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Turbotax For 2011 Taxes

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Turbotax For 2011 Taxes

Turbotax for 2011 taxes 4. Turbotax for 2011 taxes   Other Section 501(c) Organizations Table of Contents Introduction 501(c)(4) - Civic Leagues and Social Welfare OrganizationsSpecific Organizations 501(c)(5) - Labor, Agricultural and Horticultural OrganizationsLabor Organizations Agricultural and Horticultural Organizations 501(c)(6) - Business Leagues, etc. Turbotax for 2011 taxes Line of business. Turbotax for 2011 taxes Examples. Turbotax for 2011 taxes Improvement of business conditions. Turbotax for 2011 taxes Exception for local legislation. Turbotax for 2011 taxes De minimis exception. Turbotax for 2011 taxes Grass roots lobbying. Turbotax for 2011 taxes 501(c)(7) - Social and Recreation ClubsLimited membership. Turbotax for 2011 taxes Support. Turbotax for 2011 taxes Facilities open to public. Turbotax for 2011 taxes Gross receipts from nonmembership sources. Turbotax for 2011 taxes Gross receipts. Turbotax for 2011 taxes Nontraditional activities. Turbotax for 2011 taxes 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal SocietiesFraternal Beneficiary Societies (501(c)(8)) Domestic Fraternal Societies (501(c)(10)) 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' AssociationsLocal Employees' Associations (501(c)(4)) Voluntary Employees' Beneficiary Associations (501(c)(9)) Supplemental Unemployment Benefit Trusts (501(c)(17)) 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like OrganizationsMembership. Turbotax for 2011 taxes Losses and expenses. Turbotax for 2011 taxes Distributions of proceeds. Turbotax for 2011 taxes The 85% Requirement Local Life Insurance Associations Mutual or Cooperative Associations 501(c)(13) - Cemetery CompaniesBuying cemetery property. Turbotax for 2011 taxes Perpetual care organization. Turbotax for 2011 taxes Care of individual plots. Turbotax for 2011 taxes 501(c)(14) - Credit Unions and Other Mutual Financial OrganizationsState-Chartered Credit Unions Other Mutual Financial Organizations 501(c)(19) - Veterans' Organizations 501(c)(20) - Group Legal Services Plan Organizations 501(c)(21) - Black Lung Benefit TrustsExcise taxes. Turbotax for 2011 taxes 501(c)(2) - Title-Holding Corporations for Single Parent CorporationsExpenses. Turbotax for 2011 taxes Waiver of payment of income. Turbotax for 2011 taxes 501(c)(25) - Title-Holding Corporations or Trusts for Multiple Parent CorporationsUnrelated Business Income 501(c)(26) - State-Sponsored High-Risk Health Coverage Organizations 501(c)(27) - Qualified State-Sponsored Workers' Compensation Organizations 501(c)(29) - CO-OP Health Insurance Issuers New Guidance for IRC 501(c)(29) Qualified Nonprofit Health Insurance Issuers General Requirements for Exemption under 501(c)(29) and Annual Filing Requirement Additional Guidance for Prospective 501(c)(29) Organizations Introduction This chapter contains specific information for certain organizations described in section 501(c), other than those organizations that are described in section 501(c)(3). Turbotax for 2011 taxes Section 501(c)(3) organizations are covered in chapter 3 of this publication. Turbotax for 2011 taxes The Table of Contents at the beginning of this publication, as well as the Organization Reference Chart, may help you locate at a glance the type of organization discussed in this chapter. Turbotax for 2011 taxes 501(c)(4) - Civic Leagues and Social Welfare Organizations If your organization is not organized for profit and will be operated primarily to promote social welfare to benefit the community, you should file Form 1024 to apply for recognition of exemption from federal income tax under section 501(c)(4). Turbotax for 2011 taxes The discussion that follows describes the information you must provide when applying. Turbotax for 2011 taxes For application procedures, see chapter 1. Turbotax for 2011 taxes To qualify for exemption under section 501(c)(4), the organization's net earnings must be devoted primarily to charitable, educational, or recreational purposes. Turbotax for 2011 taxes In addition, no part of the organization's net earnings can inure to the benefit of any private shareholder or individual. Turbotax for 2011 taxes If the organization provides an excess benefit to certain persons, an excise tax may be imposed. Turbotax for 2011 taxes See Excise tax on excess benefit transactions , under Excess Benefit Transactions in chapter 5 for more information about this tax. Turbotax for 2011 taxes Examples. Turbotax for 2011 taxes   Types of organizations that are considered to be social welfare organizations are civic associations and volunteer fire companies. Turbotax for 2011 taxes Nonprofit operation. Turbotax for 2011 taxes   You must submit evidence that your organization is organized and will be operated on a nonprofit basis. Turbotax for 2011 taxes However, such evidence, including the fact that your organization is organized under a state law relating to nonprofit corporations, will not in itself establish a social welfare purpose. Turbotax for 2011 taxes Social welfare. Turbotax for 2011 taxes   To establish that your organization is organized primarily to promote social welfare, you should submit evidence with your application showing that your organization will operate primarily to further (in some way) the common good and general welfare of the people of the community (such as by bringing about civic betterment and social improvements). Turbotax for 2011 taxes   An organization that restricts the use of its facilities to employees of selected corporations and their guests is primarily benefiting a private group rather than the community. Turbotax for 2011 taxes It therefore does not qualify as a section 501(c)(4) organization. Turbotax for 2011 taxes Similarly, an organization formed to represent member-tenants of an apartment complex does not qualify, since its activities benefit the member-tenants and not all tenants in the community. Turbotax for 2011 taxes However, an organization formed to promote the legal rights of all tenants in a particular community may qualify under section 501(c)(4) as a social welfare organization. Turbotax for 2011 taxes Political activity. Turbotax for 2011 taxes   Promoting social welfare does not include direct or indirect participation or intervention in political campaigns on behalf of or in opposition to any candidate for public office. Turbotax for 2011 taxes However, if you submit proof that your organization is organized primarily to promote social welfare, it can obtain exemption even if it participates legally in some political activity on behalf of or in opposition to candidates for public office. Turbotax for 2011 taxes See the discussion in chapter 2 under Political Organization Income Tax Return . Turbotax for 2011 taxes Social or recreational activity. Turbotax for 2011 taxes   If social activities will be the primary purpose of your organization, you should not file an application for exemption as a social welfare organization but should file for exemption as a social club described in section 501(c)(7). Turbotax for 2011 taxes Retirement benefit program. Turbotax for 2011 taxes   An organization established by its members that has as its primary activity providing supplemental retirement benefits to its members or death benefits to their beneficiaries does not qualify as an exempt social welfare organization. Turbotax for 2011 taxes It may qualify under another paragraph of section 501(c) depending on all the facts. Turbotax for 2011 taxes   However, a nonprofit association that is established, maintained, and funded by a local government to provide the only retirement benefits to a class of employees may qualify as a social welfare organization under section 501(c)(4). Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Donations to volunteer fire companies are deductible on the donor's federal income tax return, but only if made for exclusively public purposes. Turbotax for 2011 taxes Contributions to civic leagues or other section 501(c)(4) organizations generally are not deductible as charitable contributions for federal income tax purposes. Turbotax for 2011 taxes They may be deductible as trade or business expenses, if ordinary and necessary in the conduct of the taxpayer's business. Turbotax for 2011 taxes However, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Turbotax for 2011 taxes for more information. Turbotax for 2011 taxes For more information on social welfare organizations, see Life Cycle of a Social Welfare Organization at IRS. Turbotax for 2011 taxes gov. Turbotax for 2011 taxes Specific Organizations The following information should be contained in the application form and accompanying statements of certain types of civic leagues or social welfare organizations. Turbotax for 2011 taxes Volunteer fire companies. Turbotax for 2011 taxes   If your organization wishes to obtain exemption as a volunteer fire company or similar organization, you should submit evidence that its members are actively engaged in fire fighting and similar disaster assistance, whether it actually owns the fire fighting equipment, and whether it provides any assistance for its members, such as death and medical benefits in case of injury to them. Turbotax for 2011 taxes   If your organization does not have an independent social purpose, such as providing recreational facilities for members, it may be exempt under section 501(c)(3). Turbotax for 2011 taxes In this event, your organization should file Form 1023. Turbotax for 2011 taxes Homeowners' associations. Turbotax for 2011 taxes   A membership organization formed by a real estate developer to own and maintain common green areas, streets, and sidewalks and to enforce covenants to preserve the appearance of the development should show that it is operated for the benefit of all the residents of the community. Turbotax for 2011 taxes The term community generally refers to a geographical unit recognizable as a governmental subdivision, unit, or district thereof. Turbotax for 2011 taxes Whether a particular association meets the requirement of benefiting a community depends on the facts and circumstances of each case. Turbotax for 2011 taxes Even if an area represented by an association is not a community, the association can still qualify for exemption if its activities benefit a community. Turbotax for 2011 taxes   The association should submit evidence that areas such as roadways and park land that it owns and maintains are open to the general public and not just its own members. Turbotax for 2011 taxes It also must show that it does not engage in exterior maintenance of private homes. Turbotax for 2011 taxes   A homeowners' association that is not exempt under section 501(c)(4) and that is a condominium management association, a residential real estate management association, or a timeshare association generally can elect under the provisions of section 528 to receive certain tax benefits that, in effect, permit it to exclude its exempt function income from its gross income. Turbotax for 2011 taxes Other organizations. Turbotax for 2011 taxes   Other nonprofit organizations that qualify as social welfare organizations include: An organization operating an airport that is on land owned by a local government, which supervises the airport's operation, and that serves the general public in an area with no other airport, A community association that works to improve public services, housing, and residential parking; publishes a free community newspaper; sponsors a community sports league, holiday programs, and meetings; and contracts with a private security service to patrol the community, A community association devoted to preserving the community's traditions, architecture, and appearance by representing it before the local legislature and administrative agencies in zoning, traffic, and parking matters, An organization that tries to encourage industrial development and relieve unemployment in an area by making loans to businesses so they will relocate to the area, and An organization that holds an annual festival of regional customs and traditions. Turbotax for 2011 taxes 501(c)(5) - Labor, Agricultural and Horticultural Organizations If you are a member of an organization that wants to obtain recognition of exemption from federal income tax as a labor, agricultural, or horticultural organization, you should submit an application on Form 1024. Turbotax for 2011 taxes You must indicate in your application for exemption and accompanying statements that no part of the organization's net earnings will inure to the benefit of any member. Turbotax for 2011 taxes In addition, you should follow the procedure for obtaining recognition of exempt status described in chapter 1. Turbotax for 2011 taxes Submit any additional information that may be required, as described in this section. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Contributions to labor, agricultural, and horticultural organizations are not deductible as charitable contributions on the donor's federal income tax return. Turbotax for 2011 taxes However, such payments may be deductible as business expenses if they are ordinary and necessary in the conduct of the taxpayer's trade or business. Turbotax for 2011 taxes For more information about certain limits affecting the deductibility of these business expenses, see Deduction not allowed for dues used for political or legislative activities , under 501(c)(6) - Business Leagues, etc. Turbotax for 2011 taxes Labor Organizations A labor organization is an association of workers who have combined to protect and promote the interests of the members by bargaining collectively with their employers to secure better working conditions. Turbotax for 2011 taxes To show that your organization has the purpose of a labor organization, you should include in the articles of organization or accompanying statements (submitted with your exemption application) information establishing that the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations. Turbotax for 2011 taxes In addition, no net earnings of the organization can inure to the benefit of any member. Turbotax for 2011 taxes Composition of membership. Turbotax for 2011 taxes   While a labor organization generally is composed of employees or representatives of the employees (in the form of collective bargaining agents) and similar employee groups, evidence that an organization's membership consists mainly of workers does not in itself indicate an exempt purpose. Turbotax for 2011 taxes You must show in your application that your organization has the purposes described in the preceding paragraph. Turbotax for 2011 taxes These purposes can be accomplished by a single labor organization acting alone or by several organizations acting together through a separate organization. Turbotax for 2011 taxes Benefits to members. Turbotax for 2011 taxes   The payment by a labor organization of death, sick, accident, and similar benefits to its individual members with funds contributed by its members, if made under a plan to better the conditions of the members, does not preclude exemption as a labor organization. Turbotax for 2011 taxes However, an organization does not qualify for exemption as a labor organization if it has no authority to represent members in job-related matters, even if it provides weekly income to its members in the event of a lawful strike by the members' union, in return for an annual payment by the member. Turbotax for 2011 taxes   For more information on labor organizations, see Life Cycle of a Labor Organization at IRS. Turbotax for 2011 taxes gov. Turbotax for 2011 taxes Agricultural and Horticultural Organizations Agricultural and horticultural organizations are connected with raising livestock, forestry, cultivating land, raising and harvesting crops or aquatic resources, cultivating useful or ornamental plants, and similar pursuits. Turbotax for 2011 taxes For the purpose of these provisions, aquatic resources include only animal or vegetable life, but not mineral resources. Turbotax for 2011 taxes The term harvesting, in this case, includes fishing and related pursuits. Turbotax for 2011 taxes Agricultural organizations can be quasi-public in character and are often designed to encourage the development of better agricultural and horticultural products through a system of awards, using income from entry fees, gate receipts, and donations to meet the necessary expenses of upkeep and operation. Turbotax for 2011 taxes When the activities are directed toward the improvement of marketing or other business conditions in one or more lines of business, rather than the improvement of production techniques or the betterment of the conditions of persons engaged in agriculture, the organization must qualify for exemption as a business league, board of trade, or other organization, as discussed next in the section on 501(c)(6) organizations. Turbotax for 2011 taxes The primary purpose of exempt agricultural and horticultural organizations must be to better the conditions of those engaged in agriculture or horticulture, develop more efficiency in agriculture or horticulture, or improve the products. Turbotax for 2011 taxes The following list contains some examples of activities that show an agricultural or horticultural purpose. Turbotax for 2011 taxes Promoting various cooperative agricultural, horticultural, and civic activities among rural residents by a state, farm, or home bureau. Turbotax for 2011 taxes Exhibiting livestock, farm products, and other characteristic features of agriculture and horticulture. Turbotax for 2011 taxes Testing soil for members and nonmembers of the farm bureau on a cost basis, the results of the tests and other recommendations being furnished to the community members to educate them in soil treatment. Turbotax for 2011 taxes Guarding the purity of a specific breed of livestock. Turbotax for 2011 taxes Encouraging improvements in the production of fish on privately owned fish farms. Turbotax for 2011 taxes Negotiating with processors for the price to be paid to members for their crops. Turbotax for 2011 taxes For more information on agricultural or horticultural organizations, see Life Cycle of an Agricultural or Horticultural Organization at IRS. Turbotax for 2011 taxes gov. Turbotax for 2011 taxes 501(c)(6) - Business Leagues, etc. Turbotax for 2011 taxes If your association wants to apply for recognition of exemption from federal income tax as a nonprofit business league, chamber of commerce, real estate board, or board of trade, it should file Form 1024. Turbotax for 2011 taxes For a discussion of the procedure to follow, see chapter 1. Turbotax for 2011 taxes Your organization must indicate in its application form and attached statements that no part of its net earnings will inure to the benefit of any private shareholder or individual and that it is not organized for profit or organized to engage in an activity ordinarily carried on for profit (even if the business is operated on a cooperative basis or produces only sufficient income to be self-sustaining). Turbotax for 2011 taxes In addition, your organization must be primarily engaged in activities or functions that are the basis for its exemption. Turbotax for 2011 taxes It must be primarily supported by membership dues and other income from activities substantially related to its exempt purpose. Turbotax for 2011 taxes A business league, in general, is an association of persons having some common business interest, the purpose of which is to promote that common interest and not to engage in a regular business of a kind ordinarily carried on for profit. Turbotax for 2011 taxes Trade associations and professional associations are considered business leagues. Turbotax for 2011 taxes Chamber of commerce. Turbotax for 2011 taxes   A chamber of commerce usually is composed of the merchants and traders of a city. Turbotax for 2011 taxes Board of trade. Turbotax for 2011 taxes   A board of trade often consists of persons engaged in similar lines of business. Turbotax for 2011 taxes For example, a nonprofit organization formed to regulate the sale of a specified agricultural commodity to assure equal treatment of producers, warehouse workers, and buyers is a board of trade. Turbotax for 2011 taxes   Chambers of commerce and boards of trade usually promote the common economic interests of all the commercial enterprises in a given trade community. Turbotax for 2011 taxes Real estate board. Turbotax for 2011 taxes   A real estate board consists of members interested in improving the business conditions in the real estate field. Turbotax for 2011 taxes It is not organized for profit and no part of the net earnings inures to the benefit of any private shareholder or individual. Turbotax for 2011 taxes Professional football leagues. Turbotax for 2011 taxes   The Internal Revenue Code specifically defines professional football leagues as exempt organizations under section 501(c)(6). Turbotax for 2011 taxes They are exempt whether or not they administer a pension fund for football players. Turbotax for 2011 taxes General purpose. Turbotax for 2011 taxes   You must indicate in the material submitted with your application that your organization will be devoted to the improvement of business conditions of one or more lines of business as distinguished from the performance of particular services for individual persons. Turbotax for 2011 taxes It must be shown that the conditions of a particular trade or the interests of the community will be advanced. Turbotax for 2011 taxes Merely indicating the name of the organization or the object of the local statute under which it is created is not enough to demonstrate the required general purpose. Turbotax for 2011 taxes Line of business. Turbotax for 2011 taxes   This term generally refers either to an entire industry or to all components of an industry within a geographic area. Turbotax for 2011 taxes It does not include a group composed of businesses that market a particular brand within an industry. Turbotax for 2011 taxes Common business interest. Turbotax for 2011 taxes   A common business interest of all members of the organization must be established by the application documents. Turbotax for 2011 taxes Examples. Turbotax for 2011 taxes   Activities that would tend to illustrate a common business interest are: Promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association, Education of the public in the use of credit, Establishment of uniform casualty rates and compilation of statistical information by an insurance rating bureau operated by casualty insurance companies, Establishment and maintenance