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First, you must be a consumer.If you have purchased goods or services for your business, for example for re-selling them, you are not a consumer.But if you have purchased goods or services, like medicines, computers, mobiles, etc. for your own use, or mediclaim insurance policies, you are certainly a consumer.Secondly, you must give a notice in writing to the supplier or service provider asking him to rectify the faults, defects, etc.The notice should be simple, clearly pointing out your grievances, and requesting the supplier or service provider to rectify the faults, defects, etc. or replace the goods.Normally, you should give a clear one month’s notice.You should address the notice to the nearest address available, so that if you have to file a Complaint, it will be in the nearest consumer forum.Thirdly, the Complaint must be filed within 2 years of the cause of action.If there are reasonable causes for delay in filing the Complaint, you can always request the Consumer Forum to condone the delay.The Complaint: The following is the procedure for filing a Complaint before the District Forums.(State Forums and National Forums have their own rules, but they are essentially the same)Although it is not essential that the Complaint should be typed, it is always better to get it typed, double spaced, with at least 1½ inches of margin space on the left, top and bottom.The Complaint has to be arranged in the following Order and you have to page number all documents.1. Index giving the page number(s) of each document.2. Application for condonation of delay (if there is delay), giving the reasons for the delay, duly affirmed before a notary public.3. Complaint – containing details of the grievance, preferably arranged in chronological order; briefly giving the ground on which relief is claimed, and the relief (including legal costs, damages and interest) claimed.The Complaint has to be signed by the Complainant.4. You can appear before the Consumer Forums in person, or allow a close relative to appear for you.But if you are engaging an advocate to appear on your behalf, you have to enclose a Vakalatnama, But then, your advocate will be doing all the paper work and attending the hearings.If you are authorizing, your close relative to appear for you, you have to enclose a letter of authority.5. Affidavit that the contents of the Complaint are true.6. Copies of all documents on which you rely upon in support of your Complaint.No of copies of the Complaint to be filedYou have to submit:1 Original and 2 xerox copies.In addition, if the Complaint is admitted, you will have to submit as many more copies as there are parties.Where to file your Complaint:The jurisdiction, that is the Consumer Forum, where you should file your Complaint depends on the amount involved.I am summarizing the provisions below:Amount Involved Jurisdictionupto Rs. 20 lakhs District Consumer ForumRs. 20 lakhs to Rs. 1 crore State Consumer ForumMore than Rs. 1 crore National Consumer ForumThe Fee:The fee, which is nominal, depends upon the amount involved. It is as follows:Before District Forum:For claims up to Rs. 1 lakh = Rs. 100For claims from Rs.1 lakh to Rs. 5 lakhs = Rs. 200For claims from Rs.5 lakh to Rs. 10 lakhs = Rs. 400For claims from Rs.10 lakh to Rs. 20 lakhs = Rs. 500Before State Commission: For claims from Rs.20 lakh to Rs. 50 lakhs = Rs. 2000For claims from Rs.50 lakh to Rs. 1Crore = Rs. 4000Before National CommissionFor claims exceeding Rs. 1crore = Rs. 5000The fee has to be paid in the form of a demand draft on a nationalized bank in favour of the President of the concerned District Consumer Forum (Registrar of the State or National Commission if the Complaint is filed in these places).There is no prescribed format for the affidavit. I am giving a simple format which you can modify and use.Format of AffidavitSpecimen Draft Affidavit to be filed with the ComplaintI,………….. The, COMPLAINANT ABOVE NAMED DO HEREBY SOLEMNLY AFFIRM AND STATE THAT I HAVE FILED THE COMPLAINT HEREIN AND REPEAT, REITERATE, REAFFIRM AND CONFIRM EACH AND EVERY STATEMENT MADE THEREIN AS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF.AffirmationIn practice, you can get the affirmation done (or affidavit affirmed) before any notary public, but he will usually charge anything between Rs. 100 to Rs. 200; or you can affirm before the Registrar of the concerned Forum.Actual Filing of the ComplaintYou, or your advocate, will have to personally file the Complaint in the office of the concerned Consumer Forum.The Consumer Forum’s office will go through the Complaint and point out any deficiencies.You have to correct them and submit the Complaint again.The Consumer Forum’s office will give you a short date for admission.On this date, you or your representative has to appear and explain the Complaint to show that there is a genuine consumer Complaint.This is a simple process and usually the Forum members are very helpful.Once the Complaint is admitted, The Consumer Forum will direct you to submit more copies of the complaint (as many as there are respondents). These will be sent to the Respondents along with notice prepared by the Commission’s office.+Why should you complain?Everyone has consumer rights. You have the right to know what you will receive before you pay for a product or service, obtain what you pay for, complain when you are not satisfied, and get your money back when you have a legitimate complaint.There are no magical ways to get action on a complaint, but nothing will happen unless you complain and demand action. This publication offers suggestions to help you get results when you have a problem with the purchase of goods or services.“The squeaky wheel gets the grease.” This old proverb means that noise gets attention. If you don’t let a merchant or vendor know you are dissatisfied with their goods or services, you have no chance of resolving the problem.First, ask yourself if your complaint is legitimate. Why are you dissatisfied? What went wrong? Is it a question of losing money because goods or services you received were not what was promised, or was there even outright fraud? Or, did a representative of the company treat you rudely?Taking the time to consider whether you have a valid and timely complaint will save you time and effort. But, be sure to check to see if there is a deadline for making your complaint.The first step should be to take your complaint directly to the business before you take other action. Often, the problem can be resolved quickly by doing do, so don’t forget to ask to “escalate” your call if the customer service representative is not helpful. Ask politely if you could be transferred to someone with the authority to help resolve your complaint. If it is a small company, ask to speak with the owner.Obviously, you can’t resolve a complaint about fraud or a scam by contacting the party that ripped you off—the scam artist is probably long gone, and it isn’t advisable to contact fraudsters anyway. However, you should let the appropriate authorities know when you have been a victim of fraud. There is a chance that they could recover your money, and at the very least you will help prevent other consumers from falling victim to the same scam.Complaints overviewHere are some of the concepts for complaining that are explained in this guide:Know your rights.Complain in a timely fashion.Prepare a folder or file to keep documents and notes about your complaint.Write out three or four sentences that describe your complaint clearly and concisely.Be clear about what you want.Be persistent.Be patient and don’t lose your cool.Seek assistance from a third party.Consider going to court.Before complainingReview what happened and think about your options and rights. Consider the facts of the case and what you want to happen. Write down:a brief description of your complaint;what your rights are;why you feel the business should do something for you; andwhat you want the business to do to resolve the problem.If you are not sure what your rights are or how to proceed, do an Internet search to learn more, or contact a consumer group and discuss the situation. Talking with a qualified organization may help you decide how to handle the problem, and many agencies have publications that explain consumer rights and how to resolve complaints.You can consult the Consumer Action Handbook, a free guide that includes information about your consumer rights and lists many consumer protection agencies. From this page you can order a printed copy or download the PDF version.Review all