010 However, if your organization has adopted bylaws, include a current copy. Tax forms for 2010 The bylaws need not be signed if submitted as an attachment. Tax forms for 2010   If your organization's name has been officially changed by an amendment to your organizing instruments, you should also attach a conformed copy of that amendment to your application. Tax forms for 2010    Bylaws may be considered an organizing document only if they are properly structured (includes name, purpose, signatures, and intent to form an organization). Tax forms for 2010 Conformed copy. Tax forms for 2010   A conformed copy is a copy that agrees with the original and all amendments to it. Tax forms for 2010 If the original document required a signature, the copy should either be signed by a principal officer or, if not signed, be accompanied by a written declaration signed by an authorized officer of the organization. Tax forms for 2010 With either option, the officer must certify that the document is a complete and accurate copy of the original. Tax forms for 2010 A certificate of incorporation should be approved and dated by an appropriate state official. Tax forms for 2010 Attachments. Tax forms for 2010    When submitting attachments, every attachment should show your organization's name and EIN. Tax forms for 2010 It should also state that it is an attachment to your application form and identify the part and line item number to which it applies. Tax forms for 2010 Original documents. Tax forms for 2010   Do not submit original documents because they become part of the IRS file and cannot be returned. Tax forms for 2010 Description of activities. Tax forms for 2010   Your application must include a full description of the proposed activities of your organization, including each of the fundraising activities of a section 501(c)(3) organization and a narrative description of anticipated receipts and contemplated expenditures. Tax forms for 2010 When describing the activities in which your organization expects to engage, you must include the standards, criteria, procedures, or other means that your organization adopted or planned for carrying out those activities. Tax forms for 2010   To determine the information you need to provide, you should study the part of this publication that applies to your organization. Tax forms for 2010 The appropriate chapter will describe the purposes and activities that your organization must pursue, engage in, and include in your application in order to achieve exempt status. Tax forms for 2010   Often, your organization's articles of organization (or other organizing instruments) contain descriptions of your organization's purposes and activities. Tax forms for 2010   Your application should describe completely and in detail your past, present, and planned activities. Tax forms for 2010 Financial data. Tax forms for 2010   You must include in your application financial statements showing your receipts and expenditures and a balance sheet for the current year and the 3 preceding years (or for the number of years your organization was in existence, if less than 4 years). Tax forms for 2010 For each accounting period, you must describe the sources of your receipts and the nature of your expenditures. Tax forms for 2010   If you have not yet begun operations, or have operated for less than 1 year, a proposed budget for 2 full accounting periods and a current statement of assets and liabilities will be acceptable. Tax forms for 2010 Exempt status established in application. Tax forms for 2010   If your application and its supporting documents show that your organization meets the requirements for tax-exempt status under the Code section you applied, the IRS will issue a favorable determination letter or ruling. Tax forms for 2010 Miscellaneous Procedures To help in processing your application, be sure to attach all schedules, statements, and other documents required by the application form. Tax forms for 2010 If you do not attach them, you may have to resubmit your application or you may otherwise encounter a delay in processing your application. Tax forms for 2010 Incomplete application. Tax forms for 2010   If an application is not complete and does not contain all the required attachments found under Required Inclusions, the IRS may return it to you for completion. Tax forms for 2010 The IRS may keep the application and send a letter requesting the missing information if most of the information has been received. Tax forms for 2010   If the IRS returns the application or requests additional information from you, that application will be considered filed on the date the substantially completed application is postmarked, or if no postmark, received at the IRS. Tax forms for 2010   Generally, the user fee will not be refunded if an incomplete application is filed. Tax forms for 2010   Additional information may be requested if necessary to clarify the nature of your organization. Tax forms for 2010 Application made under wrong paragraph of section 501(c). Tax forms for 2010   Occasionally, an organization appears to qualify for exemption under a paragraph of section 501(c) that is different from the one for which the organization applied. Tax forms for 2010 If the application was made on Form 1024, which applies to more than one paragraph of section 501(c), the organization can be recognized as exempt under any paragraph to which the form applies if the organization has agreed to have its application considered under that paragraph. Tax forms for 2010 It must also supply any additional information required for the application under the new paragraph. Tax forms for 2010 Different application form needed. Tax forms for 2010   If a different application form is required for your organization, the IRS will so advise your organization and will provide the appropriate application form for your convenience in reapplying under that paragraph, if you wish to do so. Tax forms for 2010 Although supporting information previously furnished need not be duplicated, you must provide any necessary additional information required for the application. Tax forms for 2010 If your reply is not received within a limited time, your application will be processed only for the paragraph under which you originally applied. Tax forms for 2010   When a specific application form is needed for the paragraph under which your organization qualifies, that form is required before a letter recognizing exemption can be issued. Tax forms for 2010 This includes cases in which a determination letter is modified to recognize an organization's exempt status under a paragraph other than the paragraph under which it originally established exemption. Tax forms for 2010 IRS responses. Tax forms for 2010   Organizations that submit a complete application will receive an acknowledgment from the IRS. Tax forms for 2010 Others will receive a letter requesting more information or returning an incomplete application. Tax forms for 2010 Applicants also will be notified if the application is forwarded to EO Technical Office for consideration. Tax forms for 2010 These letters will be sent out as soon as possible after receipt of the organization's application. Tax forms for 2010 Withdrawal of application. Tax forms for 2010   An application