New tax laws for 2020

Rent expense Rent Unreasonable rent Rent on your home Rent paid in advance Taxes on leased property www.fender-tax.com

Bonuses Education Expenses Fringe Benefits Meals & Lodging Transportation (commuting) benefits Employee benefit programs www.fender-tax.com

Employees' Pay Tests for Deducting Pay Test 1. It must be reasonable. Test 2. It must be for services performed. Kinds of Pay www.fender-tax.com

Improvements Capital vs Deductible Expenses www.fender-tax.com

What Can I Deduct? Cost of Goods Sold Capital Expenses Going into Business www.fender-tax.com

What is new for 2019 What is new for 2020 www.fender-tax.com

f someone owes you money that you can't collect, you may have a bad debt. For a discussion of what constitutes a valid debt, refer to Publication 550, Investment Income and Expenses (PDF) and Publication 535, Business Expenses. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. If you're a cash method taxpayer (most individuals are), you generally can't take a bad debt deduction for unpaid salaries, wages, rents, fees, interests, dividends, and similar items. For a bad debt, you must show that at the time of the transaction you intended to make a loan and not a gift. If you lend money to a relative or friend with the understanding the relative or friend may not repay it, you must consider it as a gift and not as a loan, and you may not deduct it as a bad debt. There are two kinds of bad debts – business and nonbusiness. www.fender-tax.com

Coronavirus-related distributions (CVDs) from IRAs are tax-favored How do you qualify for CVDs? www.fender-tax.com

What is new. Types of organizations Contributions you can deduct Contributions from which you benefit www.fender-tax.com

Before you give your vehicle to a charitable organization: 1. Check out the charity, 2. See if you will get a tax benefit, 3. Check the value of your vehicle, 4. See what your responsibilities are as a donor to a charity. www.fender-tax.com

What is a Limited Liability Company. Classification of an LLC LLCs Classified as Partnerships Member manager Change in default classification LLCs Classified as Disregarded Entities LLCs Classified as Corporations www.fender-tax.com

What's a Lump-Sum Distribution? A lump-sum distribution is the distribution or payment within a single tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). Additionally, a lump-sum distribution is a distribution that's paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Lump-Sum Treatment Options You can elect to treat the portion of a lump-sum distribution that's attributable to your active participation in the plan using one of five options: Report the taxable part of the distribution from participation before 1974 as a capital gain (if you qualify) and the taxable part of the distribution from participation after 1973 as ordinary income. Report the taxable part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). Roll over all or part of the distribution. No tax is currently due on the part rolled over. Report any part not rolled over as ordinary income. Report the entire taxable part as ordinary income. www.fender-tax.com

f you have income from your farming or fishing business, you may be able to avoid making any estimated tax payments by filing your return and paying your entire tax due on or before March 1 of the year your return is due. This rule generally applies if farming or fishing income was at least two-thirds of your total gross income in either the current or the preceding tax year. If March 1 falls on a weekend or legal holiday, you have until the next business day to file your return and pay the tax. If you choose not to file by March 1, you can make a single estimated tax payment by January 15 or the next business day if January 15 falls on a weekend or legal holiday, to avoid an estimated tax penalty. If these special rules don't apply, you may have to make quarterly estimated tax payments. For more information on estimated tax, refer to Publication 505, Tax Withholding and Estimated Tax. www.fender-tax.com

Interest is an amount you pay for the use of borrowed money. Some interest can be claimed as a deduction or as a credit. To deduct interest you paid on a debt, review each interest expense to determine how it qualifies and where to take the deduction. Mortgage Interest Deduction Mortgage Interest Credit www.fender-tax.com

Tax Treatment of Alimony and Separate Maintenance Alimony or Separate Maintenance – In General Payments Not Alimony or Separate Maintenance Reporting Taxable Alimony or Separate Maintenance www.fender-tax.com

Deferred federal income tax payment deadline for individuals Individuals can defer their federal income tax payments (including any self-employment tax) for the 2019 tax year from the normal April 15 deadline until July 15. That means you can put off paying what you still owe for last year until July 15 without incurring any interest or penalties. IRS Notice 2020-20 confirms that individuals can also defer until July 15 their initial quarterly estimated federal income tax payments for the 2020 tax year www.fender-tax.com

