Looking for a Form 4720 Templates? Download it for free!

Tax on organization managers. If tax is

modification. A material modification includes

Enter in column (c) the tax to be paid by each

imposed on a disqualified person for any

amending the contract to extend its term or to

organization manager.

excess benefit transaction, then tax is also

increase the compensation payable to a

Carry the total amount in column (d) for

imposed on any organization manager who

disqualified person.

each organization manager to page 1, Part

knowingly participated in the excess benefit

Disqualified person. For purposes of this

II-A, column (h).

transaction. The tax is 10% of the excess, not

section, a disqualified person means:

to exceed $10,000 for each transaction.

1. Any person (at any time during the

Privacy Act and Paperwork Reduction Act

Additional tax on the disqualified person. If

5-year period ending on the date of the

Notice.

the initial tax is imposed on an excess benefit

transaction) in a position to exercise

We ask for the information on this form to carry

transaction and the transaction is not corrected

substantial influence over the affairs of the

out the Internal Revenue laws of the United

within the taxable period, then any disqualified

organization,

States. We need it to ensure that you are

person involved shall be liable for an additional

2. A family member of an individual

complying with these laws and to allow us to

tax equal to 200% of the excess benefit.

described in 1, or

figure and collect the right amount of tax.

This additional tax is abated (refunded if

3. A 35% controlled entity.

Certain individuals who owe tax under Chapter

collected) if the excess benefit transaction is

41 or 42 of the Internal Revenue Code, and

Family members. Family members of an

corrected within the correction period (defined

who do not sign the Form 4720 of the

individual (described in 1 above) include a

in Question B, under, Specific Instructions for

foundation or organization, must file a separate

disqualified person’s spouse, ancestors,

Page 1 on page 3).

Form 4720 showing the tax owed and the

children, grandchildren, great grandchildren,

Taxable period. Taxable period means the

name of the foundation or organization for

and brothers and sisters (whether by whole or

period beginning with the date on which the

which they owe tax. Sections 6001 and 6011 of

half-blood). It also includes the spouse of the

excess benefit transaction occurs and ending

the Internal Revenue Code require you to

children, grandchildren, great grandchildren,

on the earlier of:

provide the requested information if the tax

brothers or sisters (whether by whole or

applies to you. Section 6109 requires you to

1. The date a notice of deficiency was

half-blood).

provide your social security number or other

mailed to the disqualified person for the initial

35% controlled entity. The term 35%

identifying number. Routine uses of this

tax on the excess benefit transaction, or

controlled entity means:

information include disclosing it to the

2. The date on which the initial tax on the

•

A corporation in which a person described in

Department of Justice for civil and criminal

excess benefit transaction for the disqualified

1 or 2 under Disqualified person owns more

litigation and to other federal agencies, as

person is assessed.

than 35% of the total combined voting power,

provided by law. We may disclose the

•

A partnership in which such persons own

Excess benefit transaction. An excess

information to cities, states, the District of

more than 35% of the profits interest, or

benefit transaction is any transaction in which:

Columbia, and U. S. Commonwealths or

•

A trust or estate in which such persons own

possessions to administer their laws. If you do

1. An excess benefit is provided by the

more than 35% of the beneficial interest.

not file this information, you may be subject to

organization, directly or indirectly to, or for the

In determining the holdings of a business

interest, penalties, and/or criminal prosecution.

use of, any disqualified person, or

enterprise, any stock or other interest owned

2. The amount of any economic benefit

We may also disclose this information to

directly or indirectly shall apply.

provided to, or for the use of, a disqualified

other countries under a tax treaty, to federal

person is determined in whole or in part by the

and state agencies to enforce federal nontax

revenues of the organization and violates the

criminal laws or to federal law enforcement and

Specific Instructions

private inurement prohibition rules (to the

intelligence agencies to combat terrorism.

extent provided in regulations).

Part I. List each excess benefit transaction in

You are not required to provide the

Part I, column (c). Enter the date of the

information requested on a form that is subject

Until final regulations are issued

transaction in column (b) and the amount of the

to the Paperwork Reduction Act unless the

regarding the special rules for revenue

excess benefit in column (d). Compute the tax

form displays a valid OMB control number.

sharing transactions described in 2

CAUTION

on the excess benefit for disqualified persons

Books or records relating to a form or its

above, these transactions will only be subject

and enter it in column (e). Compute any tax on

instructions must be retained as long as their

to section 4958 liability under the general rule

the excess benefit for organization managers

contents may become material in the

described in 1 above.

and enter the amount in column (f).

administration of any Internal Revenue law.

Excess benefit. Excess benefit means the

Generally, tax returns and return information

For organization managers, the tax is the

excess of the economic benefit received from

are confidential, as required by section 6103.

lesser of 10% of the excess benefit or $10,000.

the applicable organization over the

This tax is computed on each transaction.

The time needed to complete and file this

consideration given (including services) by a

form will vary depending on individual

Part II. Enter in column (a) the names of all

disqualified person.

circumstances. The estimated average time is:

disqualified persons who took part in the

However, an economic benefit will not be

excess benefit transactions. If more than one

Recordkeeping . . . . . . . . . . . .

39 hr., 55 min.

treated as compensation for services unless

disqualified person took part in an excess

the applicable organization clearly indicates its

Learning about the law or the

benefit transaction, each is individually liable

intent to treat the economic benefit (when paid)

form . . . . . . . . . . . . . . . . . . .

16 hr., 30 min.

for the entire tax on the transaction. But the

as compensation for a disqualified person’s

disqualified persons who are liable for the tax

Preparing the form . . . . . . . . . .

23 hr., 22 min.

services. See Regulations section 53.4958-4(c)

may prorate the payment among themselves.

Copying, assembling, and

for more information.

Enter in column (c) the tax to be paid by each

sending the form to the IRS . . . .

1 hr., 36 min.

Exception. Generally, section 4958 does

disqualified person.

not apply to any fixed payment made to a

Carry the total amount in column (d) for

If you have comments concerning the

person under an initial contract. See

each disqualified person to page 1, Part II-A,

accuracy of these time estimates or

Regulations section 53.4958-4(a)(3) for details.

column (h).

suggestions for making this form simpler, we

Special rule. The initial and additional taxes of

would be happy to hear from you. You can

Part III. Enter in column (a) the names of all

this section do not apply if the transaction

write to the Internal Revenue Service, Tax

organization managers who knowingly took

described in 1 under Excess benefit

Products Coordinating Committee,

part in the excess benefit transactions listed in

transaction, was pursuant to a written contract

SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave.

Part I. If more than one organization manager

in effect on September 13, 1995, and at all

NW, Washington, DC 20024. Do not send the

knowingly took part in an excess benefit

times after that date until the time that the

tax form to this address. Instead, see Where

transaction, each is individually liable for the

transaction occurs.

To File on page 2.

entire tax in connection with the transaction.

However, if a written contract is materially

But the organization managers liable for the tax

modified, it is treated as a new contract

may prorate the payment among themselves.

entered into as of the date of the material

-8-

Form 4720 Instructions

Instructions For Form 4720 - Return Of Certain Excise Taxes On Charities And Other Persons - Department Of The Treasury - 2004 Page 8

Related Articles

Related forms

Related Categories