may be withdrawn at any time before the issuance of a ruling or determination letter upon the written request of a principal officer or authorized representative of your organization. Tax forms for 2010 However, the withdrawal will not prevent the information contained in the application from being used by the IRS in any subsequent examination of your organization's returns. Tax forms for 2010 The information forwarded with an application will not be returned to your organization and, generally, when an application is withdrawn, the user fee paid will not be refunded. Tax forms for 2010 Requests for withholding of information from the public. Tax forms for 2010   The law requires many exempt organizations and private foundations to make their application forms and annual information returns available for public inspection. Tax forms for 2010 The law also requires the IRS to make available for public inspection, in accordance with section 6104 and the related regulations, your approved application for recognition of exemption (including any papers submitted in support of the application) and the ruling or determination letter (discussed later, under Rulings and Determination Letters . Tax forms for 2010 )   Any information submitted in the application or in support of it that relates to any trade secret, patent, process, style of work, or apparatus, upon request, can be withheld from public inspection if the IRS determines that the disclosure of such information would adversely affect the organization. Tax forms for 2010 Your request must: Identify the material to be withheld (the document, page, paragraph, and line) by clearly marking it “Not Subject To Public Inspection. Tax forms for 2010 ” Include the reasons for your organization's position that the information is of the type that can be withheld from public inspection. Tax forms for 2010 Be filed with the office where your organization files the documents in which the material to be withheld is contained. Tax forms for 2010 Where to file. Tax forms for 2010   Send your application for exempt status and Form 8718, (if required) to: Internal Revenue Service PO Box 12192 Covington, KY 41012-0192   Your application will be considered by EO Determinations, who will either issue a favorable determination letter to your organization, issue an adverse determination letter denying the exempt status claimed in the application, or refer the case to the Exempt Organizations Technical Office (EO Technical). Tax forms for 2010    Form 8940, Request for Miscellaneous Determination. Tax forms for 2010 You can request miscellaneous determinations under sections 507, 509(a), 4940, 4942, 4945, and 6033 with Form 8940. Tax forms for 2010 Nonexempt charitable trusts also file Form 8940 for an initial determination of section 509(a)(3) status or change to their type. Tax forms for 2010 See Form 8940 and instructions for more information. Tax forms for 2010 Requests other than applications. Tax forms for 2010 Requests other than applications for recognition of exemption or Form 8940 (for example, requests for rulings involving feeder organizations, application of excise taxes to activities of private foundations, taxation of unrelated business income, etc. Tax forms for 2010 ) should be sent to: Internal Revenue Service  Attention: EO Letter Rulings PO Box 27720 McPherson Station Washington, DC 20038 These requests, similar to applications for recognition of exemption previously discussed, must be accompanied by the appropriate user fee. Tax forms for 2010 The schedule for user fees, including those for requests other than applications, can be found in Revenue Procedure 2013-8, 2013-1 I. Tax forms for 2010 R. Tax forms for 2010 B. Tax forms for 2010 237. Tax forms for 2010 Referral to EO Technical. Tax forms for 2010   EO Determinations will refer to EO Technical any exempt organization issue concerning qualification for exemption or foundation status for which there is no published precedent or for which there is reason to believe that nonuniformity exists. Tax forms for 2010 EO Determinations can request technical advice on any technical or procedural question that cannot be resolved on the basis of law, regulations, or a clearly applicable revenue ruling or other published precedent. Tax forms for 2010 An organization can request that an issue be referred to EO Technical for technical advice if it feels that a lack of uniformity exists as to the disposition of the issue or if an issue is so unusual or complex as to warrant consideration by EO Technical. Tax forms for 2010 If a determination letter is issued based on technical advice from EO Technical regarding qualification for exemption or foundation status, no further administrative appeal is available on the issue that was the subject of technical advice. Tax forms for 2010 Reminder. Tax forms for 2010   The law requires payment of a user fee for determination letter requests. Tax forms for 2010 Go to IRS. Tax forms for 2010 gov/Charities and select Current User Fees-Exempt Organizations to find the required payment. Tax forms for 2010 Payment must accompany each request. Tax forms for 2010 Rulings and Determination Letters Elimination of the advance public charity status. Tax forms for 2010   New regulations eliminate the advance ruling process for a section 501(c)(3) organization. Tax forms for 2010 Under the new regulations, a new section 501(c)(3) organization will be classified as a publicly supported organization and not a private foundation if it can show when it applies for tax-exempt status that it reasonably can be expected to be publicly supported. Tax forms for 2010 The new rules no longer require the organization to file Form 8734, Support Schedule for Advance Ruling Period, after completing its first 5 tax years. Tax forms for 2010 See Elimination of the Advance Ruling Process . Tax forms for 2010 An organization must describe fully the activities in which it expects to engage. Tax forms for 2010 This includes standards, procedures, or other means adopted or planned by the organization for carrying out its activities, expected sources of funds, and the nature of its contemplated expenses. Tax forms for 2010 When an organization does not supply the information previously mentioned under Application Procedures , or fails to furnish a sufficiently detailed description of its proposed activities to permit a conclusion that it will clearly be exempt, a proposed adverse determination letter or ruling may be issued. Tax forms for 2010 Adverse determination. Tax forms for 2010   A proposed adverse ruling or determination letter will be issued to an organization that has not provided sufficiently detailed information to establish that it qualifies for exemption or if the information provided establishes that it does not qualify for exemption. Tax forms for 2010 An organization can appeal a proposed adverse ruling or determination letter. Tax forms for 2010 See Appeal Procedures , later. Tax forms for 2010 Effective Date of Exemption A ruling or determination letter recognizing exemption is usually effective as of the date of formation of an organization if, during the period before the date of the ruling or determination letter, its purposes and activities were those required by the law. Tax forms for 2010 (See Application for Recognition of Exemption in chapter 3 for the special rule for organizations applying for recognition of exemption under section 501(c)(3). Tax forms for 2010 ) Upon obtaining recognition of exemption, the organization can file a claim for a refund of income taxes paid for the period for which its exempt status is recognized. Tax forms for 2010 If an organization is required to alter its activities or substantially amend its charter to qualify, the ruling or determination letter recognizing exemption will be effective as of the date specified in the letter. Tax forms for 2010 If a nonsubstantive amendment is made, such as correction of a clerical error in the enabling instrument or the addition of a dissolution clause, exemption will ordinarily be recognized as of the date of formation if the activities of the organization before the ruling or determination are consistent with the exemption requirements. Tax forms for 2010 A ruling or determination letter recognizing exemption cannot be relied on if there is a material change, inconsistent with exemption, in the character, the purpose, or the method of operation of the organization. Tax forms for 2010 Also, a ruling or determination letter cannot be relied on if it is based on any inaccurate material factual representations. Tax forms for 2010 Revocation or Modification of Exemption A ruling or determination letter recognizing exemption may be revoked or modified by: A notice to the organization to which the ruling or determination letter originally was issued, Enactment of legislation or ratification of a tax treaty, A decision of the United States Supreme Court, Issuance of temporary or final regulations, or Issuance of a revenue ruling, a revenue procedure, or other statement published in the Internal Revenue Bulletin or Cumulative Bulletin. Tax forms for 2010 When revocation takes effect. Tax forms for 2010   If the organization omitted or misstated a material fact, operated in a manner materially different from that originally represented, or, with regard to organizations to which section 503 applies, engaged in a prohibited transaction (such as diverting corpus or income from its exempt purpose), the revocation or modification may be retroactive. Tax forms for 2010 Material change in organization. Tax forms for 2010   If there is a material change, inconsistent with exemption, in the character, purpose, or method of operation of the organization, revocation or modification will ordinarily take effect as of the date of that material change. Tax forms for 2010 Relief from retroactivity. Tax forms for 2010   If a ruling or determination letter was issued in error or the IRS changed its position after issuing a letter or ruling, and if section 7805(b) relief is granted, retroactivity of the revocation or modification ordinarily will be limited to a date not earlier than that on which the original ruling or determination letter was modified or revoked. Tax forms for 2010 For more information on requesting section 7805(b) relief, see Revenue Procedure 2013-4, 2013-1 I. Tax forms for 2010 R. Tax forms for 2010 B. Tax forms for 2010 126, sec. Tax forms for 2010 13 (or later update). Tax forms for 2010 Foundations. Tax forms for 2010   The determination of the effective date is the same for the revocation or modification of foundation status or operating foundation status unless the effective date is expressly covered by statute or regulations. Tax forms for 2010 Written notice. Tax forms for 2010   If an EO area manager concludes, as a result of examining an information return or considering information from any other source, that a ruling or determination letter should be revoked or modified, the organization will be advised in writing of the proposed action and the reasons for it. Tax forms for 2010   The organization will also be advised of its right to protest the proposed action by requesting Appeals Office consideration. Tax forms for 2010 The appeal procedures are discussed next. Tax forms for 2010 Appeal Procedures If your organization applies for tax-exempt status and EO Determination decides your organization does not qualify, your organization will be advised of its rights to protest the determination by requesting Appeals Office consideration. Tax forms for 2010 This process does not apply to determinations issued by EO Technical. Tax forms for 2010 Your organization must submit a statement of its views fully explaining its reasoning. Tax forms for 2010 The statement must be submitted within 30 days from the date of the adverse determination letter and must state whether it wishes Appeals Office consideration. Tax forms for 2010 Representation. Tax forms for 2010   A principal officer or trustee can represent an organization at any level of appeal within the IRS. Tax forms for 2010 Also, an attorney, certified public accountant, or individual enrolled to practice before the IRS can represent the organization. Tax forms for 2010   If the organization's representative attends a conference without a principal officer or trustee, the representative must file a proper power of attorney or a tax information authorization before receiving or inspecting confidential information. Tax forms for 2010 Form 2848 or Form 8821, Tax Information Authorization, as appropriate (or any other properly written power of attorney or authorization), can be used for this purpose. Tax forms for 2010 These forms can be obtained from the IRS. Tax forms for 2010 For more information, see Publication 947, Practice Before the IRS and Power of Attorney. Tax forms for 2010 Appeals Office Consideration EO Determinations will consider the statement protesting and appealing (hereinafter appealing) the adverse determination and decide if the information affects its determination. Tax forms for 2010 If the appeal does not provide a basis to reconsider its adverse determination, it will forward the appeal and case file to the Appeals Office. Tax forms for 2010 For more information about the role of the Appeals Office, see Publication 892, Exempt Organization Appeal Procedures for Unagreed Issues. Tax forms for 2010 The appeal should include the following information. Tax forms for 2010 The organization's name, address, daytime telephone number, and employer identification number. Tax forms for 2010 A statement that the organization wants to protest the determination. Tax forms for 2010 A copy of the letter showing the determination you disagree with, or the date and symbols on the determination letter. Tax forms for 2010 A statement of facts supporting the organization's position in any contested factual issue. Tax forms for 2010 A statement outlining the law or other authority the organization is relying on. Tax forms for 2010 A statement as to whether a conference at the Appeals Office is desired. Tax forms for 2010 The statement of facts in item 4 must be declared true under penalties of perjury. Tax forms for 2010 This may be done by adding to the protest the following signed declaration:   “Under penalties of perjury, I declare that I have examined the statement of facts presented in this protest and in any accompanying schedules and statements and, to the best of my knowledge and belief, it is true, correct, and complete. Tax forms for 2010 ”           