of the integrity of a local commercial market, Operation of a trade publication primarily intended to benefit an entire industry, and Encouragement of the use of goods and services of an entire industry (such as a lawyer referral service whose main purpose is to introduce individuals to the use of the legal profession in the hope that they will enter into lawyer-client relationships on a paying basis as a result). Turbotax for 2011 taxes Improvement of business conditions. Turbotax for 2011 taxes   Generally, this must be shown to be the purpose of the organization. Turbotax for 2011 taxes This is not established by evidence of particular services that provide a convenience or economy to individual members in their businesses, such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency. Turbotax for 2011 taxes Stock or commodity exchange. Turbotax for 2011 taxes   A stock or commodity exchange is not a business league, chamber of commerce, real estate board, or board of trade and is not exempt under section 501(c)(6). Turbotax for 2011 taxes Legislative activity. Turbotax for 2011 taxes   An organization that is exempt under section 501(c)(6) can work for the enactment of laws to advance the common business interests of the organization's members. Turbotax for 2011 taxes Deduction not allowed for dues used for political or legislative activities. Turbotax for 2011 taxes   A taxpayer cannot deduct the part of dues or other payments to a business league, trade association, labor union, or similar organization that is reported to the taxpayer by the organization as having been used for any of the following activities. Turbotax for 2011 taxes Influencing legislation. Turbotax for 2011 taxes Participating or intervening in a political campaign for, or against, any candidate for public office. Turbotax for 2011 taxes Trying to influence the general public, or part of the general public, with respect to elections, legislative matters, or referendums (also known as grass roots lobbying). Turbotax for 2011 taxes Communicating directly with certain executive branch officials to try to influence their official actions or positions. Turbotax for 2011 taxes See Dues Used for Lobbying or Political Activities under Required Disclosures in chapter 2 for more information. Turbotax for 2011 taxes Exception for local legislation. Turbotax for 2011 taxes   Members can deduct dues (or assessments) to an organization that are for expenses of: Appearing before, submitting statements to, or sending communications to members of a local council or similar governing body with respect to legislation or proposed legislation of direct interest to the member, or Communicating information between the member and the organization with respect to local legislation or proposed legislation of direct interest to the organization or the member. Turbotax for 2011 taxes Legislation or proposed legislation is of direct interest to a taxpayer if it will, or can reasonably be expected to, affect the taxpayer's trade or business. Turbotax for 2011 taxes De minimis exception. Turbotax for 2011 taxes   In-house expenditures of $2,000 or less for the year for activities (1) – (4) listed earlier will not prevent a deduction for dues if the dues meet all other tests to be deductible as a business expense. Turbotax for 2011 taxes Grass roots lobbying. Turbotax for 2011 taxes   A tax-exempt trade association, labor union, or similar organization is considered to be engaging in grass roots lobbying if it contacts prospective members or calls upon its own members to contact their employees and customers for the purpose of urging such persons to communicate with their elected state or Congressional representatives to support the promotion, defeat, or repeal of legislation that is of direct interest to the organization. Turbotax for 2011 taxes Any dues or assessments directly related to such activities are not deductible by the taxpayer, since the individuals being contacted, who are not members of the organization, are a segment of the general public. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Contributions to organizations described in this section are not deductible as charitable contributions on the donor's federal income tax return. Turbotax for 2011 taxes They may be deductible as trade or business expenses if ordinary and necessary in the conduct of the taxpayer's business. Turbotax for 2011 taxes   For more information on business leagues, see Life Cycle of a Business League (Trade Association) on IRS. Turbotax for 2011 taxes gov. Turbotax for 2011 taxes 501(c)(7) - Social and Recreation Clubs If your club is organized for pleasure, recreation, and other similar nonprofitable purposes and substantially all of its activities are for these purposes, it should file Form 1024 to apply for recognition of exemption from federal income tax. Turbotax for 2011 taxes In applying for recognition of exemption, you should submit the information described in this section. Turbotax for 2011 taxes Also see chapter 1 for the procedures to follow. Turbotax for 2011 taxes Typical organizations that should file for recognition of exemption as social clubs include: College alumni associations that are not described in chapter 3 under Alumni association , College fraternities or sororities operating chapter houses for students, Country clubs, Amateur hunting, fishing, tennis, swimming, and other sport clubs, Dinner clubs that provide a meeting place, library, and dining room for members, Hobby clubs, Garden clubs, and Variety clubs. Turbotax for 2011 taxes Discrimination prohibited. Turbotax for 2011 taxes   Your organization will not be recognized as tax exempt if its charter, bylaws, or other governing instrument, or any written policy statement provides for discrimination against any person on the basis of race, color, or religion. Turbotax for 2011 taxes   However, a club that in good faith limits its membership to the members of a particular religion to further the teachings or principles of that religion and not to exclude individuals of a particular race or color will not be considered as discriminating on the basis of religion. Turbotax for 2011 taxes Also, the restriction on religious discrimination does not apply to a club that is an auxiliary of a fraternal beneficiary society (discussed later) if that society is described in section 501(c)(8) and exempt from tax under section 501(a) and limits its membership to the members of a particular religion. Turbotax for 2011 taxes Private benefit prohibited. Turbotax for 2011 taxes   No part of the organization's net earnings can inure to the benefit of any person having a personal and private interest in the activities of the organization. Turbotax for 2011 taxes For purposes of this requirement, it is not necessary that net earnings be actually distributed. Turbotax for 2011 taxes Even undistributed earnings can benefit members. Turbotax for 2011 taxes Examples of this include a decrease in membership dues or an increase in the services the club provides to its members without a corresponding increase in dues or other fees paid for club support. Turbotax for 2011 taxes However, fixed-fee payments to members who bring new members into the club are not an inurement of the club's net earnings, if the payments are reasonable compensation for performance of a necessary administrative service. Turbotax for 2011 taxes Purposes. Turbotax for 2011 taxes   To show that your organization possesses the characteristics of a club within the meaning of the exemption law, you should submit evidence with your application that personal contact, commingling, and fellowship exist among members. Turbotax for 2011 taxes You must show that members are bound together by a common objective of pleasure, recreation, and other nonprofitable purposes. Turbotax for 2011 taxes   Fellowship need not be present between each member and every other member of a club if it is a material part in the life of the organization. Turbotax for 2011 taxes A statewide or nationwide organization that is made up of individual members, but is divided into local groups, satisfies this requirement if fellowship is a material part of the life of each local group. Turbotax for 2011 taxes   The term other nonprofitable purposes means other purposes similar to pleasure and recreation. Turbotax for 2011 taxes For example, a club that, in addition to its social activities, has a plan for the payment of sick and death benefits is not operating exclusively for pleasure, recreation, and other nonprofitable purposes. Turbotax for 2011 taxes Limited membership. Turbotax for 2011 taxes   The membership in a social club must be limited. Turbotax for 2011 taxes To show that your organization has a purpose that would characterize it as a club, you should submit evidence with your application that there are limits on admission to membership consistent with the character of the club. Turbotax for 2011 taxes   A social club that issues corporate membership is dealing with the general public in the form of the corporation's employees. Turbotax for 2011 taxes Corporate members of a club are not the kind of members contemplated by the law. Turbotax for 2011 taxes Gross receipts from these members would be a factor in determining whether the club qualifies as a social club. Turbotax for 2011 taxes See Gross receipts from nonmembership sources , later. Turbotax for 2011 taxes Bona fide individual memberships paid for by a corporation would not have an effect on the gross receipts source. Turbotax for 2011 taxes   The fact that a social club may have an associate (nonvoting) class of membership will not be, in and of itself, a cause for nonrecognition of exemption. Turbotax for 2011 taxes However, if one membership class pays substantially lower dues and fees than another membership class, although both classes enjoy the same rights and privileges in using the club facilities, there may be an inurement of income to the benefited class, resulting in a denial of the club's exemption. Turbotax for 2011 taxes Support. Turbotax for 2011 taxes   In general, your club should be supported solely by membership fees, dues, and assessments. Turbotax for 2011 taxes However, if otherwise entitled to exemption, your club will not be disqualified because it raises revenue from members through the use of club facilities or in connection with club activities. Turbotax for 2011 taxes Business activities. Turbotax for 2011 taxes   If your club will engage in business, such as selling real estate, timber, or other products or services, it generally will be denied exemption. Turbotax for 2011 taxes However, evidence submitted with your application form that your organization will provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests will not cause denial of exemption. Turbotax for 2011 taxes Facilities open to public. Turbotax for 2011 taxes   Evidence that your club's facilities will be open to the general public (persons other than members or their dependents or guests) may cause denial of exemption. Turbotax for 2011 taxes This does not mean, however, that any dealing with outsiders will automatically deprive a club of exemption. Turbotax for 2011 taxes Gross receipts from nonmembership sources. Turbotax for 2011 taxes   A section 501(c)(7) organization can receive up to 35% of its gross receipts, including investment income, from sources