Form 4720 Private Foundation Excise Tax Return: Reporting Taxable Violations

Perhaps the most significant challenge for tax advisers serving private foundations, as well as non-exempt charitable trusts treated as private foundations, is identifying and reporting transactions that result in an excise tax liability for the foundation. Everyday taxable situations for the foundations include instances of prohibited self-dealing, failure to make required distribution of foundation income, purchase of risky investments, payments for lobbying efforts, and excess business holdings. Each of these issues carries significant tax consequences to the foundation and potentially its insiders.

A private foundation that has engaged in any taxable transaction or situation must report the value of the violation on Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code, to report and pay the tax arising from the violation. Additionally, a transaction may create liability for officers or related parties, and the individual involved may also have to file a separate Form 4720.

The form presents several complexities for advisers, from identifying violations and determining the reporting period, to calculating the excise tax due from both the foundation and impacted parties. The form lists violations and references the appropriate Code Section to determine filing duties. Failure to report the tax carries substantial penalties, potentially including loss of exempt status.

Listen as our experienced panel provides a thorough and practical guide to completing Form 4720 Return of Excise Taxes for Private Foundations.

1. Identify transactions that may cause imposition of excise tax and the exceptions that may lift the obligation to pay excise tax.
2. Study and learn how to respond to complex questions on Form 990-PF, Part VII-B.
3. Discuss issues presented by Form 4720 layout and schedules.
4. Understand how to calculate tax on organization.
5. Learn to identify persons subject to tax – managers, self-dealers, disqualified persons, donors, donor advisors, and related persons

The panel will discuss these and other important topics:

• Determining whether the foundation has met the minimum distribution requirements
• Identifying triggers in the foundation’s records and Form 990-PF filings that lead to a Form 4720 reporting and calculation requirement
• Referencing back violations to the Code Section to ensure accurate calculation of the tax
• Knowing what violations require filings by related persons as well as the private foundation

Learning Objectives

After completing this course, you will be able to:

• Identify private foundation transactions and activities that require calculating and reporting excise tax on Form 4720
• Recognize the tie-back between Form 4720 and Part VII-B of Form 990-PF
• Discern the differences in the imposition of excise tax depending on nature of the violation
• Decide when a violation requires Form 4720 filing and payment by both the organization and impacted individuals (managers, donors or related persons)

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of private foundation operating rules and taxable violations; familiarity with Form 990-PF and all supporting schedules.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).