Signature. Tax forms for 2010   If the organization's representative submits the appeal, a substitute declaration must be included, stating: That the representative prepared the appeal and accompanying documents, and Whether the representative knows personally that the statements of fact contained in the appeal and accompanying documents are true and correct. Tax forms for 2010 Be sure the appeal contains all of the information requested. Tax forms for 2010 Incomplete appeals will be returned for completion. Tax forms for 2010 If a conference is requested, it will be held at the Appeals Office, unless the organization requests that the meeting be held at a field office convenient to both parties. Tax forms for 2010 The Appeals Office, after considering the organization's appeal as well as information presented in any conference held, will notify the organization of its decision and issue an appropriate determination letter. Tax forms for 2010 An adverse decision can be appealed to the courts (discussed later). Tax forms for 2010 The Appeals Office must request technical advice from EO Technical on any exempt organization issue concerning qualification for exemption or foundation status for which there is no published precedent or for which there is reason to believe that nonuniformity exists. Tax forms for 2010 If an organization believes that its case involves such an issue, it should ask the Appeals Office to request technical advice. Tax forms for 2010 Any determination letter issued on the basis of technical advice from EO Technical cannot be appealed to the Appeals Office for those issues that were the subject of the technical advice from EO Technical. Tax forms for 2010 EO Technical Consideration If an application is referred to EO Technical for issuance of a ruling and an adverse ruling is issued, the organization will be informed of the basis for the conclusion, its right to file a protest within 30 days, and its right to have a conference with EO Technical. Tax forms for 2010 Administrative Remedies In the case of an application under section 501(c)(3), all of the following actions, called administrative remedies, must be completed by your organization before an unfavorable ruling or determination letter from the IRS can be appealed to the courts. Tax forms for 2010 The filing of a substantially completed application Form 1023 or group exemption request under section 501(c)(3) (described earlier in this chapter) or the filing of a request for a determination of foundation status (see Private Foundations and Public Charities in chapter 3). Tax forms for 2010 In the case of a late-filed application, requesting relief under Regulations section 301. Tax forms for 2010 9100 regarding applications for extensions of time for making an election or application for relief from tax (see Application for Recognition of Exemption in chapter 3). Tax forms for 2010 The timely submission of all additional information requested to perfect an exemption application or request for determination of private foundation status. Tax forms for 2010 Exhaustion of all administrative appeals available within the IRS, including protest of an adverse ruling issued by EO Technical in the case of an exemption application. Tax forms for 2010 The actions just described will not be considered completed until the IRS has had a reasonable time to act upon the appeal or protest, as the case may be. Tax forms for 2010 An organization will not be considered to have exhausted its administrative remedies before the earlier of: The completion of the steps just listed and the sending by certified or registered mail of a notice of final determination, or The expiration of the 270-day period in which the IRS has not issued a notice of final determination and the organization has taken, in a timely manner, all reasonable steps to secure a ruling or determination. Tax forms for 2010 270-day period. Tax forms for 2010   The 270-day period will be considered by the IRS to begin on the date a substantially completed Form 1023 or group exemption request is sent to the IRS. Tax forms for 2010 See Application Procedures , earlier, for information needed to complete Form 1023. Tax forms for 2010   If the application does not contain all of the required items, it will not be further processed and may be returned to the applicant for completion. Tax forms for 2010 The 270-day period, in this event, will not be considered as starting until the date the application is remailed to the IRS with the requested information, or, if a postmark is not evident, on the date the IRS receives a substantially completed application. Tax forms for 2010 Appeal to Courts If the IRS issues an unfavorable determination letter or ruling to your organization and you have exhausted all the administrative remedies just discussed, your organization can seek judicial remedies. Tax forms for 2010 For example, if your organization has paid the tax resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a refund in a U. Tax forms for 2010 S. Tax forms for 2010 District Court or the U. Tax forms for 2010 S. Tax forms for 2010 Court of Federal Claims. Tax forms for 2010 Or, if your organization elected not to pay the tax deficiency resulting from the adverse determination and met all other statutory prerequisites, it can file suit for a redetermination of the tax deficiencies in the United States Tax Court. Tax forms for 2010 For more information on these types of suits, get Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Tax forms for 2010 In certain situations, your organization can file suit for a declaratory judgment in the U. Tax forms for 2010 S. Tax forms for 2010 District Court for the District of Columbia, the U. Tax forms for 2010 S. Tax forms for 2010 Court of Federal Claims, or the U. Tax forms for 2010 S. Tax forms for 2010 Tax Court. Tax forms for 2010 This remedy is available if your organization received an adverse notice of final determination, or if the IRS failed to make a timely determination on your initial or continuing qualification or classification as an exempt organization. Tax forms for 2010 However, your exempt status claim must be as: An organization qualifying under section 501(c)(3), An organization to which a deduction for a contribution is allowed under section 170(c)(2), An organization that is a private foundation under section 509(a), A private operating foundation under section 4942(j)(3), or A cooperative organization that is exempt from tax under section 521. Tax forms for 2010 Adverse notice of final determination. Tax forms for 2010   The adverse notice of final determination referred to above is a ruling or determination letter sent by certified or registered mail holding that your organization: Is not described in section 501(c)(3) or section 170(c)(2), Is a private foundation as defined in section 4942(j)(3), or Is a public charity described in a part of section 509(a) or section 170(b)(1)(A) other than the part under which your organization requested classification. Tax forms for 2010 Favorable court rulings - IRS procedure. Tax forms for 2010   If a suit results in a final determination that your organization is exempt from tax, the IRS will issue a favorable ruling or determination letter, provided your organization has filed an