outside of its membership without losing its tax-exempt status. Turbotax for 2011 taxes Income from nontraditional business activity with members is not exempt function income, and thus is included as income from sources outside of the membership. Turbotax for 2011 taxes Of the 35% gross receipts listed above, up to 15% of the gross receipts can be derived from the use of the club's facilities or services by the general public. Turbotax for 2011 taxes If an organization has outside income that is more than these limits, all the facts and circumstances will be taken into account in determining whether the organization qualifies for exempt status. Turbotax for 2011 taxes Gross receipts. Turbotax for 2011 taxes   Gross receipts, for this purpose, are receipts from the normal and usual (traditionally conducted) activities of the club. Turbotax for 2011 taxes These receipts include charges, admissions, membership fees, dues, assessments, investment income, and normal recurring capital gains on investments. Turbotax for 2011 taxes Receipts do not include initiation fees and capital contributions. Turbotax for 2011 taxes Unusual amounts of income, such as from the sale of a clubhouse or similar facility, are not included in gross receipts or in figuring the percentage limits. Turbotax for 2011 taxes Nontraditional activities. Turbotax for 2011 taxes   Activities conducted by a social club need to further its exempt purposes. Turbotax for 2011 taxes Traditional business activities are those that further a social club's exempt purposes. Turbotax for 2011 taxes Nontraditional business activities do not further the exempt purposes of a social club even if conducted solely on a membership basis. Turbotax for 2011 taxes Nontraditional business activities are prohibited (subject to an insubstantial, trivial, and nonrecurrent test) for businesses conducted with both members and nonmembers. Turbotax for 2011 taxes Examples of nontraditional business activities include sale of package liquor, take-out food, and long-term room rental. Turbotax for 2011 taxes Fraternity foundations. Turbotax for 2011 taxes   If your organization is a foundation formed for the exclusive purpose of acquiring and leasing a chapter house to a local fraternity chapter or sorority chapter maintained at an educational institution and does not engage in any social or recreational activities, it may be a title holding corporation (discussed later under section 501(c)(2) organizations and under section 501(c)(25) organizations) rather than a social club. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor's federal income tax return. Turbotax for 2011 taxes 501(c)(8) and 501(c)(10) - Fraternal Beneficiary Societies and Domestic Fraternal Societies This section describes the information to be provided upon application for recognition of exemption by two types of fraternal societies: beneficiary and domestic. Turbotax for 2011 taxes The major distinction is that fraternal beneficiary societies provide for the payment of life, sick, accident, or other benefits to their members or their dependents, while domestic fraternal societies do not provide these benefits but rather devote their earnings to fraternal, religious, charitable, etc. Turbotax for 2011 taxes , purposes. Turbotax for 2011 taxes The procedures to follow in applying for recognition of exemption are described in chapter 1. Turbotax for 2011 taxes If your organization is controlled by a central organization, you should check with your controlling organization to determine whether your unit has been included in a group exemption letter or can be added. Turbotax for 2011 taxes If so, your organization need not apply for individual recognition of exemption. Turbotax for 2011 taxes For more information, see Group Exemption Letter in chapter 1 of this publication. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Donations by an individual to a domestic fraternal beneficiary society or a domestic fraternal society operating under the lodge system are deductible as charitable contributions only if used exclusively for religious, charitable, scientific, literary, or educational purposes or for the prevention of cruelty to children or animals. Turbotax for 2011 taxes Fraternal Beneficiary Societies (501(c)(8)) A fraternal beneficiary society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Turbotax for 2011 taxes The application and accompanying statements should establish that the organization: Is a fraternal organization, Operates under the lodge system or for the exclusive benefit of the members of a fraternal organization itself operating under the lodge system, and Provides for the payment of life, sick, accident, or other benefits to the members of the society, order, or association or their dependents. Turbotax for 2011 taxes Lodge system. Turbotax for 2011 taxes   Operating under the lodge system means carrying on activities under a form of organization that comprises local branches, chartered by a parent organization and largely self-governing, called lodges, chapters, or the like. Turbotax for 2011 taxes Payment of benefits. Turbotax for 2011 taxes   It is not essential that every member be covered by the society's program of sick, accident, or death benefits. Turbotax for 2011 taxes An organization can qualify for exemption if most of its members are eligible for benefits, and the benefits are paid from contributions or dues paid by those members. Turbotax for 2011 taxes   The benefits must be limited to members and their dependents. Turbotax for 2011 taxes If members will have the ability to confer benefits to other than themselves and their dependents, exemption will not be recognized. Turbotax for 2011 taxes Whole-life insurance. Turbotax for 2011 taxes   Whole-life insurance constitutes a life benefit under section 501(c)(8) even though the policy may contain investment features such as a cash surrender value or a policy loan. Turbotax for 2011 taxes Reinsurance pool. Turbotax for 2011 taxes   Payments by a fraternal beneficiary society into a state-sponsored reinsurance pool that protects participating insurers against excessive losses on major medical health and accident insurance will not preclude exemption as a fraternal beneficiary society. Turbotax for 2011 taxes Domestic Fraternal Societies (501(c)(10)) A domestic fraternal society, order, or association must file an application for recognition of exemption from federal income tax on Form 1024. Turbotax for 2011 taxes The application and accompanying statements should establish that the organization: Is a domestic fraternal organization organized in the U. Turbotax for 2011 taxes S. Turbotax for 2011 taxes , Operates under the lodge system, Devotes its net earnings exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and Does not provide for the payment of life, sick, accident, or other benefits to its members. Turbotax for 2011 taxes The organization can arrange with insurance companies to provide optional insurance to its members without jeopardizing its exempt status. Turbotax for 2011 taxes 501(c)(4), 501(c)(9), and 501(c)(17) - Employees' Associations This section describes the information to be provided upon application for recognition of exemption by the following types of employees' associations: A voluntary employees' beneficiary association (including federal employees' associations) organized to pay life, sick, accident, and similar benefits to members or their dependents, or designated beneficiaries, if no part of the net earnings of the association inures to the benefit of any private shareholder or individual, and A supplemental unemployment benefit trust whose primary purpose is providing for payment of supplemental unemployment benefits. Turbotax for 2011 taxes Both the application form to file and the information to provide are discussed later under the section that describes your employee association. Turbotax for 2011 taxes Chapter 1 describes the procedures to follow in applying for exemption. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Donations to these organizations are not deductible as charitable contributions on the donor's federal income tax return. Turbotax for 2011 taxes Local Employees' Associations (501(c)(4)) A local association of employees whose membership is limited to employees of a designated person or persons in a particular municipality, and whose income will be devoted exclusively to charitable, educational, or recreational purposes. Turbotax for 2011 taxes A local employees' association must apply for recognition of exemption by filing Form 1024. Turbotax for 2011 taxes The organization must submit evidence that: It is of a purely local character, Its membership is limited to employees of a designated person or persons in a particular locality, and Its net earnings will be devoted exclusively to charitable, educational, or recreational purposes. Turbotax for 2011 taxes A local association of employees that has established a system of paying retirement or death benefits, or both, to its members will not qualify for exemption since the payment of these benefits is not considered as being for charitable, educational, or recreational purposes. Turbotax for 2011 taxes Similarly, a local association of employees that is operated primarily as a cooperative buying service for its members in order to obtain discount prices on merchandise, services, and activities does not qualify for exemption. Turbotax for 2011 taxes Voluntary Employees' Beneficiary Associations (501(c)(9)) An application for recognition of exemption as a voluntary employees' beneficiary association must be filed on Form 1024. Turbotax for 2011 taxes The material submitted with the application must show that your organization: Is a voluntary association of employees, Will provide for payment of life, sick, accident, or other benefits to members or their dependents or designated beneficiaries and substantially all of its operations are for this purpose, and Will not allow any of its net earnings to inure to the benefit of any private individual or shareholder except in the form of scheduled benefit payments. Turbotax for 2011 taxes To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Turbotax for 2011 taxes Note. Turbotax for 2011 taxes Under section 4976, the reversion of funds from a section 501(c)(9) organization to the employer who created the beneficiary association may subject the employer to a 100% penalty excise tax on the amount of the reversion. Turbotax for 2011 taxes Notice requirement. Turbotax for 2011 taxes   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Turbotax for 2011 taxes The organization gives notice by filing Form 1024. Turbotax for 2011 taxes If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before notice is given. Turbotax for 2011 taxes An extension of time for filing the notice can be granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Turbotax for 2011 taxes Membership. Turbotax for 2011 taxes   Membership of a section 501(c)(9) organization must consist of individuals who are employees and have an employment-related common bond. Turbotax for 2011 taxes This common bond can be a common employer (or affiliated employers), coverage under one or more collective bargaining agreements, membership in a labor union, or membership in one or more locals of a national or international labor union. Turbotax for 2011 taxes   The