printed information you have about the case, such as:any ad that you responded to, or any brochure, warranty, guarantee or other document that describes the product or service and how it should work;all letters between you and the business; andany other papers you received from the company, including agreements, instructions, receipts and billing statements.If you signed a contract, read it carefully and ask the company for explanations of anything you don’t understand. The contract or warranty may limit your options or provide you with certain rights. Make sure you have done everything that you were supposed to do to live up to your part of the agreement.Decide what you want from the company, such as repair or replacement of the item, a refund, an exchange, a credit, a correction of the company’s records or the payment of damages. Consider whether a compromise would be acceptable. It may be easier to resolve the complaint if you agree to a settlement that falls short of a full refund.Complain as soon as possibleThe sooner you complain, the better your chances are for a satisfactory settlement. In some cases, especially billing disputes, the company may not be legally liable if you fail to complain within a reasonable time after you first discover the problem or receive the bill. That is why it is important to read all bills and statements as soon as you get them.Some store refund policies allow you to return items if you do so within a few days. If you wait too long to return the item, you will lose the right to get your money back. In addition, it can be difficult to defend yourself if you wait a long time to complain. If you buy a television and don’t return it for three months, you may have a hard time convincing the store that it didn’t work when you first tried to use it.How to complainThe first step in complaining is to clearly present your problem. Failure to communicate effectively often makes it difficult to resolve complaints. Have all relevant information at hand when you contact the company, including: a description of the item; your account number or other facts to help the company identify the transaction; your receipt, billing statement or cancelled check; and a clear and brief explanation of what is wrong and what you want the company to do.Do not get emotional: Speak calmly and politely. Think about how the person you are speaking to will react. If you raise your voice, that person will probably get angry and yell back or simply hang up. Handling complaints can be a tough job. If you make the complaint handler’s job harder by getting angry, that person is likely to respond negatively to you.Make notes about all conversations you have about the complaint, including the time and date of your calls, names of everyone at the company you spoke to and what they said.You can complain by phone, in person, or in writing by email or mail.Phone or email first to tell the company about the problem and to try to resolve it. You should be able to learn pretty quickly whether the problem will be resolved.Go to the company to return the purchase, or if there is a need to meet with someone to examine the item, receipts or statements. Complaining in person helps to force the issue, but is not always necessary. Ask a friend to go with you if you are concerned about being harassed or want a witness.Sometimes problems can be resolved with one call, email or visit. You may learn that you are not using the item properly, or that the company is willing to give you a refund without an argument.But when you realize that your attempts to contact the company are being ignored, or the company refuses to help you, start putting your communications in writing. Sometimes businesses ignore complaints until they see them in writing. Even if you email, it’s a good idea to print out a copy of the message and send it through the mail. Always send your hard-copy complaint letters certified mail or “return receipt requested.” This way you will have a record that the company received your communication.Complaint emails and letters are important because they:create a written record of your complaint with the company;preserve your rights under law;help the business understand your side of the story;involve government agencies that you send copies to and alert them to the firm’s practices;lay the groundwork for a future legal case or defense; andlet the company know you are serious about the matter.Complaint emails or letters should not be long—a long letter can be a drawback as representatives may not have the time to read every word and may even choose to ignore your letter as a “rant.”Spend some time trying to explain your problem in 250 words or less. Include your name, address and phone number, and account or invoice number, if any. (However, if you are going to CC others on your letter, redact (cross out) account numbers on the copies.)If appropriate, include a copy of your cancelled check, receipt or other documents. Keep a copy of all communications you send and receive. If the first contact does not bring a response, send another. Simply send the same email or letter, with a new sentence stating, “This is my second attempt to contact you about this matter.”Remember: Always send your complaint letters certified mail or “return receipt requested.” A mail receipt will provide proof that delivery was made. Make sure you do not delete emails you send, but save or copy them for future reference.Keep recordsYou may need certain documents, or evidence, in order to win your case or prove you paid for the item. These can include your receipt, credit card statements, screenshots of the company’s website, repair orders and/or the warranty.Keep receipts and proof of purchase until you are sure you won’t need them:Companies may demand proof of purchase before settling a complaint or fixing an item under warranty. Note that you don’t need to mail in a product warranty card in order to claim your rights on a product that is still under warranty—a receipt and the barcode (Universal Product Code, or UPC) from product packaging is enough. If your purchase was made online, you might be able to print another receipt from the company’s website.If you don’t have a copy of your credit card statement or cancelled check, you may be able to print one out from your bank’s website or request a copy from your bank. (Banks may charge a fee for copies of older records.)Never send originals of receipts or checks to the company or any complaint-handling agency—always send copies. Copies of your emails or letters can also be very helpful. If the firm claims it never heard from you, copies of letters with return receipts or proof of delivery, or emails with a date header, can help you resolve the problem.Contact someone higher upIf your first attempt at complaining fails, contact someone higher up in the company. If the salesperson can’t help you, ask to speak to a supervisor or store manager, and then the owner or the company’s headquarters. Larger companies often have customer relations or consumer complaint departments that you can contact for assistance. If all else fails, ask to be connected to “customer retention,” a department responsible for keeping customers.Don’t hesitate to send complaint letters to the owner, president, chief executive officer (CEO) or general counsel of the company at its executive offices. These officials should send your letter to the appropriate person, and may take steps to resolve the dispute promptly. Higher-level officials are sensitive to the firm’s image and often are more willing and able to find a solution to complaints. Top executives do not like hearing from consumers, and top-level staff often intervene to solve problems quickly, before they reach the big boss.To get the name and address of the president or executive offices, put “CEO” and the name of the company in a search engine. Or call any office of the company and ask for that information.All companies, foreign and domestic, are required to file registration statements, periodic reports and other forms with the Securities and Exchange Commission (SEC) electronically through EDGAR. You can access this information for free. The reports are a good resource for finding the address and phone number of a company’s headquarters or general counsel. Other sources of this information are Hoovers, Google Finance and Yahoo Finance.Call the executive’s office by dialing the general number for the company and asking for the executive by name. In most cases, you will get through to someone who will take your complaint seriously. If you cannot get through