application for exemption and submitted a statement that the underlying facts and applicable law are the same as in the period considered by the court. Tax forms for 2010 Group Exemption Letter A group exemption letter is a ruling or determination letter issued to a central organization recognizing on a group basis the exemption under section 501(c) of subordinate organizations on whose behalf the central organization has applied for recognition of exemption. Tax forms for 2010 A central organization is an organization that has one or more subordinates under its general supervision or control. Tax forms for 2010 A subordinate organization is a chapter, local, post, or unit of a central organization. Tax forms for 2010 A central organization may be a subordinate itself, such as a state organization that has subordinate units and is itself affiliated with a national (central) organization. Tax forms for 2010 A subordinate organization may or may not be incorporated, but it must have an organizing document. Tax forms for 2010 A subordinate that is organized and operated in a foreign country cannot be included in a group exemption letter. Tax forms for 2010 A subordinate described in section 501(c)(3) cannot be included in a group exemption letter if it is a private foundation described in section 509(a). Tax forms for 2010 If your organization is a subordinate controlled by a central organization (for example, a church, a veterans' organization, or a fraternal organization), you should check with the central organization to see if it has been issued a group exemption letter that covers your organization. Tax forms for 2010 If it has, you do not have to file a separate application unless your organization no longer wants to be included in the group exemption letter. Tax forms for 2010 If the group exemption letter does not cover your organization, ask your central organization about being included in the next annual group ruling update that it submits to the IRS. Tax forms for 2010 Central Organization Application Procedure If your organization is a central organization with affiliated subordinates under its control, it can apply for a group exemption letter for its subordinates, provided it has obtained recognition of its own exemption before or concurrently with the group exemption. Tax forms for 2010 You should make the application for such subordinates by letter instead of submitting either Form 1023 or 1024. Tax forms for 2010 This procedure relieves each of the subordinates covered by a group exemption letter from filing its own application. Tax forms for 2010 A central organization obtains its own recognition of exemption by sending its application to the IRS address shown on Form 8718 or Form 1023. Tax forms for 2010 If the central organization has previously obtained recognition of its own exemption, it must indicate its employer identification number and the date of the letter recognizing its exemption. Tax forms for 2010 It need not forward documents already submitted. Tax forms for 2010 However, if it has not already done so, the central organization must submit a copy of any amendment to its governing instruments or internal regulations as well as any information about changes in its character, purposes, or method of operation. Tax forms for 2010 Employer identification number. Tax forms for 2010   The central organization must have an EIN before it submits a completed exemption or group exemption application. Tax forms for 2010 Each subordinate must have its own EIN, even if it has no employees. Tax forms for 2010 When submitting its group exemption application, the central organization must provide an EIN for each subordinate organization. Tax forms for 2010 Information required for subordinate organizations. Tax forms for 2010   In addition to the information required to obtain recognition of its own exemption, the central organization must submit information for those subordinates to be included in the group exemption letter. Tax forms for 2010 The information should be forwarded in a letter signed by a principal officer of the central organization setting forth or including as attachments the following. Tax forms for 2010 Information verifying that the subordinates: Are affiliated with the central organization at the close of its annual accounting period; Are subject to its general supervision or control; Are all eligible to qualify for exemption under the same paragraph of section 501(c), though not necessarily the paragraph under which the central organization itself is exempt; Are not private foundations if the application for a group exemption letter involves section 501(c)(3); Are all on the same accounting period as the central organization if they are to be included in group returns; and Are organizations that have been formed within the 15-month period preceding the date of submission of the group exemption application if they are claiming section 501(c)(3) status and are subject to the requirements of section 508(a) and wish to be recognized as exempt from their dates of creation (a group exemption letter may be issued covering subordinates, one or more of which have not been organized within the 15-month period preceding the date of submission, if all subordinates are willing to be recognized as exempt only from the date of application). Tax forms for 2010 A detailed description of the purposes and activities of the subordinates, including the sources of receipts and the nature of expenditures. Tax forms for 2010 A sample copy of a uniform governing instrument (such as a charter or articles of association) adopted by the subordinates, or, in its absence, copies of representative instruments. Tax forms for 2010 An affirmation to the effect that, to the best of the officer's knowledge, the purposes and activities of the subordinates are as stated in (2) and (3), above. Tax forms for 2010 A statement that each of the subordinates has provided a written authorization to the central organization, signed by an authorized officer of the subordinate, agreeing to be included in the group exemption (see also New 501(c)(3) organizations that want to be included , later in this section). Tax forms for 2010 A list of subordinates to be included in the group exemption letter to which the IRS has issued an outstanding ruling or determination letter relating to exemption. Tax forms for 2010 If the application for a group exemption letter involves section 501(c)(3) and is subject to the provisions of the Code requiring that it give timely notice that it is not a private foundation (see Private Foundations in chapter 3), an affirmation to the effect that, to the best of the officer's knowledge and belief, no subordinate to be included in the group exemption letter is a private foundation as defined in section 509(a). Tax forms for 2010 For each subordinate that is a school claiming exemption under section 501(c)(3), the information required by Revenue Ruling 71-447, 1971-2 C. Tax forms for 2010 B. Tax forms for 2010 230 and Revenue Procedure 75-50, 1975-2 C. Tax forms for 2010 B. Tax forms for 2010 587 (these requirements are fully described in chapter 3, under Private Schools ; see also Schedule B, Form 1023). Tax forms for 2010 For any school affiliated with a church, the information to show