membership of an association can include some individuals who are not employees, provided they have an employment-related bond with the employee-members. Turbotax for 2011 taxes For example, the owner of a business whose employees are members of the association can be a member. Turbotax for 2011 taxes An association will be considered composed of employees if 90% of its total membership on one day of each quarter of its tax year consists of employees. Turbotax for 2011 taxes Employees. Turbotax for 2011 taxes   Employees include individuals who became entitled to membership because they are or were employees. Turbotax for 2011 taxes For example, an individual will qualify as an employee even though the individual is on a leave of absence or has been terminated due to retirement, disability, or layoff. Turbotax for 2011 taxes   Generally, membership is voluntary if an affirmative act is required on the part of an employee to become a member. Turbotax for 2011 taxes Conversely, membership is involuntary if the designation as a member is due to employee status. Turbotax for 2011 taxes However, an association will be considered voluntary if employees are required to be members of the organization as a condition of their employment and they do not incur a detriment (such as a payroll deduction) as a result of their membership. Turbotax for 2011 taxes An employer has not imposed involuntary membership on the employee if membership is required as the result of a collective bargaining agreement or as an incident of membership in a labor organization. Turbotax for 2011 taxes Payment of benefits. Turbotax for 2011 taxes   The information submitted with your application must show that your organization will pay life, sick, accident, supplemental unemployment, or other similar benefits. Turbotax for 2011 taxes The benefits can be provided directly by your association or indirectly by your association through the payments of premiums to an insurance company (or fees to a medical clinic). Turbotax for 2011 taxes Benefits can be in the form of medical, clinical, or hospital services, transportation furnished for medical care, or money payments. Turbotax for 2011 taxes Nondiscrimination requirements. Turbotax for 2011 taxes   An organization that is part of a plan will not be exempt unless the plan meets certain nondiscrimination requirements. Turbotax for 2011 taxes However, if the organization is part of a plan that is a collective bargaining agreement that was the subject of good faith bargaining between employee organizations and employers, the plan need not meet these requirements for the organization to qualify as tax exempt. Turbotax for 2011 taxes   A plan meets the nondiscrimination requirements only if both of the following statements are true. Turbotax for 2011 taxes Each class of benefits under the plan is provided under a classification of employees that is set forth in the plan and does not discriminate in favor of employees who are highly compensated individuals. Turbotax for 2011 taxes The benefits provided under each class of benefits do not discriminate in favor of highly compensated individuals. Turbotax for 2011 taxes A life insurance, disability, severance pay, or supplemental unemployment compensation benefit does not discriminate in favor of highly compensated individuals merely because the benefits available bear a uniform relationship to the total compensation, or the basic or regular rate of compensation, of employees covered by the plan. Turbotax for 2011 taxes   For purposes of determining whether a plan meets the nondiscrimination requirements, the employer can elect to exclude all disability or severance payments payable to individuals who are in pay status as of January 1, 1985. Turbotax for 2011 taxes This will not apply to any increase in such payment by any plan amendment adopted after June 22, 1984. Turbotax for 2011 taxes   If a plan provides a benefit for which there is a nondiscrimination provision provided under Chapter 1 of the Internal Revenue Code as a condition of that benefit being excluded from gross income, these nondiscrimination requirements do not apply. Turbotax for 2011 taxes The benefit will be considered nondiscriminatory only if it meets the nondiscrimination provision of the applicable Code section. Turbotax for 2011 taxes For example, benefits provided under a medical reimbursement plan would meet the nondiscrimination requirements for an association, if the benefits meet the nondiscrimination requirements of section 105(h)(3) and 105(h)(4). Turbotax for 2011 taxes Excluded employees. Turbotax for 2011 taxes   Certain employees who are not covered by a plan can be excluded from consideration in applying these requirements. Turbotax for 2011 taxes These include employees: Who have not completed 3 years of service, Who have not attained age 21, Who are seasonal or less than half-time employees, Who are not in the plan and who are included in a unit of employees covered by a collective bargaining agreement if the class of benefits involved was the subject of good faith bargaining, or Who are nonresident aliens and who receive no earned income from the employer that has United States source income. Turbotax for 2011 taxes Highly compensated individual. Turbotax for 2011 taxes   A highly compensated individual is one who: Owned 5 percent or more of the employer at any time during the current year or the preceding year, Received more than $115,000 in compensation from the employer for the preceding year (the amount is annualized for inflation. Turbotax for 2011 taxes Go to IRS. Turbotax for 2011 taxes gov, and search “Pension Plan Limitation” for the year), and Was among the top 20% of employees by compensation for the preceding year. Turbotax for 2011 taxes However, the employer can choose not to have (3) apply. Turbotax for 2011 taxes Aggregation rules. Turbotax for 2011 taxes   The employer can choose to treat two or more plans as one plan for purposes of meeting the nondiscrimination requirements. Turbotax for 2011 taxes Employees of controlled groups of corporations, trades, or businesses under common control, or members of an affiliated service group, are treated as employees of a single employer. Turbotax for 2011 taxes Leased employees are treated as employees of the recipient. Turbotax for 2011 taxes One employee. Turbotax for 2011 taxes   A trust created to provide benefits to one employee will not qualify as a voluntary employees' beneficiary association under section 501(c)(9). Turbotax for 2011 taxes Supplemental Unemployment Benefit Trusts (501(c)(17)) A trust or trusts forming part of a written plan (established and maintained by an employer, his or her employees, or both) providing solely for the payment of supplemental unemployment compensation benefits must file the application for recognition of exemption on Form 1024. Turbotax for 2011 taxes The trust must be a valid, existing trust under local law and must be evidenced by an executed document. Turbotax for 2011 taxes A conformed copy of the plan of which the trust is a part should be attached to the application. Turbotax for 2011 taxes To be complete, an application must include a copy of the document (such as the trust instrument) by which the organization was created; a full description of the benefits available to participants and the terms and conditions of eligibility for benefits (usually contained in a plan document); and, if providing benefits pursuant to a collective bargaining agreement, a copy of that agreement. Turbotax for 2011 taxes Note. Turbotax for 2011 taxes Under section 4976, the reversion of funds from a section 501(c)(17) organization to the employer who created the supplemental unemployment benefit trust may subject the employer to a 100% penalty excise tax on the amount of the reversion. Turbotax for 2011 taxes Notice requirement. Turbotax for 2011 taxes   An organization will not be considered tax exempt under this section unless the organization gives notice to the IRS that it is applying for recognition of exempt status. Turbotax for 2011 taxes The organization gives notice by filing Form 1024. Turbotax for 2011 taxes If the notice is not given by 15 months after the end of the month in which the organization was created, the organization will not be exempt for any period before such notice is given. Turbotax for 2011 taxes An extension of time for filing the notice is granted under the same procedures as those described for section 501(c)(3) organizations in chapter 3 under Application for Recognition of Exemption . Turbotax for 2011 taxes Types of payments. Turbotax for 2011 taxes   You must show that the supplemental unemployment compensation benefits will be benefits paid to an employee because of the employee's involuntary separation from employment (whether or not the separation is temporary) resulting directly from a reduction-in-force, discontinuance of a plant or operation, or other similar conditions. Turbotax for 2011 taxes In addition, sickness and accident benefits (but not vacation, retirement, or death benefits) may be included in the plan if these are subordinate to the unemployment compensation benefits. Turbotax for 2011 taxes Diversion of funds. Turbotax for 2011 taxes   It must be impossible under the plan (at any time before the satisfaction of all liabilities with respect to employees under the plan) to use or to divert any of the corpus or income of the trust to any purpose other than the payment of supplemental unemployment compensation benefits (or sickness or accident benefits to the extent just explained). Turbotax for 2011 taxes Discrimination in benefits. Turbotax for 2011 taxes   Neither the terms of the plan nor the actual payment of benefits can be discriminatory in favor of the company's officers, stockholders, supervisors, or highly paid employees. Turbotax for 2011 taxes However, a plan is not discriminatory merely because benefits bear a uniform relationship to compensation or the rate of compensation. Turbotax for 2011 taxes Prohibited transactions and exemption. Turbotax for 2011 taxes   If your organization is a supplemental unemployment benefit trust and has received a denial of exemption because it engaged in a prohibited transaction, as defined by section 503(b), it can file a claim for exemption in any tax year following the tax year in which the notice of denial was issued. Turbotax for 2011 taxes It must file the claim on Form 1024. Turbotax for 2011 taxes The organization must include a written declaration that it will not knowingly again engage in a prohibited transaction. Turbotax for 2011 taxes An authorized principal officer of your organization must make this declaration under the penalties of perjury. Turbotax for 2011 taxes   If your organization has satisfied all requirements as a supplemental unemployment benefit trust described in section 501(c)(17), it will be notified in writing that it has been recognized as exempt. Turbotax for 2011 taxes However, the organization will be exempt only for those tax years after the tax year in which the claim for exemption (Form 1024) is filed. Turbotax for 2011 taxes Tax year in this case means the established annual accounting period of the organization or, if the organization has not established an annual accounting period, the calendar year. Turbotax for 2011 taxes For more information about the requirements for reestablishing an