Under the tax law, certain tax benefits can significantly reduce a taxpayer's regular tax amount. The alternative minimum tax (AMT) applies to taxpayers with high economic income by setting a limit on those benefits. It helps to ensure that those taxpayers pay at least a minimum amount of tax. How Is the AMT Calculated? The AMT is the excess of the tentative minimum tax over the regular tax. Thus, the AMT is owed only if the tentative minimum tax for the year is greater than the regular tax for that year. The tentative minimum tax is figured separately from the regular tax. In general, compute the tentative minimum tax by: Computing taxable income eliminating or reducing certain exclusions and deductions, and taking into account differences with respect to when certain items are taken into account in computing regular taxable income and alternative minimum taxable income (AMTI), Subtracting the AMT exemption amount, Multiplying the amount computed in (2) by the appropriate AMT tax rates, and Subtracting the AMT foreign tax credit. The law sets the AMT exemption amounts and AMT tax rates. Taxpayers can use the special capital gain rates in effect for the regular tax if they're lower than the AMT tax rates that would otherwise apply. In addition, some tax credits that reduce regular tax liability don't reduce AMT tax liability. Am I Subject to the AMT? To find out if you may be subject to the AMT, refer to the Alternative Minimum Tax (AMT) line instructions in the Instructions for Form 1040 and 1040-SR (PDF). If subject to the AMT, you may be required to complete and attach Form 6251, Alternative Minimum Tax – Individuals. See the Instructions for Form 6251. Am I Eligible for a Tax Credit? If you're not liable for AMT this year, but you paid AMT in one or more previous years, you may be eligible to take a special minimum tax credit against your regular tax this year. If eligible, you should complete and attach Form 8801, Credit for Prior Year Minimum Tax - Individuals, Estates, and Trusts (PDF) to claim the minimum tax credit. www.fender-tax.com

Dividends are distributions of property a corporation may pay you if you own stock in that corporation. Corporations pay most dividends in cash. However, they may also pay them as stock of another corporation or as any other property. You also may receive distributions through your interest in a partnership, an estate, a trust, a subchapter S corporation, or from an association that's taxable as a corporation. A shareholder of a corporation may be deemed to receive a dividend if the corporation pays the debt of its shareholder, the shareholder receives services from the corporation, or the shareholder is allowed the use of the corporation's property without adequate reimbursement to the corporation. Additionally, a shareholder that provides services to a corporation may be deemed to receive a dividend if the corporation pays the shareholder service-provider in excess of what it would pay a third party for the same services. A shareholder may also receive distributions such as additional stock or stock rights in the distributing corporation; such distributions may or may not qualify as dividends. Form 1099-DIV Return of Capital Capital Gain Distributions www.fender-tax.com

A licensed, commissioned, or ordained minister is generally the common law employee of the church, denomination, sect, or organization that employs him or her to provide ministerial services. However, there are some exceptions, such as traveling evangelists who are independent contractors (self-employed) under the common law. Regardless of whether you're a minister performing ministerial services as an employee or a self-employed person, all of your earnings, including wages, offerings, and fees you receive for performing marriages, baptisms, funerals, etc., are subject to income tax. However, the way you treat expenses related to those earnings differs if you earn the income as an employee or as a self-employed person. www.fender-tax.com

A qualified tuition program (QTP), also referred to as a section 529 plan, is a program established and maintained by a state, or an agency or instrumentality of a state, that allows a contributor either to prepay a beneficiary's qualified higher education expenses at an eligible educational institution or to contribute to an account for paying those expenses. Eligible educational institutions can also establish and maintain QTPs but only to allow prepaying a beneficiary's qualified higher education expenses. Qualified higher education expenses include tuition expenses in connection with a designated beneficiary's enrollment or attendance at an elementary or secondary public, private, or religious school, i.e. kindergarten through grade 12, up to a total amount of $10,000 per year from all of the designated beneficiary's QTPs. It also includes expenses for fees, books, supplies, and equipment required for the participation in an apprenticeship program registered and certified with the Secretary of Labor and qualified education loan repayments in limited amounts. www.fender-tax.com

