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2020 Publication 535: Business Expenses

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2020 Publication 535: Business Expenses Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 8 Draft Ok to Print AH XSL/XML Fileid: … tions/P535/2020/A/XML/Cycle01/source (Init. & Date) _______ Page 1 of 56 13:21 - 11-Feb-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Publication 535 Cat. No. 15065Z Contents Introduction .................. 1 Department of the Business What's New for 2020 ............. 2 Treasury Internal What's New for 2021 ............. 2 Revenue Expenses Service Reminders ................... 2 Chapter 1. Deducting For use in preparing Business Expenses .......... 3 Chapter 2. Employees' Pay ........ 7 Returns 2020 Chapter 3. Rent Expense ........ 10 Chapter 4. Interest ............ 13 Chapter 5. Taxes ............. 18 Chapter 6. Insurance ........... 20 Chapter 7. Costs You Can Deduct or Capitalize .............. 24 Chapter 8. Amortization ......... 28 Chapter 9. Depletion ........... 35 Chapter 10. Business Bad Debts .... 40 Chapter 11. Other Expenses ...... 42 Chapter 12. How To Get Tax Help ... 49 The Taxpayer Advocate Service (TAS) Is Here To Help You ..... 53 Index ..................... 55 Introduction This publication discusses common business expenses and explains what is and is not de- ductible. The general rules for deducting busi- ness expenses are discussed in the opening chapter. The chapters that follow cover specific expenses and list other publications and forms you may need. Note. Section references within this publica- tion are to the Internal Revenue Code and regu- lation references are to the Income Tax Regula- tions under the Code. Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions. You can send us comments through IRS.gov/FormComments. Or you can write to the Internal Revenue Service, Tax Forms and Publications, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publi- cations. Do not send tax questions, tax returns, Get forms and other information faster and easier at: or payments to the above address. • IRS.gov (English) • IRS.gov/Korean (한국어) • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) Getting answers to your tax questions. • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) If you have a tax question not answered by this publication or the How To Get Tax Help section Feb 11, 2021 Page 2 of 56 Fileid: … tions/P535/2020/A/XML/Cycle01/source 13:21 - 11-Feb-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. at the end of this publication, go to the IRS In- For more information, go to the Gig teractive Tax Assistant page at IRS.gov/ Reminders Economy Tax Center at IRS.gov/Gig. Help/ITA where you can find topics using the Photographs of missing children. The Inter- search feature or by viewing the categories lis- The following reminders and other items may nal Revenue Service is a proud partner with the ted. help you file your tax return. National Center for Missing & Exploited Getting tax forms, instructions, and pub- Children® (NCMEC). Photographs of missing lications. Visit IRS.gov/Forms to download IRS e-file (Electronic Filing) children selected by the Center may appear in current and prior-year forms, instructions, and this publication on pages that would otherwise publications. be blank. You can help bring these children home by looking at the photographs and calling Ordering tax forms, instructions, and 1-800-THE-LOST (1-800-843-5678) (24 hours publications. Go to IRS.gov/OrderForms to a day, 7 days a week) if you recognize a child. order current forms, instructions, and publica- Preventing slavery and human trafficking. tions; call 800-829-3676 to order prior-year You can file your tax returns electronically Human trafficking is a form of modern-day slav- forms and instructions. The IRS will process using an IRS e-file option. The benefits of IRS ery, and involves the use of force, fraud, or co- your order for forms and publications as soon e-file include faster refunds, increased ercion to exploit human beings for some type of as possible. Do not resubmit requests you've al- accuracy, and acknowledgment of IRS receipt labor or commercial sex purpose. The United ready sent us. You can get forms and publica- of your return. You can use one of the following States is a source, transit, and destination tions faster online. IRS e-file options. country for men, women, and children, both • Use an authorized IRS e-file provider. U.S. citizens and foreign nationals, who are • Use a personal computer. subjected to the injustices of slavery and hu- • Visit a Volunteer Income Tax Assistance man trafficking, including forced labor, debt (VITA) or Tax Counseling for the Elderly Future Developments bondage, involuntary servitude, “mail-order” (TCE) site. For the latest information about developments marriages, and sex