during business hours, try calling the number after business hours to see if it has a directory of employees you can search by name. Leave a short but informative message about your problem and ask for a return call.Sometimes you encounter a company that makes complaining very difficult. It may say, “The person you need to speak to is not in the office today, call back next week,” or “Leave your number and we will get back to you.” This may be a sign that the company is stalling you. If you are not being treated seriously, it might be time to take your problem to a person higher up in the company, complain to a government agency or consider legal action.If you cannot find a phone number or you prefer to communicate by email, Consumerist offers some tips for finding or figuring out executives’ email addresses .Contact government agenciesGovernment agencies will not always intervene to settle your case, but some will contact the company to open up communication. For example, if you complain to the state public utilities commission about a telephone company, it might ask that company for an explanation of its position. A government financial services regulator might contact your bank to ask for its side of the story. State attorneys general (AGs) and municipal district attorneys (DAs) handle many cases that do not fall under the jurisdiction of any other government agency. Some district attorneys have units that offer consumer complaint mediation.No agency can force a business to settle an individual’s complaint, but the government’s interest in the case may convince the company to resolve the dispute. Businesses that ignore most complaining consumers often settle cases that are sent to government agencies (or consumer groups, business associations or action lines).Government agencies can be excellent sources of information about consumer rights and the laws and regulations that companies must follow. If you are not sure whether a company has broken the law, call the appropriate government agency and ask for information about your rights.Many businesses are directly regulated by government agencies, such as a department of insurance or department of banking. These agencies receive complaints about the companies they regulate and investigate allegations that those businesses have violated the law. The agencies depend upon consumers to alert them to companies that are engaged in illegal practices. Even if the agency doesn’t help you resolve your complaint, it might be able to use your case to stop an unfair business practice.If your complaint involves an out-of-state company, you may still be able to obtain assistance from government agencies in your state. You can also contact a federal government agency to complain about out-of-state firms.Government agencies usually prefer that you complain by email, phone or mail—not in person. Most are not prepared to help people who walk into their offices without appointments. Some have special complaint forms for consumers to use. To make sure you are complaining to the appropriate agency, visit its website or call before submitting a complaint, or ask a consumer group which agency to contact.When you call or submit a complaint to a government agency, indicate what you are looking for. For example, ask it to “Please investigate my complaint,” or “Advise me if there is a law that covers my complaint.”To find the appropriate agencies, consult the Consumer Action Handbook, a free guide. From this page you can order a printed copy or download the PDF version.If you don’t find the information you are looking for, look for the names, phone numbers and addresses of government agencies in your phone book. A special government section in most phone directories lists local, state and federal agencies.Complaining through an organizationWhen you have done all you can on your own, consider whether an organization can assist you. In many areas, chapters of the Better Business Bureau (BBB) assist consumers with certain complaints. You can file a complaint with the BBB.Few consumer groups handle individual complaints, but action lines in many states help consumers to resolve problems. The entrance of a third party into a dispute may send a signal to the business that:you are determined to see the case through, and won’t give up;depending on the organization, there could be bad publicity and lost business; andyou may be represented by people with sufficient expertise, sophistication and resources to cause problems for the business.Action lines are volunteer programs, usually run through newspapers and radio or television stations. (Callers to action lines are not placed on the air.) They give assistance to people who are having difficulty resolving complaints. They can contact a business on your behalf and try to work out a solution. You may know of a local station that features consumer complaints. To learn if there is a Call For Action-affiliated action line that serves your area, visit Call For Action.Consider your alternativesIf you feel you have run out of options, consider taking these steps:Seek advice. There are many sources of information and advice. Many consumer groups and action lines offer free consultation about consumer problems. Some government agencies provide advice and information concerning complaints against the companies that they regulate. There are many publications that provide helpful suggestions about resolving consumer problems.Sue in small claims court. Small claims court is an appropriate place to settle many consumer cases.Contact a lawyer. Usually, the money involved in consumer cases is not enough to involve a lawyer, and legal actions can take years to complete. But a lawyer can advise you about your legal rights and options.Conduct a consumer picket. You can hand out information about your case to the public while you stand in front of the company’s store or offices, as long as you do not block traffic, break any laws or say anything in your handouts that you cannot prove.Use social pressure. The opportunity to shame a business publicly has grown in the age of the Internet. It’s possible to post your story online in reviews, blogs, comments and social media such as Facebook and Twitter. Many complaint websites allow you to post public complaints or to write a review of the business. (To find them, do an Internet search.) As with a consumer picket, never post anything you cannot prove or defend in court, as you could face legal action from the business if you go too far or make false claims. However, this avenue can be effective, as a large number of companies monitor the Web and social media in order to resolve complaints before they create bad publicity or damage their brands.Create a website or a social media page. Disgruntled consumers have gotten very creative and set up “corporate hate websites” targeting companies for bad practices. It is important to remember that the company may try to take legal action against you, and even though you are probably within your rights of freedom of speech, defending yourself could be costly. (To protect yourself from any lawsuit, make sure you have adequate liability insurance on your rental or homeowners insurance policy.) Most of these “hate sites” accept posts from other disgruntled consumers.Stopping paymentYou can stop payment on a check or an electronic payment from your bank account. This is a traditional consumer remedy, but it doesn’t work in every case and it may not end the dispute.Stopping payment on a check means that you tell your bank not to pay a check that you wrote, but there is no guarantee that your bank can stop a payment. Most banks charge fees of $30 or more to stop a payment. Stop payment orders generally expire after six months. When you stop payment, the company you gave the check to will be unable to get any money for it—unless it cashed the check before you stopped payment. Businesses often cash checks immediately to prevent customers from stopping payment.To stop an electronic payment from your bank account, you will need to notify your bank at least three business days before the transaction is scheduled to be made. (Again, a stop payment fee is likely to apply.) This notice may be made orally or in writing. However, if the notice is made orally, the bank may require you to follow up with written notice within 14 days. If you don’t provide written verification of the oral notice when required, the oral stop payment order may expire.If you gave a merchant preauthorization to take money from your bank account, you need to revoke the authorization with the