Deductible medical expenses may include but aren't limited to the following: Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, and nontraditional medical practitioners. Payments for inpatient hospital care or residential nursing home care, if the availability of medical care is the principal reason for being in the nursing home, including the cost of meals and lodging charged by the hospital or nursing home. If the availability of medical care isn't the principal reason for residence in the nursing home, the deduction is limited to that part of the cost that's for medical care. Payments for acupuncture treatments or inpatient treatment at a center for alcohol or drug addiction; or for participation in a smoking-cessation program and for drugs to alleviate nicotine withdrawal that require a prescription. Payments to participate in a weight-loss program for a specific disease or diseases diagnosed by a physician, including obesity, but not ordinarily payments for diet food items or the payment of health club dues. Payments for insulin and for drugs that require a prescription for its use by an individual. Payments made for admission and transportation to a medical conference relating to a chronic illness of you, your spouse, or your dependent (if the costs are primarily for and essential to necessary medical care). However, you may not deduct the costs for meals and lodging while attending the medical conference. Payments for false teeth, reading or prescription eyeglasses, contact lenses, hearing aids, crutches, wheelchairs, and for a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. Payments for transportation primarily for and essential to medical care that qualify as medical expenses, such as payments of the actual fare for a taxi, bus, train, ambulance, or for transportation by personal car; the amount of your actual out-of-pocket expenses such as for gas and oil; or the amount of the standard mileage rate for medical expenses, plus the cost of tolls and parking. Payments for insurance premiums you paid for policies that cover medical care or for a qualified long-term care insurance policy covering qualified long-term care services. However, if you're an employee, don't include in medical expenses the portion of your premiums treated as paid by your employer. Employer-sponsored premiums paid under a premium conversion plan, cafeteria plan, or any other medical and dental expenses paid by the plan aren't deductible unless the premiums are included in box 1 of your Form W-2, Wage and Tax Statement (PDF). For example, if you're a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program, you may not include the premiums paid for the policy as a medical expense. www.fender-tax.com

An employer may outsource some or all of its federal employment tax withholding, reporting, and payment obligations. An employer who outsources payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer, generally will remain responsible for those duties, including liability for the taxes. www.fender-tax.com

No regular payroll period Employee paid for period less than one year Using Form W-4 to figure withholding www.fender-tax.com

Cash tips your employee receives from customers are generally subject to withholding. Your employee must re-port cash tips to you by the 10th of the month after the month the tips are received. Cash tips include tips paid by cash, check, debit card, and credit card. The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Both directly and indirectly tipped employees must report tips to you. No report is required for months when tips are less than $20. Your employee reports the tips on Form 4070 or on a similar statement. The statement must be signed and dated by the employee and must include: • The employee's name, address, and SSN; • Your name and address; • The month and year (or the beginning and ending dates, if the statement is for a period of less than 1 calendar month) the report covers; and • The total of tips received during the month or period. www.fender-tax.com

Health insurance plans. If you pay the cost of an accident or health insurance plan for your employees, including an employee's spouse and dependents, your payments aren't wages and aren't subject to social security, Medicare, and FUTA taxes, or federal income tax with-holding. Generally, this exclusion also applies to qualified long-term care insurance contracts. However, for income tax withholding, the value of health insurance benefits must be included in the wages of S corporation employees who own more than 2% of the S corporation (2% shareholders). For social security, Medicare, and FUTA taxes, the health insurance benefits are excluded from the 2% shareholder's wages. See Announcement 92-16 for more information. You can find Announcement 92-16 on page 53 of Internal Revenue Bulletin 1992-5. Health savings accounts (HSAs) and medical savings accounts (MSAs). Your contributions to an employee's HSA or Archer MSA aren't subject to social security, Medicare, or FUTA taxes, or federal income tax withholding if it is reasonable to believe at the time of payment of the contributions they’ll be excludable from the income of the employee. To the extent it isn't reasonable to believe they’ll be excludable, your contributions are subject to these taxes. Employee contributions to their HSAs or MSAs through a payroll deduction plan must be included in wages and are subject to social security, Medicare, and FUTA taxes and income tax withholding. However, HSA contributions made under a salary reduction arrangement in a section 125 cafeteria plan aren't wages and aren't subject to employment taxes or withholding. For more information, see the Instructions for Form 8889. www.fender-tax.com