trafficking. Trafficking in related to Pub. 535, such as legislation enacted For details on these fast filing methods, see persons can occur in both lawful and illicit in- after it was published, go to IRS.gov/Pub535. your income tax package. dustries or markets, including in hotel services, hospitality, agriculture, manufacturing, janitorial Form 1099-MISC. File Form 1099-MISC, Mis- services, construction, health and elder care, cellaneous Income, for each person to whom domestic service, brothels, massage parlors, you have paid during the year in the course of and street prostitution, among others. What's New for 2020 your trade or business at least $600 in rents, The following items highlight some changes in prizes and awards, other income payments, The President’s Interagency Task Force to the tax law for 2020. medical and health care payments, and crop in- Monitor and Combat Trafficking in Persons surance proceeds. See the Instructions for (PITF) brings together federal departments and Coronavirus (COVID-19) related employ- Forms 1099-MISC and 1099-NEC for more in- agencies to ensure a whole-of-government ap- ment tax credits. formation and additional reporting require- proach that addresses all aspects of human • The Families First Coronavirus Response ments. trafficking. Online resources for recognizing and Act (FFCRA), enacted on March 18, 2020, reporting trafficking activities, and assisting vic- provides certain employers with tax credits Form 1099-NEC. File Form 1099-NEC, Non- tims include the Department of Homeland Se- that reimburse them for the cost of provid- employee Compensation, for each person to curity (DHS) Blue Campaign at DHS.gov/blue- ing paid sick and family leave wages to whom you have paid during the year in the campaign, the Department of State Office to their employees for leave related to course of your trade or business at least $600 in Monitor and Combat Trafficking in Persons at COVID-19. services (including parts and materials), who is State.gov/j/tip, and the National Human Traf- • The Coronavirus Aid, Relief, and Eco- not your employee. See the Instructions for ficking Resource Center (NHTRC) at nomic Security Act (CARES Act), enacted Forms 1099-MISC and 1099-NEC for more in- humantraffickinghotline.org. DHS is responsible on March 27, 2020, provides eligible em- formation and additional reporting require- for investigating human trafficking, arresting ployers with an employee retention tax ments. traffickers, and protecting victims. DHS also credit if they keep employees on their pay- provides immigration relief to non-U.S. citizen roll, despite experiencing economic hard- Gig Economy Tax Center. The IRS Gig Econ- victims of human trafficking. DHS uses a victim- ship related to COVID-19. omy Tax Center on IRS.gov can help people in centered approach to combating human traf- this growing area meet their tax obligations For more information, see chapter 2. ficking, which places equal value on identifying through more streamlined information. and stabilizing victims and on investigating and Film, television, and live theatrical produc- The gig economy is also known as the shar- prosecuting traffickers. Victims are crucial to in- tion costs. The election to expense certain ing, on-demand, or access economy. It usually vestigations and prosecutions; each case and costs of qualified film, television, and live theat- includes businesses that operate an app or every conviction changes lives. DHS under- rical productions has been extended to include website to connect people to provide services stands how difficult it can be for victims to come costs of productions that begin before January to customers. While there are many types of gig forward and work with law enforcement due to 1, 2026. For more information, see chapter 7. economy businesses, ride-sharing and home their trauma. DHS is committed to helping vic- rentals are two of the most popular. Standard mileage rate. For tax year 2020, the tims feel stable, safe, and secure. standard mileage rate for the cost of operating The Gig Economy Tax Center streamlines To report suspected human trafficking, call your car, van, pickup, or panel truck for each various resources, making it easier for taxpay- the DHS domestic 24-hour toll-free number at mile of business use is 57.5 cents per mile. For ers to find information about the tax implications 866-DHS-2-ICE (866-347-2423) or more information, see chapter 11. for the companies that provide the services and 802-872-6199 (non-toll-free international). For the individuals who perform them. It offers tips help from the NHTRC, call the National Human and resources on a variety of topics including: Trafficking Hotline toll free at 888-373-7888 or • Filing requirements; text HELP or INFO to BeFree (233733). What's New for 2021 • Making quarterly estimated income tax The U.S.
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