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Forms and Instructions

Individual Tax Return
Instructions for Form 1040
Request for Taxpayer Identification Number (TIN) and Certification
Request for Transcript of Tax Return

 

Employee's Withholding Allowance Certificate
Employer's Quarterly Federal Tax Return
Employers engaged in a trade or business who pay compensation
Installment Agreement Request

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Amend/Fix Return
Apply for Power of Attorney
Apply for an ITIN
Rules Governing Practice before IRS

Tax on Net Investment Income

Internal Revenue Code section 4940 imposes an excise tax of 2 percent on the net investment income of most domestic tax-exempt private foundations, including pri­vate operating foundations. Some exceptions apply.  An exempt operating foundation is not subject to the tax.  Further, the tax: is reduced to 1 percent in certain cases.

This tax must be reported on Form 990-PF, Return of Private Foundation.  Payment of the tax is subject to estimated tax requirements.  For more information concerning payment of esti­mated tax, see the Instructions for Form 990-PF.  Nonexempt private foundations are also subject to this tax, but only to the extent that the sum of the 2 percent tax plus tax on unrelated busi­ness income, applied as if the foundation were tax-exempt, is greater than income tax liability for the year.

Example.  A taxable private foundation had an income tax liability for 2002 of $10,000.  If the foundation were tax exempt, it would have a $4,000 liability for tax on net investment income and a $7,000 liability for tax on unrelated busi­ness income.  The foundation is liable under sec­tion 4940 for $1,000, the amount by which the sum of the tax on net investment income and the tax on unrelated business income ($11,000) ex­ceeds the amount of income tax liability ($10,000).

 

 


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