Wages subject to federal employment taxes generally include all you give to an employee for services performed. The pay may be in cash or in other forms. It includes salaries, vacation allowances, bonuses, commissions, and taxable fringe benefits. It doesn't matter how you measure or make the payments. Amounts an employer pays as a bonus for signing or ratifying a contract in connection with the establishment of an employer-employee relationship and an amount paid to an employee for cancellation of an employment contract and relinquishment of contract rights are wages subject to social security, Medicare, and FUTA taxes and income tax withholding. Also, compensation paid to a former employee for services performed while still employed is wages subject to employment taxes. www.fender-tax.com

If you and your spouse jointly own and operate a business and share in the profits and losses, you may be partners in a partnership, whether or not you have a formal partner-ship agreement. See Pub. 541 for more details. The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Exception - Qualified Joint Venture Family Employees One Spouse Employed by Another Spouse Covered Services of a Child or Spouse www.fender-tax.com

This publication explains your tax responsibilities as an employer. It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and the SSA. References to “in-come tax” in this guide apply only to “federal” income tax. Contact your state or local tax department to determine their rules. When you pay your employees, you don't pay them all the money they earned. As their employer, you have the added responsibility of withholding taxes from their pay-checks. The federal income tax and employees' share of social security and Medicare taxes that you withhold from your employees' paychecks are part of their wages that you pay to the U.S. Treasury instead of to your employees. Your employees trust that you pay the withheld taxes to the U.S. Treasury by making federal tax deposits. This is the reason that these withheld taxes are called trust fund taxes. If federal income, social security, or Medicare taxes that must be withheld aren't withheld or aren't de-posited or paid to the U.S. Treasury, the trust fund recovery penalty may apply. See section 11 for more information. www.fender-tax.com

What's New Redesigned Form W-4 for 2020 Social Security and Medicare Tax for 2020 www.fender-tax.com

Social Security Coverage Earning Credits in 2019 and 2020 Social Security Administration (SSA) time limit for posting Who Must Pay Self-Employment Tax SE Tax Rate Maximum Earnings Subject to SE Tax Additional Medicare Tax Employment Taxes www.fender-tax.com

Are You Self-Employed Are You a Statutory Employee Business Owned and Operated by Spouses www.fender-tax.com

Sole Proprietorships Partnerships Corporations LLCs for Federal Tax Purposes www.fender-tax.com

Nonresident Aliens Resident Aliens Green Card Test Substantial Presence Test Choosing Resident Alien Status Dual-Status Tax Year www.fender-tax.com

Statutory Stock Options -- Incentive Stock Option -- Employee Stock Purchase Plan Nonstatutory Stock Options -- Readily Determined Fair Market Value -- Not Readily Determined Fair Market Value www.fender-tax.com

You're self-employed for this purpose if you're a sole proprietor (including an independent contractor), a partner in a partnership (including a member of a multi-member limited liability company (LLC) that is treated as a partnership for federal tax purposes) or are otherwise in business for yourself. The term sole proprietor also includes the member of a single member LLC that's disregarded for federal income tax purposes and a member of a qualified joint venture. You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more. Generally, the amount subject to self-employment tax is 92.35% of your net earnings from self-employment. You calculate net earnings by subtracting ordinary and necessary trade or business expenses from the gross income you derived from your trade or business. You can be liable for paying self-employment tax even if you currently receive social security benefits. The law sets a maximum amount of net earnings subject to the social security tax. This amount changes annually. All of your net earnings are subject to the Medicare tax. Optional Methods Church Employee Self-Employment Tax Rate Additional Medicare Tax Reporting Self-Employment tax www.fender-tax.com

Investors Dealers Traders Mark-To-Market www.fender-tax.com

Amounts that meet the requirements for any of the following exceptions aren't cancellation of debt income. EXCEPTIONS to Cancellation of Debt Income: Amounts canceled as gifts, bequests, devises, or inheritances Certain qualified student loans canceled under the loan provisions that the loans would be canceled if you work for a certain period of time in certain professions for a broad class of employers Certain other education loan repayment or loan forgiveness programs to help provide health services in certain areas. Amounts of canceled debt that would be deductible if you, as a cash basis taxpayer, paid it A qualified purchase price reduction given by the seller of property to the buyer Any Pay-for-Performance Success Payments that reduce the principal balance of your home mortgage under the Home Affordable Modification Program Amounts from student loans discharged on the account of death or total and permanent disability of the student. Amounts that meet the requirements for any of the following exclusions aren't included in income, even though they're cancellation of debt income. EXCLUSIONS from Gross Income: Debt canceled in a Title 11 bankruptcy case Debt canceled to the extent insolvent Cancellation of qualified farm indebtedness Cancellation of qualified real property business indebtedness Cancellation of qualified principal residence indebtedness that is discharged subject to an arrangement that is entered into and evidenced in writing before January 1, 2021. www.fender-tax.com