exemption previously denied, contact the IRS. Turbotax for 2011 taxes 501(c)(12) - Local Benevolent Life Insurance Associations, Mutual Irrigation and Telephone Companies, and Like Organizations Each of the following organizations apply for recognition of exemption from federal income tax by filing Form 1024. Turbotax for 2011 taxes Benevolent life insurance associations of a purely local character and like organizations. Turbotax for 2011 taxes Mutual ditch or irrigation companies and like organizations. Turbotax for 2011 taxes Mutual or cooperative telephone companies and like organizations. Turbotax for 2011 taxes A like organization is an organization that performs a service comparable to that performed by any one of the above organizations. Turbotax for 2011 taxes The information to be provided upon application by each of these organizations is described in this section. Turbotax for 2011 taxes For information as to the procedures to follow in applying for exemption, see chapter 1. Turbotax for 2011 taxes General requirements. Turbotax for 2011 taxes   These organizations must use their income solely to cover losses and expenses, with any excess being returned to members or retained to cover future losses and expenses. Turbotax for 2011 taxes They must collect at least 85% of their income from members for the sole purpose of meeting losses and expenses. Turbotax for 2011 taxes Mutual character. Turbotax for 2011 taxes   These organizations, other than benevolent life insurance associations, must be organized and operated on a mutual or cooperative basis. Turbotax for 2011 taxes They are associations of persons or organizations, or both, banded together to provide themselves a mutually desirable service approximately at cost and on a mutual basis. Turbotax for 2011 taxes To maintain the mutual characteristic of democratic ownership and control, they must be so organized and operated that their members have the right to choose the management, to receive services at cost, to receive a return of any excess of payments over losses and expenses, and to share in any assets upon dissolution. Turbotax for 2011 taxes   The rights and interests of members in the annual savings of the organization must be determined in proportion to their business with the organization. Turbotax for 2011 taxes Upon dissolution, gains from the sale of appreciated assets must be distributed to all persons who were members during the period the assets were owned by the organization in proportion to the amount of business done during that period. Turbotax for 2011 taxes The bylaws must not provide for forfeiture of a member's rights and interest upon withdrawal or termination. Turbotax for 2011 taxes Membership. Turbotax for 2011 taxes   Membership of a mutual organization consists of those who join the organization to obtain its services, and have a voice in its management. Turbotax for 2011 taxes In a stock company, the stockholders are members. Turbotax for 2011 taxes However, a mutual life insurance organization cannot have policyholders other than its members. Turbotax for 2011 taxes Losses and expenses. Turbotax for 2011 taxes   In furnishing services substantially at cost, an organization must use its income solely for paying losses and expenses. Turbotax for 2011 taxes Any excess income not retained in reasonable reserves for future losses and expenses belongs to members in proportion to their patronage or business done with the organization. Turbotax for 2011 taxes If such patronage refunds are retained in reasonable amounts for purposes of expanding and improving facilities, retiring capital indebtedness, acquiring other assets, and unexpected expenses, the organization must maintain records sufficient to reflect the equity of each member in the assets acquired with the funds. Turbotax for 2011 taxes Distributions of proceeds. Turbotax for 2011 taxes   The cooperative may distribute the unexpended balance of collections or assessments remaining on hand at the end of the year to members or patrons prorated on the basis of their patronage or business done with the cooperative. Turbotax for 2011 taxes Such distribution represents a refund in the costs of services rendered to the member. Turbotax for 2011 taxes The 85% Requirement All of the organizations listed above must submit evidence with their application that they receive 85% or more of their gross income from their members for the sole purpose of meeting losses and expenses. Turbotax for 2011 taxes Nevertheless, certain items of income are excluded from the computation of the 85% requirement if the organization is a mutual or cooperative telephone or electric company. Turbotax for 2011 taxes Mutual or cooperative telephone company. Turbotax for 2011 taxes   A mutual or cooperative telephone company will exclude from the computation of the 85% requirement any income received or accrued from: A nonmember telephone company for the performance of communication services involving the completion of long distance calls to, from, or between members of the mutual or cooperative telephone company, Qualified pole rentals, The sale of display listings in a directory furnished to its members, or The prepayment of a loan created in 1987, 1988, or 1989, under section 306A, 306B, or 311 of the Rural Electrification Act of 1936. Turbotax for 2011 taxes Mutual or cooperative electric company. Turbotax for 2011 taxes   A mutual or cooperative electric company will exclude from the computation of the 85% requirement any income received or accrued from: Qualified pole rentals, Any provision or sale of electric energy transmission services or ancillary service if the services are provided on a nondiscriminatory open access basis under an open access transmission tariff approved or accepted by the Federal Energy Regulatory Commission (FERC) or under an independent transmission provider agreement approved or accepted by FERC (other than income received or accrued directly or indirectly from a member), The provision or sale of electric energy distribution services or ancillary services if the services are provided on a nondiscriminatory open-access basis to distribute electric energy not owned by the mutual or electric cooperative company: To end-users who are served by distribution facilities not owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), or Generated by a generation facility not owned or leased by the company or any of its members and which is directly connected to distribution facilities owned by the company or any of its members (other than income received or accrued directly or indirectly from a member), Any nuclear decommissioning transaction, or Any asset exchange or conversion transaction. Turbotax for 2011 taxes   An electric cooperative's sale of excess fuel at cost in the year of purchase is not income for purposes of determining compliance with the 85% requirement. Turbotax for 2011 taxes Qualified pole rental. Turbotax for 2011 taxes   The term qualified pole rental means any rental of a pole (or other structure used to support wires) if the pole (or other structure) is used: By the telephone or electric company to support one or more wires that are used by the company in providing telephone or electric services to its members, and Pursuant to the rental to support one or more wires (in addition to wires described in (1)) for use in connection with the transmission by wire of electricity or of telephone or other communications. Turbotax for 2011 taxes   The term rental, for this purpose, includes any sale of the right to use the pole (or other structure). Turbotax for 2011 taxes The 85% requirement is applied on the basis of an annual accounting period. Turbotax for 2011 taxes Failure of an organization to meet the requirement in a particular year precludes exemption for that year, but has no effect upon exemption for years in which the 85% requirement is met. Turbotax for 2011 taxes Gain from the sale or conversion of the organization's property is not considered an amount received from members in determining whether the organization's income consists of amounts collected from members. Turbotax for 2011 taxes Because the 85% income test is based on gross income, capital losses cannot be used to reduce capital gains for purposes of this test. Turbotax for 2011 taxes Example. Turbotax for 2011 taxes   The books of an organization reflect the following for the calendar year. Turbotax for 2011 taxes Collections from members $2,400 Short-term capital gains 600 Short-term capital losses 400 Other income None Gross income ($2,400 + $600 =$3000) 100% Collected from members ($2,400) 80%   Since amounts collected from members do not constitute at least 85% of gross income, the organization is not entitled to exemption from federal income tax for the year. Turbotax for 2011 taxes   Voluntary contributions in the nature of gifts are not taken into account for purposes of the 85% computation. Turbotax for 2011 taxes   Other tax-exempt income besides gifts is considered as income received from other than members in applying the 85% test. Turbotax for 2011 taxes   If the 85% test is not met, your organization, if classifiable under this section, will not qualify for exemption as any other type of organization described in this publication. Turbotax for 2011 taxes Tax treatment of donations. Turbotax for 2011 taxes   Donations to an organization described in this section are not deductible as charitable contributions on the donor's federal income tax return. Turbotax for 2011 taxes Local Life Insurance Associations A benevolent life insurance association or an organization seeking recognition of exemption on grounds of similarity to a benevolent life insurance association must submit evidence upon applying for recognition of exemption that it will be of a purely local character, that its excess funds will be refunded to members or retained in reasonable reserves to meet future losses and expenses, and that it meets the 85% income requirement. Turbotax for 2011 taxes If an organization issues policies for stipulated cash premiums, or if it requires advance deposits to cover the cost of the insurance and maintains investments from which more than 15% of its income is derived, it will not be entitled to exemption. Turbotax for 2011 taxes To establish that your organization is of a purely local character, it should show that its activities will be confined to a particular community, place, or district irrespective of political subdivisions. Turbotax for 2011 taxes If the activities of an organization are limited only by the borders of a state, it cannot be purely local in character. Turbotax for 2011 taxes A benevolent life insurance association that does not terminate membership when a member moves from the local area in which the association operates will qualify for exemption if it meets the other requirements. Turbotax for 2011 taxes A copy of each type of policy issued by your organization should be included with the application for recognition of exemption. Turbotax for 2011 taxes Organizations similar to local benevolent life insurance companies. Turbotax for 2011 taxes   These organizations include those that in addition to paying death benefits also provide for the payment of sick, accident, or health benefits. Turbotax for 2011 taxes However, an organization that pays only sick, accident, or health benefits, but not life insurance