that the provisions of Revenue Ruling 75-231, 1975-1 C. Tax forms for 2010 B. Tax forms for 2010 158, have been met. Tax forms for 2010 A list of the names, mailing addresses, actual addresses if different, and EINs of subordinates to be included in the group exemption letter. Tax forms for 2010 A current directory of subordinates may be furnished instead of the list if it includes the required information and if the subordinates not to be included in the group exemption letter are identified. Tax forms for 2010 New 501(c)(3) organizations that want to be included. Tax forms for 2010   A new organization, described in section 501(c)(3), that wants to be included in a group exemption letter must submit its authorization (as explained in item number 5, earlier, under Information required for subordinate organizations ) to the central organization before the end of the 15th month after it was formed in order to satisfy the requirement of section 508(a). Tax forms for 2010 The central organization must also include this subordinate in its next annual submission of information, as discussed later, under Information Required Annually . Tax forms for 2010 Keeping the Group Exemption Letter in Force Continued effectiveness of a group exemption letter is based on the following conditions. Tax forms for 2010 The continued existence of the central organization. Tax forms for 2010 The continued qualification of the central organization for exemption under section 501(c). Tax forms for 2010 The submission by the central organization of the information regarding its subordinate organizations that is required annually (described under Information Required Annually). Tax forms for 2010 The annual filing of an information return (Form 990, for example) by the central organization if required. Tax forms for 2010 The continued effectiveness of a group exemption letter as to a particular subordinate is based on these four conditions, as well as on the continued conformity by the subordinate to the requirements for inclusion in a group exemption letter, the authorization for inclusion, and the annual filing of any required information return for the subordinate. Tax forms for 2010 Information Required Annually To maintain a group exemption letter, the central organization must submit annually, at least 90 days before the close of its annual accounting period, all of the following information. Tax forms for 2010 Information about all changes in the purposes, character, or method of operation of the subordinates included in the group exemption letter. Tax forms for 2010 A separate list (that includes the names, mailing addresses, actual addresses if different, and EINs of the affected subordinates) for each of the three following categories. Tax forms for 2010 Subordinates that have changed their names or addresses during the year. Tax forms for 2010 Subordinates no longer to be included in the group exemption letter because they no longer exist or have disaffiliated from or withdrawn their authorization to the central organization. Tax forms for 2010 Subordinates to be added to the group exemption letter because they are newly organized or affiliated or because they have recently authorized the central organization to include them. Tax forms for 2010 An annotated directory of subordinates will not be accepted for this purpose. Tax forms for 2010 If there were none of the above changes, the central organization must submit a statement to that effect. Tax forms for 2010 The same information about new subordinates that was required in the initial application for group exemption. Tax forms for 2010 (This information is listed in items 1 through 10, under Information required for subordinate organizations. Tax forms for 2010 , earlier. Tax forms for 2010 ) If a new subordinate does not differ in any material respects from the subordinates included in the application for group exemption, however, a statement to this effect may be submitted in lieu of detailed information. Tax forms for 2010 The organization should send this information to:   Ogden Service Center  Mail Stop 6271 Ogden, UT 84404-4749 Submitting the required information annually does not relieve the central organization or any of its subordinates of the duty to submit any other information that may be required by an EO area manager to determine whether the conditions for continued exemption are being met. Tax forms for 2010 Events Causing Loss of Group Exemption A group exemption letter no longer has effect, for either a particular subordinate or the group as a whole, when: The central organization notifies the IRS that it is going out of existence, The central organization notifies the IRS, by its annual submission or otherwise, that any of its subordinates will no longer fulfill the conditions for continued effectiveness, explained earlier, or The IRS notifies the central organization or the affected subordinate that the group exemption letter will no longer have effect for some or all of the group because the conditions for continued effectiveness of a group exemption letter have not been fulfilled. Tax forms for 2010 When notice is given under any of these three conditions, the IRS will no longer recognize the exempt status of the affected subordinates until they file separate applications on their own behalf or the central organization files complete supporting information for their reinclusion in the group exemption at the time of its annual submission. Tax forms for 2010 However, when the notice is given by the IRS and the withdrawal of recognition is based on the failure of the organization to comply with the requirements for recognition of tax-exempt status under the particular subsection of section 501(c), the revocation will ordinarily take effect as of the date of that failure. Tax forms for 2010 The notice, however, will be given only after the appeal procedures described earlier in this chapter are completed. Tax forms for 2010 Prev  Up  Next   Home   More Online Publications
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The Tax Forms For 2010

Tax forms for 2010 2. Tax forms for 2010   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Tax forms for 2010 Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Tax forms for 2010 S. Tax forms for 2010 or foreign source income. Tax forms for 2010 This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Tax forms for 2010 S. Tax forms for 2010 Virgin Islands (USVI). Tax forms for 2010 Generally, the same rules that apply for determining U. Tax forms for 2010 S. Tax forms for 2010 source income also apply for determining possession source income. Tax forms for 2010 However, there are some important exceptions to these rules. Tax forms for 2010 Both the general rules and the exceptions are discussed in this chapter. Tax forms for 2010 U. Tax forms for 2010 S. Tax forms for 2010 income rule. Tax forms for 2010   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Tax forms for 2010 Table 2-1 shows the general rules for determining whether income is from sources within the United States. Tax forms for 2010 Table 2-1. Tax forms for 2010 General Rules for Determining U. Tax forms for 2010 S. Tax forms for 2010 Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Tax forms for 2010 Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Tax forms for 2010 For more information, see Regulations section 1. Tax forms for 2010 863-1(b). Tax forms for 2010 Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Tax forms for 2010 Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Tax forms for 2010 Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Tax forms for 2010 It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Tax forms for 2010 Services performed wholly within a relevant possession. Tax forms for 2010   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Tax forms for 2010 However, there is an exception for income earned as a member of the U. Tax forms for 2010 S. Tax forms for 2010 Armed Forces or a civilian spouse. Tax forms for 2010 U. Tax forms for 2010 S. Tax forms for 2010 Armed Forces. Tax forms for 2010   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Tax forms for 2010 However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Tax forms for 2010 Civilian spouse of active duty member of the U. Tax forms for 2010 S. Tax forms for 2010 Armed Forces. Tax forms for 2010   If you are a bona fide resident of a U. Tax forms for 2010 S. Tax forms for 2010 possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Tax forms for 2010 Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Tax forms for 2010 S. Tax forms for 2010 possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Tax forms for 2010 Services performed partly inside and partly outside a relevant possession. Tax forms for 2010   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Tax forms for 2010 Compensation (other than certain fringe benefits) is sourced on a time basis. Tax forms for 2010 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Tax forms for 2010   Or, you may be permitted to use an alternative basis to determine the source of compensation. Tax forms for 2010 See Alternative basis , later. Tax forms for 2010   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Tax forms for 2010 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Tax forms for 2010 Time basis. Tax forms for 2010   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Tax forms for 2010 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Tax forms for 2010 The time period for which the income is made does not have to be a year. Tax forms for 2010 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Tax forms for 2010 Example. Tax forms for 2010 In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Tax forms for 2010 Your Puerto Rico source income is $60,000, figured as follows. Tax forms for 2010       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Tax forms for 2010   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Tax forms for 2010 Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Tax forms for 2010 You determine the period to which the income is attributable based on the facts and circumstances of your case. Tax forms for 2010 For more information on multi-year compensation, see Treasury Decision (T. Tax forms for 2010 D. Tax forms for 2010 ) 9212 and Regulations section 1. Tax forms for 2010 861-4, 2005-35 I. Tax forms for 2010 R. Tax forms for 2010 B. Tax forms for 2010 429, available at www. Tax forms for 2010 irs. Tax forms for 2010 gov/irb/2005-35_IRB/ar14. Tax forms for 2010 html. Tax forms for 2010 Certain fringe benefits sourced on a geographical basis. Tax forms for 2010   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Tax forms for 2010 Housing. Tax forms for 2010 Education. Tax forms for 2010 Local transportation. Tax forms for 2010 Tax reimbursement. Tax forms for 2010 Hazardous or hardship duty pay. Tax forms for 2010 Moving expense reimbursement. Tax forms for 2010 For information on determining the source of the fringe benefits listed above, see Regulations section 1. Tax forms for 2010 861-4. Tax forms for 2010 Alternative basis. Tax forms for 2010   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Tax forms for 2010 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Tax forms for 2010 De minimis exception. Tax forms for 2010   There is an exception to the rule for determining the source of income earned in a possession. Tax forms for 2010 Generally, you will not have income from a possession if during a tax year you: Are a U. Tax forms for 2010 S. Tax forms for 2010 citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Tax forms for 2010 This exception began with income earned during your 2008 tax year. Tax forms for 2010 Pensions. Tax forms for 2010   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Tax forms for 2010 The contribution portion is sourced according to where services were performed that earned the pension. Tax forms for 2010 The investment earnings portion is sourced according to the location of the pension trust. Tax forms for 2010 Example. Tax forms for 2010 You are a U. Tax forms for 2010 S. Tax forms for 2010 citizen who worked in Puerto Rico for a U. Tax forms for 2010 S. Tax forms for 2010 company. Tax forms for 2010 All services were performed in Puerto Rico. Tax forms for 2010 Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Tax forms for 2010 S. Tax forms for 2010 pension trust of your employer. Tax forms for 2010 Distributions from the U. Tax forms for 2010 S. Tax forms for 2010 pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Tax forms for 2010 S. Tax forms for 2010 source income. Tax forms for 2010 Investment Income This category includes such income as interest, dividends, rents, and royalties. Tax forms for 2010 Interest income. Tax forms for 2010   The source of interest income is generally determined by the residence of the payer. Tax forms for 2010 Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Tax forms for 2010   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Tax forms for 2010 See Regulations section 1. Tax forms for 2010 937-2(i) for more information. Tax forms for 2010 Dividends. Tax forms for 2010   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Tax forms for 2010 There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Tax forms for 2010 For more information, see Regulations section 1. Tax forms for 2010 937-2(g). Tax forms for 2010 Rental income. Tax forms for 2010   Rents from property located in a relevant possession are treated as income from sources within that possession. Tax forms for 2010 Royalties. Tax forms for 2010   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Tax forms for 2010   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Tax forms for 2010 Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Tax forms for 2010 The most common situations are discussed below. Tax forms for 2010 Real property. Tax forms for 2010   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Tax forms for 2010 The location of the property generally determines the source of income from the sale. Tax forms for 2010 For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Tax forms for 2010 If, however, the home you sold was located in the United States, the gain is U. Tax forms for 2010 S. Tax forms for 2010 source income. Tax forms for 2010 Personal property. Tax forms for 2010   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Tax forms for 2010 Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Tax forms for 2010 