merchant. Pre-authorized withdrawal agreements are between consumers and vendors—the bank can’t cancel them until you notify the vendor/merchant. Write directly to the vendor/merchant to request that no further money is taken from your account. It can be difficult to stop payment on a recurring debit if the company won’t cooperate. You should provide the bank with a copy of the letter and inform the bank that you no longer authorize these charges and you have notified the vendor/merchant. Keep a copy of the letter for your records.Once you stop payment, you should immediately tell the company (or person) what you have done and why. You can do this by phone, but you should also write a letter to create a written record of your position. (If you fail to explain the situation, the company might assume that you are trying to take the item without paying for it.) When you stop payment for a purchase, you should return the item to the company.Credit card rightsContact your credit card company. If you paid by credit card, the bank that issued the card may be able to help you resolve the problem. Make sure the bank receives your notice of billing error within 60 days of the monthly statement containing the unauthorized charges. You may be required to submit your dispute in writing.Your card issuer will investigate the case and may decide in your favor if it believes you have a legitimate complaint. While it is investigating, you do not have to pay the disputed amount on your credit card statement, but the bank can charge you interest on the amount you don’t pay if it rules against you. (Make sure you pay the undisputed portion of the bill.) If the bank rules in your favor, it will give you a credit for the disputed amount. If it rules against you, you can still seek a refund in court or through other actions, such as by complaining to government agencies.The process for stopping pre-authorized, recurring credit card payments to a merchant is a little different than a credit card dispute. First, write to the merchant, directing it to stop the charges. Second, notify your bank about any charges that you feel were in error. You may be required to submit your dispute in writing or to explain it in a form the card issuer will provide.Writing your complaintSee the sample letter and sample email. Copy and paste the text, or download these as plain text files, and insert your own information.In your letter or email, include your name, address and phone number.Note what you are complaining about, when and where the purchase or agreement took place, and any other pertinent information, such as the item’s make, model or serial number, or your account number.Briefly and clearly describe the problem, ideally in 250 words or less, and what you want done to resolve it.Give a specific period of time in which a response must be received (such as 10-14 days), and indicate that you will seek legal advice or take other steps if the matter is not resolved. You need not tell the party exactly what you will do.Write “CC” and the names of other recipients at the end of the letter if you are sending copies to anyone, such as a local consumer group or district attorney’s office. For email, use the CC field to copy government agencies, organizations or the media. (Remember to remove account numbers or Social Security numbers from your CC copies before you send them.)Indicate if you are attaching copies of supporting documents. (Never send originals.)Keep a copy of all communications and supporting documents.Consulting a lawyerSometimes your only alternatives may be to hire a lawyer or drop the matter. If you believe your best option is to sue, but the amount is more than the small claims court limit or the case cannot be pursued in small claims court, you may have to hire a lawyer.However, most consumer cases do not involve enough money to make it worthwhile to hire a lawyer. You may not be able to locate one who is willing to help you or who is familiar with the legal issues involved. It could be many years before a court decides your case.If you want to speak to an attorney but don’t know how to find one, contact a lawyer referral service. (See Resources, or call your county’s bar association.) If you can’t afford an attorney, ask if your county has a legal aid agency or bar association that can help low-income consumers obtain legal advice.In many consumer complaints, the amounts involved are much too small to make it worthwhile to consult a lawyer, but contacting a lawyer can be of value in some instances:If you are being sued, you definitely need legal advice. Your failure to appear in court or obtain legal advice could be costly. Even if you know that you will lose the case, the advice of an attorney may help you to reduce the amount you will have to pay.You may benefit from having a legal expert read or review a document. If you are about to buy a house or sign a contract, a lawyer can make sure the agreement doesn’t have clauses that could cost you money.It can be helpful just to discuss a matter with a lawyer. If consumer agencies tell you that your only option is to sue, a lawyer can tell you the costs involved and what to expect.In some cases, a letter from a lawyer can resolve the problem.For example, if you have just signed a car contract after being subjected to high-pressure sales tactics, a letter from a lawyer questioning such practices might convince the dealership to cancel the agreement.Small claims courtSmall claims court is for the resolution of minor disputes. The rules and requirements for such courts differ widely from state to state, so the first step is to learn the rules for filing a case in your state.Nolo, a legal self-help publisher, offers an online list of small claims limits in every state.Search online or look in your phone book for the telephone number for your local small claims court. Generally, you must file your suit in the city or county in which the business you have the dispute with has an office or in which the transaction took place. There is usually a fee for filing a case.Here is some general advice about suing in small claims court:Before you file, learn about the limitations and requirements of small claims court. This includes the maximum amount that you can sue for and restrictions against filing certain types of cases. Nolo offers a free online list of state Statutes of Limitations.Ask the clerk of the small claims court for advice about how to file your case. If you do not file correctly, the case might be thrown out.Give the company a chance to resolve the problem. Before you sue, notify it of your intention to sue by sending a letter.Tell the firm why you feel it owes you money, and the specific dollar amount you want from it.Find out the company’s legal name, and use that when suing it.Formally notify the company of your suit. Ask the small claims court clerk how to do this.Prepare your case. Gather your evidence and consider whether there are witnesses who can testify on your behalf. Practice your presentation by explaining your case to friends. Ask if they can understand your position and think you are making a good case. Be clear and concise.You can visit a small claims court before your court date. Watching other people appear before the judge could make you feel more comfortable about the process.Usually, the judge will first ask you, the plaintiff, to speak, followed by the defendant. Then the judge will ask questions and consider the evidence. Even if you win your case, there is no guarantee you will get your money. If the person refuses to pay, then you may have to take steps to force payment. Ask the court clerk how to do this.For more about small claims court, go online to read the questions and answers offered by Nolo, or obtain a copy of “Everybody’s Guide to Small Claims Court” by Ralph Warner, published by Nolo. Check your public library for a copy before purchasing the book.Community mediation servicesMany states offer community or court-based mediation designed to help disputing parties arrive at their own compromise settlement with the help of a neutral third party. The National Association for Community Mediation offers a program locator to help you find community mediation programs near you.ResourcesBetter Business Bureau: Complain about businesses.Consumer Action: Call (415-777-9635) or send a webmail for advice and referrals. Access free, multilingual brochures.Consumer Financial Protection Bureau (CFPB): Submit complaints about credit cards and other financial services.Consumer Product Safety Commission (CPSC): Submit and review consumer product