benefits, is not an organization similar to a benevolent life insurance association and should not apply for recognition of exemption as described in this section. Turbotax for 2011 taxes Burial and funeral benefit insurance organization. Turbotax for 2011 taxes   This type of organization can apply for recognition of exemption as an organization similar to a benevolent life insurance company if it establishes that the benefits are paid in cash and if it is not engaged directly in the manufacture of funeral supplies or the performance of funeral services. Turbotax for 2011 taxes An organization that provides its benefits in the form of supplies and service is not a life insurance company. Turbotax for 2011 taxes Such an organization can seek recognition of exemption from federal income tax, however, as a mutual insurance company other than life. Turbotax for 2011 taxes Mutual or Cooperative Associations Mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations need not establish that they are of a purely local character. Turbotax for 2011 taxes They can serve noncontiguous areas. Turbotax for 2011 taxes Like organization. Turbotax for 2011 taxes   A like organization is a cooperative or mutual organization that performs a service similar to mutual ditch, irrigation, telephone, or electric companies. Turbotax for 2011 taxes Examples include the following: cooperatives that provide protection of river banks to prevent erosion, water and sewer services, cable television, satellite, television, cellular phone services, two-way radio service, or natural gas services. Turbotax for 2011 taxes 501(c)(13) - Cemetery Companies If your organization wishes to obtain recognition of exemption from federal income tax as a cemetery company or a corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, it must file an application on Form 1024. Turbotax for 2011 taxes For the procedure to follow to file an application, see Application, Approval, and Appeal Procedures in chapter 1. Turbotax for 2011 taxes A nonprofit mutual cemetery company that seeks recognition of exemption should submit evidence with its application that it is owned and operated exclusively for the benefit of its lot owners who hold lots for bona fide burial purposes and not for purposes of resale. Turbotax for 2011 taxes A mutual cemetery company that also engages in charitable activities, such as the burial of paupers, will be regarded as operating within this standard. Turbotax for 2011 taxes The fact that a mutual cemetery company limits its membership to a particular class of individuals, such as members of a family, will not affect its status as mutual so long as all the other requirements of section 501(c)(13) are met. Turbotax for 2011 taxes If your organization is a nonprofit corporation chartered solely for the purpose of the disposal of human bodies by burial or cremation, you should show that it is not permitted by its charter to engage in any business not necessarily incident to that purpose. Turbotax for 2011 taxes Operating a mortuary is not permitted. Turbotax for 2011 taxes However, selling monuments, markers, vaults, and flowers solely for use in the cemetery is permitted if the profits from these sales are used to maintain the cemetery as a whole. Turbotax for 2011 taxes How income can be used. Turbotax for 2011 taxes   You should show that your organization's earnings are or will be used only in one or more of the following ways. Turbotax for 2011 taxes To pay the ordinary and necessary expenses of operating, maintaining, and improving the cemetery or crematorium. Turbotax for 2011 taxes To buy cemetery property. Turbotax for 2011 taxes To create a fund that will provide a source of income for the perpetual care of the cemetery or a reasonable reserve for any ordinary or necessary purpose. Turbotax for 2011 taxes No part of the net earnings of your organization can inure to the benefit of any private shareholder or individual. Turbotax for 2011 taxes Ordinary and necessary expenses in connection with the operation, management, maintenance, and improvement of the cemetery are permitted, as are reasonable fees for the services of a manager. Turbotax for 2011 taxes Buying cemetery property. Turbotax for 2011 taxes   Payments can be made to amortize debt incurred to buy land, but cannot be in the nature of profit distributions. Turbotax for 2011 taxes You must show the method used to finance the purchase of the cemetery property and that the purchase price of the land at the time of its sale to the cemetery was not unreasonable. Turbotax for 2011 taxes   Except for holders of preferred stock (discussed later), no person can have any interest in the net earnings of a tax-exempt cemetery company or crematorium. Turbotax for 2011 taxes Therefore, if property is transferred to the organization in exchange for an interest in the organization's net earnings, the organization will not
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The Turbotax For 2011 Taxes

Turbotax for 2011 taxes 3. Turbotax for 2011 taxes   Limit on Annual Additions Table of Contents Ministers and church employees. Turbotax for 2011 taxes Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. Turbotax for 2011 taxes This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. Turbotax for 2011 taxes The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. Turbotax for 2011 taxes More than one 403(b) account. Turbotax for 2011 taxes If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. Turbotax for 2011 taxes Ministers and church employees. Turbotax for 2011 taxes   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. Turbotax for 2011 taxes For more information, see chapter 5. Turbotax for 2011 taxes Participation in a qualified plan. Turbotax for 2011 taxes If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Turbotax for 2011 taxes You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. Turbotax for 2011 taxes Includible Compensation for Your Most Recent Year of Service Definition. Turbotax for 2011 taxes   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. Turbotax for 2011 taxes When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. Turbotax for 2011 taxes This can happen if your tax year is not the same as your employer's annual work period. Turbotax for 2011 taxes When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. Turbotax for 2011 taxes Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. Turbotax for 2011 taxes Tax year different from employer's annual work period. Turbotax for 2011 taxes   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. Turbotax for 2011 taxes Example. Turbotax for 2011 taxes A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). Turbotax for 2011 taxes To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. Turbotax for 2011 taxes Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. Turbotax for 2011 taxes A full year of service is equal to full-time employment for your employer's annual work period. Turbotax for 2011 taxes After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. Turbotax for 2011 taxes Part-time or employed only part of the year. Turbotax for 2011 taxes   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. Turbotax for 2011 taxes To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. Turbotax for 2011 taxes Example. Turbotax for 2011 taxes You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). Turbotax for 2011 taxes Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). Turbotax for 2011 taxes Not yet employed for 1 year. Turbotax for 2011 taxes   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. Turbotax for 2011 taxes Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. Turbotax for 2011 taxes Includible compensation is not the same as income included on your tax return. Turbotax for 2011 taxes Compensation is a combination of income and benefits received in exchange for services provided to your employer. Turbotax for 2011 taxes Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. Turbotax for 2011 taxes Includible compensation includes the following amounts. Turbotax for 2011 taxes Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). Turbotax for 2011 taxes Amounts contributed or deferred by your employer under a section 125 cafeteria plan. Turbotax for 2011 taxes Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). Turbotax for 2011 taxes  Note. Turbotax for 2011 taxes For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. Turbotax for 2011 taxes Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. Turbotax for 2011 taxes Income otherwise excluded under the foreign earned income exclusion. Turbotax for 2011 taxes Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. Turbotax for 2011 taxes Includible compensation does not include the following items. Turbotax for 2011 taxes Your employer's contributions to your 403(b) account. Turbotax for 2011 taxes Compensation earned while your employer was not an eligible employer. Turbotax for 2011 taxes Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. Turbotax for 2011 taxes The cost of incidental life insurance. Turbotax for 2011 taxes See Cost of Incidental Life Insurance, later. Turbotax for 2011 taxes If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. Turbotax for 2011 taxes Contributions after retirement. Turbotax for 2011 taxes   Nonelective contributions may be made for an employee for up to 5 years after retirement. Turbotax for 2011 taxes These contributions would be based on includible compensation for the last year of service before retirement. Turbotax for 2011 taxes Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. Turbotax for 2011 taxes If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. Turbotax for 2011 taxes If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. Turbotax for 2011 taxes If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Turbotax for 2011 taxes Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. Turbotax for 2011 taxes Not all annuity contracts include life insurance. Turbotax for 2011 taxes Contact your plan administrator to determine if your contract includes incidental life insurance. Turbotax for 2011 taxes If it does, you will need to figure the cost of life insurance each year the policy is in effect. Turbotax for 2011 taxes Figuring the cost of incidental life insurance. Turbotax for 2011 taxes If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. Turbotax for 2011 taxes To determine the amount of the life insurance premiums, you will need to know the following information. Turbotax for 2011 taxes The value of your life insurance contract, which is the amount payable upon your death. Turbotax for 2011 taxes The cash value of your life insurance contract at the end of the tax year. Turbotax for 2011 taxes Your age on your birthday nearest the beginning of the policy year. Turbotax for 2011 taxes Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. Turbotax for 2011 taxes You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. Turbotax for 2011 taxes Example. Turbotax for 2011 taxes Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Turbotax for 2011 taxes Your cash value in the contract at the end of the first year is zero. Turbotax for 2011 taxes Your current life insurance protection for the first year is $10,000 ($10,000 − 0). Turbotax for 2011 taxes The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). Turbotax