If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Tax forms for 2010   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Tax forms for 2010 The rules applying to sales of inventory are discussed below. Tax forms for 2010 For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Tax forms for 2010 Inventory. Tax forms for 2010   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Tax forms for 2010 The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Tax forms for 2010 Purchased. Tax forms for 2010   Income from the sale of inventory that you purchased is sourced where you sell the property. Tax forms for 2010 Generally, this is where title to the property passes to the buyer. Tax forms for 2010 Produced. Tax forms for 2010   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Tax forms for 2010 For information on making the allocation, see Regulations section 1. Tax forms for 2010 863-3(f). Tax forms for 2010 Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Tax forms for 2010 S. Tax forms for 2010 citizen or resident alien prior to becoming a bona fide resident of a possession. Tax forms for 2010 You are subject to these special rules if you meet both of the following conditions. Tax forms for 2010 For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Tax forms for 2010 For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Tax forms for 2010 If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Tax forms for 2010 Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Tax forms for 2010 S. Tax forms for 2010 tax return. Tax forms for 2010 (See chapter 3 for additional filing information. Tax forms for 2010 ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Tax forms for 2010 These rules apply to dispositions after April 11, 2005. Tax forms for 2010 For details, see Regulations section 1. Tax forms for 2010 937-2(f)(1) and Examples 1 and 2 of section 1. Tax forms for 2010 937-2(k). Tax forms for 2010 Example 1. Tax forms for 2010 In 2007, Cheryl Jones, a U. Tax forms for 2010 S. Tax forms for 2010 citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Tax forms for 2010 S. Tax forms for 2010 corporation listed on the New York Stock Exchange. Tax forms for 2010 On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Tax forms for 2010 Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Tax forms for 2010 On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Tax forms for 2010 On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Tax forms for 2010 Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Tax forms for 2010 The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Tax forms for 2010 This existing special rule applies if you are a U. Tax forms for 2010 S. Tax forms for 2010 citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Tax forms for 2010 S. Tax forms for 2010 assets during the 10-year period beginning when you became a bona fide resident. Tax forms for 2010 The gain is U. Tax forms for 2010 S. Tax forms for 2010 source income that generally is subject to U. Tax forms for 2010 S. Tax forms for 2010 tax if the property is either (1) located in the United States; (2) stock issued by a U. Tax forms for 2010 S. Tax forms for 2010 corporation or a debt obligation of a U. Tax forms for 2010 S. Tax forms for 2010 person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Tax forms for 2010 See chapter 3 for filing information. Tax forms for 2010 Special election. Tax forms for 2010   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Tax forms for 2010 Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Tax forms for 2010 This election overrides both of the special rules discussed earlier. Tax forms for 2010   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Tax forms for 2010 Marketable securities. Tax forms for 2010   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Tax forms for 2010 Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Tax forms for 2010 S. Tax forms for 2010 holding periods. Tax forms for 2010   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Tax forms for 2010 The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Tax forms for 2010 This is your gain (or loss) that is treated as being from sources within the relevant possession. Tax forms for 2010 If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Tax forms for 2010 Example 2. Tax forms for 2010 Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Tax forms for 2010 S. Tax forms for 2010 and possession holding periods. Tax forms for 2010 Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Tax forms for 2010 Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Tax forms for 2010 By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Tax forms for 2010 Other personal property. Tax forms for 2010   For personal property other than marketable securities, use a time-based allocation. Tax forms for 2010 Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Tax forms for 2010      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Tax forms for 2010 Example 3. Tax forms for 2010 In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Tax forms for 2010 On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Tax forms for 2010 On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Tax forms for 2010 She had owned the interest for a total of 1,720 days. Tax forms for 2010 Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Tax forms for 2010 The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Tax forms for 2010 By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Tax forms for 2010 Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Tax forms for 2010 Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Tax forms for 2010 These rules do not apply to amounts paid as salary or other compensation for services. Tax forms for 2010 See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Tax forms for 2010 Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Tax forms for 2010 These circumstances are listed below. Tax forms for 2010 You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Tax forms for 2010 That office or place of business is a material factor in producing the income. Tax forms for 2010 The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Tax forms for 2010 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Tax forms for 2010 The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Tax forms for 2010 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Tax forms for 2010 Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Tax forms for 2010 Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Tax forms for 2010 Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Tax forms for 2010 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Tax forms for 2010 Example. Tax forms for 2010 Marcy Jackson is a bona fide resident of American Samoa. Tax forms for 2010 Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Tax forms for 2010 A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Tax forms for 2010 Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Tax forms for 2010 The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Tax forms for 2010 However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Tax forms for 2010 Prev  Up  Next   Home   More Online Publications