safety complaints.Federal Communications Commission (FCC) (Complaint form): Submit landline and wireless phone complaints as well as those related to telemarketing, broadband (Internet) and TV broadcasting.Federal Trade Commission: Submit complaints about unfair or deceptive business practices, fraud, scams, credit reports and collections abuse.Financial Industry Regulatory Authority (FINRA): Submit complaints about an investment or financial advisor or brokerage under FINRA’s mediation program.Help With My Bank (Comptroller of the Currency): Submit complaints about national banks (with “National” or “NA” in or after the name).Legal Services Corporation: Find legal assistance for low-income individuals and families.National Association of Attorneys General (AGs): Find your state AG’s office to make a complaint of fraud or unfair business practices.National Association for Community Mediation: Find a local mediation organization.National Association of Consumer Advocates: Search by location and specialty to find a consumer attorney.National Association of Insurance Commissioners: Find your state insurance regulator to submit insurance-related complaints.National Motor Vehicle Title Information System (NMVTIS): Access important vehicle history information.Securities and Exchange Commission (SEC): Submit investment-related complaints.Consumer Action Handbook: Get this free resource for helping you complain effectively.Sample complaint letterYour nameAddressPhone numberCompany officialCompany nameCompany addressDateDear (title) ____:I wish to complain about ____ (name of product or service, with serial number or account number) that I purchased on ____ (date and location of transaction).I am complaining because ____ (the reason you are dissatisfied). To resolve this problem, I would like you to ____ (what you want the business to do).When I first learned of this problem, I contacted ____ (name of the person, date of the call) at your company and was told that nothing could be done about my problem. I believe that this response is unfair because ____ (the reason you feel the company has an obligation to you). I would like a written statement explaining your company’s position and what you will do about my complaint.I look forward to hearing from you as soon as possible to resolve this problem. If I do not hear from you within ____ days, I will file complaints with the appropriate consumer agencies and consider my legal alternatives. I am enclosing copies of my_____ (receipt or other proof of payment or documentation of complaint).I may be contacted at the above address/phone number.Sincerely,(Sign and type your name)CC: (local consumer group) (appropriate government agencies)ATT: (attach and list documentation of your complaint, if any)Sample complaint emailFrom: (your name: [email protected])Subject: (short description of your complaint)Date: (most email programs enter this field automatically)To: (the email address of the person you are contacting)CC: (local consumer group) (appropriate government agencies)Dear (title) ____:I wish to complain about ____ (name of product or service, with serial number or account number) that I purchased on ____ (date and location of transaction).I am complaining because ____ (the reason you are dissatisfied). To resolve this problem, I would like you to ____ (what you want the business to do).When I first learned of this problem, I contacted ____ (name of the person, date of the call) at your company and was told that nothing could be done about my problem. I believe that this response is unfair because ____ (the reason you feel the company has an obligation to you). I would like a written statement explaining your company’s position and what you will do about my complaint.I look forward to hearing from you as soon as possible to resolve this problem. If I do not hear from you within ____ days, I will file complaints with the appropriate consumer agencies and consider my legal alternatives. I am attaching copies of my_____ (receipt or other proof of payment or documentation of complaint).You may reply to me at this email address or call me at (phone number).Sincerely,(your full name)Note: You can download text files for the sample letter and email on our website.About Consumer ActionConsumer Action is a non-profit organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial literacy and advocating for consumer rights in both the media and before lawmakers to promote economic justice for all. With the resources and infrastructure to reach millions of consumers, Consumer Action is one of the most recognized, effective, and trusted consumer organizations in the nation.Financial Education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of educational resources. The organization’s extensive library of free publications offers in-depth financial information, while its hotline provides non-legal advice and referrals. Consumer Action also publishes unbiased surveys of financial and consumer services that exposes excessive prices and anti-consumer practices to help consumers make informed buying choices and elicit change from big business.Community Outreach. With a special focus on serving low- and moderate-income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of nearly 7,500 community-based organizations. Outreach services include training and free mailings of financial education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s network is the largest and most diverse of its kind.Advocacy. Consumer Action is deeply committed to ensuring that underrepresented consumers are represented in the national media and in front of lawmakers. The organization promotes pro-consumer policy, regulation and legislation by taking positions on dozens of bills at the state and national levels and submitting comments and testimony on a host of consumer protection issues. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.

Publication 535 (2018), Business ExpensesFor use in preparing 2018 ReturnsPublication 535 - Introductory MaterialIntroductionThis publication discusses common business expenses and explains what is and is not deductible. The general rules for deducting business 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 publication are to the Internal Revenue Code and regulation references are to the Income Tax Regulations under the Code.Comments and suggestions.We welcome your comments about this publication and your suggestions for future editions.You can send us comments from IRS.gov/FormComments. Or you can write to:Internal Revenue ServiceTax Forms and Publications1111 Constitution Ave. NW, IR-6526Washington, DC 20224Although 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 publications.Ordering forms and publications.Visit IRS.gov/FormsPubs to download forms and publications. Otherwise, you can go to IRS.gov/OrderForms to order current and prior-year forms and instructions. Your order should arrive within 10 business days.Tax questions.If you have a tax question not answered by this publication, check An official website of the United States government and How To Get Tax Help at the end of this publication.Future DevelopmentsFor the latest information about developments related to Pub. 535, such as legislation enacted after it was published, go toIRS.gov/Pub535.What's New for 2018The following items highlight some changes in the tax law for 2018.Form 1040 redesigned. Form 1040 has been redesigned for 2018. See Form 1040 and its instructions for more information.Forms 1040A and 1040EZ no longer available. Forms 1040A and 1040EZ aren't available to file your 2018 taxes. If you used one of these forms in the past, you will now file Form 1040.Credit expiration. At the time this publication was printed, certain credits expired at the end of 2017. To find out if legislation was enacted to extend these credits and make them available for 2018, go to IRS.gov/FormsUpdates.Small business taxpayers. For tax years beginning after 2017, more small business taxpayers may qualify to use the cash method of accounting and be exempt from capitalizing certain expenses under section 263A. In addition, small business taxpayers may not be required to account for inventories under section 471 and are not subject to the business interest expenses limitation. See the discussion in chapter 1.Compensation in excess of $1 million. P.L. 115-97, Tax Cuts and Jobs Act, made significant changes to section 162(m) which disallows the deduction of excessive employee compensation by any publicly held corporation. For more information, see chapter 2.Employee achievement awards. P.L. 115-97 defines items that aren't tangible personal property for purposes of employee achievement awards. Tangible personal property doesn't include cash, gift cards, and other nontangible personal property. For more information, see chapter 2.Certain expense deductions are now limited. Certain expense deductions are now limited. P.L. 115-97 limits the deduction by employers of expenses for certain fringe benefits and entertainment expenses. For more information, see chapter 2.Uniform capitalization rules. P.L. 115-97, Tax Cuts and Jobs Act, made changes to uniform capitalization rules for small business taxpayers. For more information, see chapter 3.Alternative minimum tax (AMT). For tax years beginning after 2017, the Tax Cuts and Jobs Act, section 12001, repealed the corporate AMT. For more information, see chapter 7.Standard mileage rate. Beginning in 2018, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 54.5 cents per mile. For more information, see chapter 11.No miscellaneous itemized deductions allowed. You can no longer claim any miscellaneous itemized deductions, including the deduction for repayments (claim of right). Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income limitation. For more information, see chapter 11.Certain payments made in sexual harassment or sexual abuse cases. For amounts paid or incurred after December 22, 2017, new section 162(q) provides that no deduction is allowed under section 162 for any settlement or payment related to sexual harassment or sexual abuse if it is subject to a nondisclosure agreement. In addition, attorney’s fees related to such a settlement or payment are not allowed as a deduction. For more information, see chapter 11.Qualified Business Income Deduction. We added a new chapter 12 discussing qualified business income deduction under section 199A. For tax years beginning after 2017, individual taxpayers and some trusts and estates may be entitled to a deduction of up to 20% of their Qualified Business Income (QBI) from a trade or business, including income from a pass-through entity, but not from a C corporation, plus 20% of qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. The deduction is subject to multiple limitations, such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid in the trade or business, and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business. The deduction can be taken in addition to the standard or itemized deductions. For more information, see chapter 12.What's New for 2019The following item highlights a change in the tax law for 2019.Standard mileage rate. Beginning in 2019, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 58 cents per mile.RemindersThe following reminders and other items may help you file your tax return.IRS e-file (Electronic Filing)You can file your tax returns electronically using an IRS e-file option. The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. You can use one of the following IRS e-file options.Use an authorized IRS e-file provider.Use a personal computer.Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site.For details on these fast filing methods, see your income tax package.Form 1099-MISC. File Form 1099-MISC, Miscellaneous Income, for each person to whom you have paid during the year in the course of your trade or business at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, and crop insurance proceeds. See the Instructions for Form 1099-MISC for more information and additional reporting requirements.Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing & Exploited Children® (NCMEC). Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 800-THE-LOST (800-843-5678) (24 hours a day, 7 days a week) if you recognize a child.Preventing slavery and human trafficking. Human trafficking is a form of modern-day slavery, and involves the use of force, fraud, or coercion to exploit human beings for some type of labor or commercial sex purpose. The United States is a source, transit, and destination country for men, women, and children, both U.S. citizens and foreign nationals, who are subjected to the injustices of slavery and human trafficking, including forced labor, debt bondage, involuntary servitude, "mail-order" marriages, and sex trafficking. Trafficking in persons can occur in both lawful and illicit industries or markets, including in hotel services, hospitality, agriculture, manufacturing, janitorial services, construction, health and elder care, domestic service, brothels, massage parlors, and street prostitution, among others. The President’s Interagency Task Force to Monitor and Combat Trafficking in Persons (PITF) brings together federal departments and agencies to ensure a whole-of-government approach that addresses all aspects of human trafficking. Online resources for recognizing and reporting trafficking activities, and assisting victims include the Department of Homeland Security (DHS) Blue Campaign at DHS.gov/blue-campaign, the Department of State Office to Monitor and Combat Trafficking in Persons at State.gov/j/tip, and the National Human Trafficking Resource Center (NHTRC) at humantraffickinghotline.org. DHS is responsible for investigating human trafficking, arresting traffickers, and protecting victims. DHS also provides immigration relief to non-U.S. citizen victims of human trafficking. DHS uses a victim-centered approach to combating human trafficking, which places equal value on identifying and stabilizing victims and on investigating and prosecuting traffickers. Victims are crucial to investigations and prosecutions; each case and every conviction changes lives. DHS understands how difficult it can be for victims to come forward and work with law enforcement due to their trauma. DHS is committed to helping victims feel stable, safe, and secure. To report suspected human trafficking, call the DHS domestic 24-hour toll-free number at 866-DHS-2-ICE (866-347-2423) or 802-872-6199 (non-toll-free international). For help from the NHTRC, call the National Human Trafficking Hotline toll free at 888-373-7888 or text HELP or INFO to BeFree (233733).The Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) has issued a public advisory to financial institutions that contains red flag indicators for potential suspicious financial activity associated with human trafficking. If warranted, financial institutions should file a Suspicious Activity Report (FinCEN 112) with FinCEN to report these activities. For more information, go to Fincen.gov/Sites/default/files/advisory/FIN-2014-A008.pdf1. Deducting Business ExpensesWhat’s NewForm 1040 redesigned. Form 1040 has been redesigned for 2018. See Form 1040 and its instructions for more information.Forms 1040A and 1040EZ no longer available. Forms 1040A and 1040EZ aren't available to file your 2018 taxes. If you used one of these forms in the past, you will now file Form 1040.Deduction for qualified business income. For tax years beginning after 2017, you may be entitled to take a deduction of up to 20% of your qualified business income from your qualified trade or business, plus 20% of the aggregate amount of qualified real estate investment trust (REIT), and qualified publicly traded partnership income.Small business taxpayers. For tax years beginning after 2017, more small business taxpayers may qualify to use the cash method of accounting and be exempt from capitalizing certain expenses under section 263A. In addition, small business taxpayers may not be required to account for inventories under section 471 and are not subject to the business interest expenses limitation.IntroductionThis chapter covers the general rules for deducting business expenses. Business expenses are the costs of carrying on a trade or business, and they are usually deductible if the business is operated to make a profit.Topics - This chapter discusses:What you can deductHow much you can deductWhen you can deductNot-for-profit activitiesUseful Items - You may want to see:Publication334 Tax Guide for Small Business463 Travel, Gift, and Car Expenses525 Taxable and Nontaxable Income529 Miscellaneous Deductions536 Net Operating Losses (NOLs) for Individuals, Estates, and Trusts538 Accounting Periods and Methods542 Corporations547 Casualties, Disasters, and Thefts583 Starting a Business and Keeping Records587 Business Use of Your Home925 Passive Activity and At-Risk Rules936 Home Mortgage InterestDeduction946 How To Depreciate PropertyForm (and Instructions)Schedule A (Form 1040) Itemized Deductions5213 Election To PostponeDetermination as To Whether the Presumption Applies That anActivity Is Engaged in for ProfitSee chapter 13 for information about getting publications and forms.What Can I Deduct?To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.Even though an expense may be ordinary and necessary, you may not be allowed to deduct the expense in the year you paid or incurred it. In some cases, you may not be allowed to deduct the expense at all. Therefore, it is important to distinguish usual business expenses from expenses that include the following.The expenses used to figure cost of goods sold.Capital expenses.Personal expenses.Cost of Goods SoldIf your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your business expenses may be included in figuring cost of goods sold. Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.The following are types of expenses that go into figuring cost of goods sold.The cost of products or raw materials, including freight.Storage.Direct labor (including contributions to pension or annuity plans) for workers who produce the products.Factory overhead.Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.This rule does not apply to small business taxpayers. You qualify as a small business taxpayer if you (a) have average annual gross receipts of $25 million or less for the 3 prior tax years, and (b) are not a tax shelter (as defined in section 448(d)(3)). If your business has not been in existence for all of the 3-tax-year period used in figuring average gross receipts, base your average on the period it has existed, and if your business has a predecessor entity, include the gross receipts of the predecessor entity from the 3-tax-year period when figuring average gross receipts. If your business (or predecessor entity) had short taxable years for any of the 3-tax-year period, annualize your business’ gross receipts for the short tax years that are part of the 3-tax-year period. See Pub. 538 for more information.For more information, see the following sources.Cost of goods sold—chapter 6 of Pub. 334.Inventories—Pub. 538.Uniform capitalization rules—Pub. 538 and section 263A and the related regulations.Capital ExpensesYou must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called "capital expenses." Capital expenses are considered assets in your business. In general, you capitalize three types of costs.Business start-up costs (see Tip below).Business assets.Improvements.You can elect to deduct or amortize certain business start-up costs. See chapters 7 and 8.Cost recovery.Although you generally cannot take a current deduction for a capital expense, you may be able to recover the amount you spend through depreciation, amortization, or depletion. These recovery methods allow you to deduct part of your cost each year. In this way, you are able to recover your capital expense. See Amortization (chapter 8) and Depletion (chapter 9) in this publication. A taxpayer can elect to deduct a portion of the costs of certain depreciable property as a section 179 deduction. A greater portion of these costs can be deducted if the property is qualified disaster assistance property. See Pub. 946 for details.Going Into BusinessThe costs of getting started in business, before you actually begin business operations, are capital expenses. These costs may include expenses for advertising, travel, or wages for training employees.If you go into business.When you go into business, treat all costs you had to get your business started as capital expenses.Usually, you recover costs for a particular asset through depreciation. Generally, you cannot recover other costs until you sell the business or otherwise go out of business. However, you can choose to amortize certain costs for setting up your business. See Starting a Business in chapter 8 for more information on business start-up costs.If your attempt to go into business is unsuccessful.If you are an individual and your attempt to go into business is not successful, the expenses you had in trying to establish yourself in business fall into two categories.The costs you had before making a decision to acquire or begin a specific business. These costs are personal and nondeductible. They include any costs incurred during a general search for, or preliminary investigation of, a business or investment possibility.The costs you had in your attempt to acquire or begin a specific business. These costs are capital expenses and you can deduct them as a capital loss.If you are a corporation and your attempt to go into a new trade or business is not successful, you may be able to deduct all investigatory costs as a loss.The costs of any assets acquired during your unsuccessful attempt to go into business are a part of your basis in the assets. You cannot take a deduction for these costs. You will recover the costs of these assets when you dispose of them.Business AssetsThere are many different kinds of business assets, for example, land, buildings, machinery, furniture, trucks, patents, and franchise rights. You must fully capitalize the cost of these assets, including freight and installation charges.Certain property you produce for use in your trade or business must be capitalized under the uniform capitalization rules. See Regulations section 1.263A-2 for information on these rules.De Minimis Safe Harbor for Tangible PropertyAlthough you must generally capitalize costs to acquire or produce real or tangible personal property used in your trade or business, such as buildings, equipment, or furniture, you can elect to use a de minimis safe harbor to deduct the costs of some tangible property. Under the de minimis safe harbor for tangible property, you can deduct de minimis amounts paid to acquire or produce certain tangible business property if these amounts are deducted by you for financial accounting purposes or in keeping your books and records. See the following for the requirements for the de minimis safe harbor.You have an applicable financial statement.If you elect the de minimis safe harbor for the tax year, you can deduct amounts paid to acquire or produce certain tangible business property if:You have a trade or business or are a corporation, partnership, or S corporation that has an applicable financial statement;You have, at the beginning of the tax year, written accounting procedures treating as an expense for nontax purposes:– Amounts paid for property costing less than a certain dollar amount, or– Amounts paid for property with an economic useful life of 12 months or less;You treat the amount paid during the tax year for which you make the election as an expense on your applicable financial statements in accordance with your written accounting procedures;The amount paid for the property does not exceed $5,000 per invoice (or per item substantiated by invoice); andThe uniform capitalization rules do not apply to the amount.You do not have an applicable financial statement.If you elect the de minimis safe harbor for the tax year, you can deduct amounts paid to acquire or produce certain tangible business property if:You have a trade or business, partnership, or S corporation that does not have an applicable financial statement;You have, at the beginning of the tax year, accounting procedures treating as an expense for nontax purposes:– Amounts paid for property costing less than a certain dollar amount, or– Amounts paid for property with an economic useful life of 12 months or less;You treat the amounts paid for the property as an expense on your books and records in accordance with your accounting procedures;The amount paid for the property does not exceed $2,500 per invoice (or per item substantiated by invoice); andThe uniform capitalization rules do not apply to the amounts.How to make the de minimis safe harbor election.To elect the de minimis safe harbor for the tax year, attach a statement to the taxpayer’s timely filed original tax return (including extensions) for the tax year when qualifying amounts were paid. The statement must be titled "Section 1.263(a)-1(f) de minimis safe harbor election" and must include your name, address, taxpayer identification number (TIN), and a statement that you are making the de minimis safe harbor election under section 1.263(a)-1(f). In the case of a consolidated group filing a consolidated income tax return, the election is made for each member of the consolidated group.In the case of a consolidated group filing a consolidated income tax return, the election is made for each member of the consolidated group. In the case of an S corporation or a partnership, the election is made by the S corporation or the partnership and not by the shareholders or partners. The election