Instructions For Form 4720 (2015) (Page 4 of 19) in pdf

from a United States person (as defined

excess benefit transaction subject to the

Schedule A of this form; for the

in section 7701(a)(30)) are from sources

tax unless the organization included the

definition of jeopardy investment, see

within the United States. See

reimbursement in the disqualified

the instructions for Schedule D of this

Regulations section 53.4948-1.

person's compensation and the

form.) Paying the tax and filing a Form

disqualified person's total compensation

4720 are required for each year or part

Although a foreign organization

was reasonable. See the instructions for

of a year in the taxable period that

described in section 4948(b) is not

Schedule I, later, for information on

applies to the act or investment.

subject to Chapter 42 taxes, it shall not

excess benefit transactions.

Generally, the taxable period begins

be exempt from tax under section

with the date of the act or investment

501(a) if it engages in a prohibited

Rounding Off to Whole

and ends with the date corrective action

transaction. See section 4948(c). A

Dollars

is completed, a notice of deficiency is

prohibited transaction is a transaction

mailed, or the tax is assessed,

You may round off cents to whole

that would subject the organization or its

whichever comes first.

dollars on your return and schedules. If

disqualified person to a penalty under

you do round to whole dollars, you must

section 6684 if the foreign organization

Similar rules apply for the initial tax

round all amounts. To round, drop

were a domestic organization. Unless

liability resulting from failing to distribute

amounts under 50 cents and increase

the transaction constitutes a willful and

income (Schedule B) and from acquiring

amounts from 50 to 99 cents to the next

flagrant violation of a Chapter 42

excess business holdings (Schedule C).

dollar. For example, $1.39 becomes $1

provision, a transaction violating a

Thus, the initial tax liability for those

and $2.50 becomes $3.

Chapter 42 provision will not constitute

taxes continues to accrue until the date

a prohibited transaction except under

a notice of deficiency is mailed, the

If you have to add two or more

the following circumstances:

violation is corrected, or the tax is

amounts to figure the amount to enter

assessed, whichever comes first.

1. There was a prior Chapter 42

on a line, include cents when adding the

violation that resulted in a warning from

amounts and round off only the total.

Completing the Schedules

the IRS that a second violation would

result in a prohibited transaction.

Before completing any of the schedules

Penalties and Interest

in this return, read the applicable

2. The IRS provides notice that the

There are penalties for failure to file or to

instructions. If any completed schedule

second transaction will constitute a

pay tax. There are also penalties for

shows taxes owed, enter them on

prohibited transaction unless it is

willful failure to file, supply information or

page 1 of this return.

corrected within 90 days of the notice.

pay tax, and for filing fraudulent returns

3. The second transaction is not

and statements, that apply to public

The instructions for Schedules A

timely corrected.

charities, private foundations,

through M describe acts or transactions

managers, donors, donor advisors,

subject to tax under Chapter 42. Also,

Tax Payments

go to

related persons, and self-dealers who

index.html

and then click on “Private

are required to file this return. See

Managers, self-dealers, disqualified

Foundations” or “Private Foundations

sections 6651, 7203, 7206, and 7207.

persons, donors, donor advisors, and

Manual” for a list of exceptions that

Also, see section 6684 for penalties that

related persons, paying tax on the

eliminate any tax liability that would

relate to tax liability under Chapter 42.

organization's Form 4720 must pay with

otherwise be shown on Schedules A

the return the tax that applies to them as

Interest charges for any unpaid tax is

and E. Do not complete Schedules A

shown in Part II-A. Managers,

charged at the underpayment rate

and E if exceptions apply to all the acts

self-dealers, disqualified persons,

established under section 6621. The

or transactions. In general, question A

donors, donor advisors, and related

interest on underpayments is in addition

on page 1 and Schedules A, B, C, D,

persons, who file separate Forms 4720

to any penalties.

and E do not apply to public charities.

must pay the applicable tax with their

However, Schedule C does apply to

separate returns. When managers do

Abatement

some public charities including donor

not sign the organization's Form 4720 to

See section 4962 for rules on

advised funds and certain supporting

report their own tax liability, the amount

organizations that are treated as private

abatement, refund, or relief from

of tax they owe should not be entered in

foundations for purposes of section

payment of first tier taxes under

Part II-B, line 1.

4943. See the instructions for

sections 4942 through 4945, 4955,

Payment by a private foundation of

Schedule C for a description of the

4958, 4966, and 4967. To request

any taxes owed by the foundation

public charities to which section 4943

abatement, refund, or relief under

managers or self-dealers will result in

applies.

section 4962, write “Request for

additional taxes under the self-dealing

Abatement Under Section 4962” in the

Before completing Schedule C,

and taxable expenditure provisions.

top margin of Form 4720, page 1.

determine whether the organization or

Managers and self-dealers should pay

donor advised fund has excess holdings

taxes imposed on them with their own

Initial Tax Liability

in any business enterprise. If the

check or money order.

If you pay an initial tax on self-dealing or

organization or donor advised fund has

Disqualified persons and entity

on investments that jeopardize

holdings subject to the tax on excess

managers should pay taxes on excess

charitable purpose (figured on

business holdings, complete

benefit transactions that are imposed on

Schedules A and D of Form 4720,

Schedule C for each enterprise.

them with their own check or money

respectively) for tax year 2015, the

order. Any reimbursement of a

payment may not satisfy the entire tax

Before completing Schedule D,

disqualified person's tax liability from

liability for an act of self-dealing or a

determine whether the investment was

excess benefit transactions by the

jeopardy investment. (For the definition

program related. If not, complete

organization will be treated as an

of self-dealing, see the instructions for

Schedule D for each investment for

Instructions for Form 4720 (2015)

Instructions For Form 4720 (2015) Page 4

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