for 2011 taxes The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . Turbotax for 2011 taxes The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. Turbotax for 2011 taxes Figure 3-1. Turbotax for 2011 taxes Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. Turbotax for 2011 taxes 70   35 $0. Turbotax for 2011 taxes 99   70 $20. Turbotax for 2011 taxes 62 1 0. Turbotax for 2011 taxes 41   36 1. Turbotax for 2011 taxes 01   71 22. Turbotax for 2011 taxes 72 2 0. Turbotax for 2011 taxes 27   37 1. Turbotax for 2011 taxes 04   72 25. Turbotax for 2011 taxes 07 3 0. Turbotax for 2011 taxes 19   38 1. Turbotax for 2011 taxes 06   73 27. Turbotax for 2011 taxes 57 4 0. Turbotax for 2011 taxes 13   39 1. Turbotax for 2011 taxes 07   74 30. Turbotax for 2011 taxes 18 5 0. Turbotax for 2011 taxes 13   40 1. Turbotax for 2011 taxes 10   75 33. Turbotax for 2011 taxes 05 6 0. Turbotax for 2011 taxes 14   41 1. Turbotax for 2011 taxes 13   76 36. Turbotax for 2011 taxes 33 7 0. Turbotax for 2011 taxes 15   42 1. Turbotax for 2011 taxes 20   77 40. Turbotax for 2011 taxes 17 8 0. Turbotax for 2011 taxes 16   43 1. Turbotax for 2011 taxes 29   78 44. Turbotax for 2011 taxes 33 9 0. Turbotax for 2011 taxes 16   44 1. Turbotax for 2011 taxes 40   79 49. Turbotax for 2011 taxes 23 10 0. Turbotax for 2011 taxes 16   45 1. Turbotax for 2011 taxes 53   80 54. Turbotax for 2011 taxes 56 11 0. Turbotax for 2011 taxes 19   46 1. Turbotax for 2011 taxes 67   81 60. Turbotax for 2011 taxes 51 12 0. Turbotax for 2011 taxes 24   47 1. Turbotax for 2011 taxes 83   82 66. Turbotax for 2011 taxes 74 13 0. Turbotax for 2011 taxes 28   48 1. Turbotax for 2011 taxes 98   83 73. Turbotax for 2011 taxes 07 14 0. Turbotax for 2011 taxes 33   49 2. Turbotax for 2011 taxes 13   84 80. Turbotax for 2011 taxes 35 15 0. Turbotax for 2011 taxes 38   50 2. Turbotax for 2011 taxes 30   85 88. Turbotax for 2011 taxes 76 16 0. Turbotax for 2011 taxes 52   51 2. Turbotax for 2011 taxes 52   86 99. Turbotax for 2011 taxes 16 17 0. Turbotax for 2011 taxes 57   52 2. Turbotax for 2011 taxes 81   87 110. Turbotax for 2011 taxes 40 18 0. Turbotax for 2011 taxes 59   53 3. Turbotax for 2011 taxes 20   88 121. Turbotax for 2011 taxes 85 19 0. Turbotax for 2011 taxes 61   54 3. Turbotax for 2011 taxes 65   89 133. Turbotax for 2011 taxes 40 20 0. Turbotax for 2011 taxes 62   55 4. Turbotax for 2011 taxes 15   90 144. Turbotax for 2011 taxes 30 21 0. Turbotax for 2011 taxes 62   56 4. Turbotax for 2011 taxes 68   91 155. Turbotax for 2011 taxes 80 22 0. Turbotax for 2011 taxes 64   57 5. Turbotax for 2011 taxes 20   92 168. Turbotax for 2011 taxes 75 23 0. Turbotax for 2011 taxes 66   58 5. Turbotax for 2011 taxes 66   93 186. Turbotax for 2011 taxes 44 24 0. Turbotax for 2011 taxes 68   59 6. Turbotax for 2011 taxes 06   94 206. Turbotax for 2011 taxes 70 25 0. Turbotax for 2011 taxes 71   60 6. Turbotax for 2011 taxes 51   95 228. Turbotax for 2011 taxes 35 26 0. Turbotax for 2011 taxes 73   61 7. Turbotax for 2011 taxes 11   96 250. Turbotax for 2011 taxes 01 27 0. Turbotax for 2011 taxes 76   62 7. Turbotax for 2011 taxes 96   97 265. Turbotax for 2011 taxes 09 28 0. Turbotax for 2011 taxes 80   63 9. Turbotax for 2011 taxes 08   98 270. Turbotax for 2011 taxes 11 29 0. Turbotax for 2011 taxes 83   64 10. Turbotax for 2011 taxes 41   99 281. Turbotax for 2011 taxes 05 30 0. Turbotax for 2011 taxes 87   65 11. Turbotax for 2011 taxes 90       31 0. Turbotax for 2011 taxes 90   66 13. Turbotax for 2011 taxes 51       32 0. Turbotax for 2011 taxes 93   67 15. Turbotax for 2011 taxes 20       33 0. Turbotax for 2011 taxes 96   68 16. Turbotax for 2011 taxes 92       34 0. Turbotax for 2011 taxes 98   69 18. Turbotax for 2011 taxes 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. Turbotax for 2011 taxes Example 1. Turbotax for 2011 taxes Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. Turbotax for 2011 taxes The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Turbotax for 2011 taxes Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. Turbotax for 2011 taxes Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. Turbotax for 2011 taxes When figuring her includible compensation for this year, Lynne will subtract $28. Turbotax for 2011 taxes Table 3-1. Turbotax for 2011 taxes Worksheet A. Turbotax for 2011 taxes Cost of Incidental Life Insurance Note. Turbotax for 2011 taxes Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Turbotax for 2011 taxes This amount will be used to figure includible compensation for your most recent year of service. Turbotax for 2011 taxes 1. Turbotax for 2011 taxes Enter the value of the contract (amount payable upon your death) 1. Turbotax for 2011 taxes $20,000. Turbotax for 2011 taxes 00 2. Turbotax for 2011 taxes Enter the cash value in the contract at the end of the year 2. Turbotax for 2011 taxes 0. Turbotax for 2011 taxes 00 3. Turbotax for 2011 taxes Subtract line 2 from line 1. Turbotax for 2011 taxes This is the value of your current life insurance protection 3. Turbotax for 2011 taxes $20,000. Turbotax for 2011 taxes 00 4. Turbotax for 2011 taxes Enter your age on your birthday nearest the beginning of the policy year 4. Turbotax for 2011 taxes 44 5. Turbotax for 2011 taxes Enter the 1-year term premium for $1,000 of life insurance based on your age. Turbotax for 2011 taxes (From Figure 3-1) 5. Turbotax for 2011 taxes $1. Turbotax for 2011 taxes 40 6. Turbotax for 2011 taxes Divide line 3 by $1,000 6. Turbotax for 2011 taxes 20 7. Turbotax for 2011 taxes Multiply line 6 by line 5. Turbotax for 2011 taxes This is the cost of your incidental life insurance 7. Turbotax for 2011 taxes $28. Turbotax for 2011 taxes 00 Example 2. Turbotax for 2011 taxes Lynne's cash value in the contract at the end of the second year is $1,000. Turbotax for 2011 taxes In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. Turbotax for 2011 taxes In year two, Lynne's employer will include $29. Turbotax for 2011 taxes 07 in her current year's income. Turbotax for 2011 taxes Lynne will subtract this amount when figuring her includible compensation. Turbotax for 2011 taxes Table 3-2. Turbotax for 2011 taxes Worksheet A. Turbotax for 2011 taxes Cost of Incidental Life Insurance Note. Turbotax for 2011 taxes Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Turbotax for 2011 taxes This amount will be used to figure includible compensation for your most recent year of service. Turbotax for 2011 taxes 1. Turbotax for 2011 taxes Enter the value of the contract (amount payable upon your death) 1. Turbotax for 2011 taxes $20,000. Turbotax for 2011 taxes 00 2. Turbotax for 2011 taxes Enter the cash value in the contract at the end of the year 2. Turbotax for 2011 taxes $1,000. Turbotax for 2011 taxes 00 3. Turbotax for 2011 taxes Subtract line 2 from line 1. Turbotax for 2011 taxes This is the value of your current life insurance protection 3. Turbotax for 2011 taxes $19,000. Turbotax for 2011 taxes 00 4. Turbotax for 2011 taxes Enter your age on your birthday nearest the beginning of the policy year 4. Turbotax for 2011 taxes 45 5. Turbotax for 2011 taxes Enter the 1-year term premium for $1,000 of life insurance based on your age. Turbotax for 2011 taxes (From Figure 3-1) 5. Turbotax for 2011 taxes $1. Turbotax for 2011 taxes 53 6. Turbotax for 2011 taxes Divide line 3 by $1,000 6. Turbotax for 2011 taxes 19 7. Turbotax for 2011 taxes Multiply line 6 by line 5. Turbotax for 2011 taxes This is the cost of your incidental life insurance 7. Turbotax for 2011 taxes $29. Turbotax for 2011 taxes 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. Turbotax for 2011 taxes Example. Turbotax for 2011 taxes Floyd has been periodically working full-time for a local hospital since September 2011. Turbotax for 2011 taxes He needs to figure his limit on annual additions for 2014. Turbotax for 2011 taxes The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. Turbotax for 2011 taxes During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. Turbotax for 2011 taxes Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. Turbotax for 2011 taxes Floyd has never worked abroad and there is no life insurance provided under the plan. Turbotax for 2011 taxes Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. Turbotax for 2011 taxes Table 3-3. Turbotax for 2011 taxes Floyd's Compensation Note. Turbotax for 2011 taxes This table shows information Floyd will use to figure includible compensation for his most recent year of service. Turbotax for 2011 taxes   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. Turbotax for 2011 taxes Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. Turbotax for 2011 taxes If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. Turbotax for 2011 taxes He figures his most recent year of service shown in the following list. Turbotax for 2011 taxes Time he will work in 2014 is 6/12 of a year. Turbotax for 2011 taxes Time worked in 2013 is 4/12 of a year. Turbotax for 2011 taxes All of this time will be used to determine Floyd's most recent year of service. Turbotax for 2011 taxes Time worked in 2012 is 4/12 of a year. Turbotax for 2011 taxes Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. Turbotax for 2011 taxes Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. Turbotax for 2011 taxes Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). Turbotax for 2011 taxes His includible compensation for his most recent year of service is figured as shown in Table 3-4. Turbotax for 2011 taxes After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. Turbotax for 2011 taxes Table 3-4. Turbotax for 2011 taxes Worksheet B. Turbotax for 2011 taxes Includible Compensation for Your Most Recent Year of Service1 Note. Turbotax for 2011 taxes Use this worksheet to figure includible compensation for your most recent year of service. Turbotax for 2011 taxes 1. Turbotax for 2011 taxes Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Turbotax for 2011 taxes $66,000 2. Turbotax for 2011 taxes Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Turbotax for 2011 taxes 4,4753 3. Turbotax for 2011 taxes Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Turbotax for 2011 taxes -0- 4. Turbotax for 2011 taxes Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. Turbotax for 2011 taxes -0- 5. Turbotax for 2011 taxes Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Turbotax for 2011 taxes -0- 6. Turbotax for 2011 taxes Enter your foreign earned income exclusion for your most recent year of service 6. Turbotax for 2011 taxes -0- 7. Turbotax for 2011 taxes Add lines 1, 2, 3, 4, 5, and 6 7. Turbotax for 2011 taxes 70,475 8. Turbotax for 2011 taxes Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Turbotax for 2011 taxes -0- 9. Turbotax for 2011 taxes Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Turbotax for 2011 taxes -0- 10. Turbotax for 2011 taxes Add lines 8 and 9 10. Turbotax for 2011 taxes -0- 11. Turbotax for 2011 taxes Subtract line 10 from line 7. Turbotax for 2011 taxes This is your includible compensation for your most recent year of service 11. Turbotax for 2011 taxes 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. Turbotax for 2011 taxes 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Turbotax for 2011 taxes  3$4,475 ($2,000 + $1,650 + $825). Turbotax for 2011 taxes Prev  Up  Next   Home   More Online Publications