Deductible travel expenses while away from home include, but aren't limited to, the costs of: Travel by airplane, train, bus or car between your home and your business destination. (If you're provided with a ticket or you're riding free as a result of a frequent traveler or similar program, your cost is zero.) Fares for taxis or other types of transportation between: The airport or train station and your hotel, The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location. Shipping of baggage, and sample or display material between your regular and temporary work locations. Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses. Lodging and non-entertainment-related meals. Dry cleaning and laundry. Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.) Tips you pay for services related to any of these expenses. Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer.) www.fender-tax.com

Pass-Through Business Entities Non-Pass-Through Business Entities Tax Advantages of Corporations www.fender-tax.com

Under the Tax Cuts and Jobs Act, pass-through business entity owners can potentially deduct 20% of their business income. 1. You Must Have a Pass-Through Business 2. You Must Have Qualified Business Income 3. 20% Deduction for Taxable Income Below Annual Threshold 4. Deduction for Income Above Annual Threshold you need to determine whether your business falls within one of the following service provider categories: health (doctors, dentists, and other health fields) law accounting actuarial science performing arts consulting athletics financial services brokerage services (not including real estate or insurance brokers) investing and investment management (not including property managers), or trading and dealing in securities or commodities. www.fender-tax.com

To deduct expenses for business use of the home, you must use part of your home as one of the following: Exclusively and regularly as your principal place of business for your trade or business; Exclusively and regularly as a place where you meet and deal with your patients, clients, or customers in the normal course of your trade or business; A separate structure that's not attached to your home used exclusively and regularly in connection with your trade or business; On a regular basis for storage of inventory or product samples used in your trade or business of selling products at retail or wholesale; For rental use; or As a daycare facility. www.fender-tax.com

Fully Taxable Payments Partially Taxable Payments Additional 10% Tax on Early Distributions www.fender-tax.com

Real Estate Rentals Personal Property Rentals Rental Income Rental Expenses Personal Use Minimal Rental Use Dividing Expenses between Rental and Personal Use www.fender-tax.com

Ineligible Distributions Timeframe to Complete a Rollover IRA-to-IRA Rollover Limitation Additional Taxes www-fender-tax.com

Short-term or Long-term Capital Gain Tax Rates Limit on the Deduction and Carryover of Losses Net Investment Income Tax www.fender-tax.com

Contributions Distributions Hardship Withdrawals Additional 10% Tax Taxable and Nontaxable Income www.fender-tax.com

What is the Earned Income Tax Credit? How to qualify for the Earned Income Tax Credit? How much can I get? Children and the Earned Income Tax Credit If you do not have children Consequences of an EIC-related error www.fender-tax.com

Six Tax Deductions to claim without itemizing: 1. IRA Contributions 2. HSA Contributions 3. Self-employment tax 4. Health insurance premiums 5. Educator expenses 6. Student loan interest Mistakes to avoid: 1. Wrong Social Security Number 2. Choosing the wrong tax-filing status 3. Writing off itemizing before calculating the numbers 4. Failing to report all of your income 5. Filing your taxes on paper

Line 8 Home Mortgage Interest Limits on home mortgage interest Limit for loan proceeds not used to buy, build, or substantially improve your home Limit on loans taken out on before December 15, 2017 www.fender-tax.com

Use Schedule 1 to report income or adjustments to income that are not included directly on Form 1040 or 1040-SR Virtual Currency Line 1: Taxable Refunds, Credits, Offsets of State and Local Income Taxes Line 2a and 2b: Alimony Received Line 3: Business Income or (Loss) Line 4: Other Gains or (Losses) Line 7: Unemployment Compensation www.fender-tax.com

Examples of Qualified Charitable Organizations Amounts You Cannot Deduct Gifts by Cash or Check Qualified Contributions www.fender-tax.com