applies only for the tax year for which it is made.Example.In 2018, you do not have an applicable financial statement and you purchase five laptop computers for use in your trade or business. You paid $2,000 each for a total cost of $10,000 and these amounts are substantiated in an invoice. You had an accounting procedure in place at the beginning of 2018 to expense the cost of tangible property if the property costs $2,000 or less. You treat each computer as an expense on your books and records for 2018 in accordance with this policy. If you elect the de minimis safe harbor in your tax returns for your 2018 tax year, you can deduct the cost of each $2,000 computer.ImprovementsGenerally, you must capitalize the costs of making improvements to a business asset if the improvements result in a betterment to the unit of property, restore the unit of property, or adapt the unit of property to a new or different use.Some examples of improvements include rewiring or replumbing of a building, replacing an entire roof, increasing the production output of your equipment, putting an addition on your building, strengthening the foundation of a building so you can use it for a new purpose, or replacing a major component or substantial structural part of a machine.However, you may currently deduct the costs of repairs or maintenance that do not improve a unit of property. This generally includes the costs of routine repairs and maintenance to your property that result from your use of the property and that keep your properly in an ordinary efficient operating condition. For example, deductible repairs include costs such as painting exteriors or interiors of business buildings, repairing broken window panes, replacing worn-out minor parts, sealing cracks and leaks, and changing oil or other fluids to maintain business equipment.Routine maintenance safe harbor.If you determine that your cost was for an improvement to a building or equipment, you can deduct your cost under the routine maintenance safe harbor. Under the routine maintenance safe harbor, you can deduct the costs of an improvement that meets all of the following criteria.It is paid for recurring activities performed on tangible property.It arises from the use of the property in your trade or business.It keeps your property in an ordinarily efficient operating condition.You reasonably expect, at the time the property is placed in service, to perform this activity:For buildings and building systems, more than once during the 10-year period after you place the building in service; orFor other property, more than once during the class life of the particular type of property. For class lives, see Revenue Procedure 88-57, 1987-2 C.B. 674.Costs incurred during an improvement.You must capitalize both the direct and indirect costs of an improvement. Indirect costs include repairs and other expenses that directly benefit or are incurred by reason of your improvement. For example, if you improve the electrical system in your building, you must also capitalize the costs of repairing the holes that you made in walls to install the new wiring. This rule applies even if this work, performed by itself, would otherwise be treated as currently deductible repair costs.Election to capitalize repair and maintenance costs.You can elect to capitalize and depreciate certain amounts paid for repair and maintenance of tangible property, even if they do not improve your property. To qualify for this election, you must treat these amounts as capital expenditures on your books and records used in figuring your income. If you make this election, you must apply it to all repair and maintenance costs of tangible property that you treat as capital expenditures on your books and records for this tax year. To make the election to treat repairs and maintenance as capital expenditures, attach a statement titled "Section 1.263(a)-3(n) Election" to your timely filed original tax return (including extensions) and include your name and address, TIN, and a statement that you elect to capitalize repair and maintenance costs under section 1.263(a)-3(n). You must treat these amounts as improvements to your tangible property and begin to depreciate these amounts when the improvement is placed in service.Capital Versus Deductible ExpensesTo help you distinguish between capital and deductible expenses, different examples are given below.Motor vehicles.You usually capitalize the cost of a motor vehicle you use in your business. You can recover its cost through annual deductions for depreciation.There are dollar limits on the depreciation you can claim each year on passenger automobiles used in your business. See Pub. 463 for more information.Generally, repairs you make to your business vehicle are currently deductible. However, amounts you pay to improve your business vehicle are generally capital expenditures and are recovered through depreciation.Roads and driveways.The cost of building a private road on your business property and the cost of replacing a gravel driveway with a concrete one are capital expenses you may be able to depreciate. The cost of maintaining a private road on your business property is a deductible expense.Tools.Unless the uniform capitalization rules apply, amounts spent for tools used in your business are deductible expenses if the tools have a life expectancy of less than 1 year or they cost $200 or less per item or invoice.Machinery parts.Unless the uniform capitalization rules apply, the cost of replacing short-lived parts of a machine to keep it in good working condition, but not to improve the machine, is a deductible expense.Heating equipment.The cost of changing from one heating system to another is a capital expense.Deduction for qualified business income.For tax years beginning after 2017, you may be entitled to take a deduction of up to 20% of your qualified business income from your qualified trade or business, plus 20% of the aggregate amount of qualified real estate investment trust (REIT), and qualified publicly traded partnership income. The deduction is subject to various limitations, such as limitations based on the type of your trade or business, your taxable income, the amount of W-2 wages paid with respect to the qualified trade or business, and the unadjusted basis of qualified property held by your trade or business. You will claim this deduction on Form 1040, not on Schedule C or C-EZ. Unlike other deductions, this deduction can be taken in addition to the standard or itemized deductions. For more information, see the Instructions for Form 1040 and Pub. 535.Personal Versus Business ExpensesGenerally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you generally can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and generally is not deductible. See chapter 4 for information on deducting interest and the allocation rules.Business use of your home.If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.To qualify to claim expenses for the business use of your home, you must meet both of the following tests.The business part of your home must be used exclusively and regularly for your trade or business.The business part of your home must be:Your principal place of business; orA place where you meet or deal with patients, clients, or customers in the normal course of your trade or business; orA separate structure (not attached to your home) used in connection with your trade or business.You generally do not have to meet the exclusive use test for the part of your home that you regularly use either for the storage of inventory or product samples, or as a daycare facility.Your home office qualifies as your principal place of business if you meet the following requirements.You use the office exclusively and regularly for administrative or management activities of your trade or business.You have no other fixed location where you conduct substantial administrative or management activities of your trade or business.If you have more than one business location, determine your principal place of business based on the following factors.The relative importance of the activities performed at each location.If the relative importance factor does not determine your principal place of business, consider the time spent at each location.Optional safe harbor method.Individual taxpayers can use the optional safe harbor method to determine the amount of deductible expenses attributable to certain business use of a residence during the tax year. This method is an alternative to the calculation, allocation, and substantiation of actual expenses.The deduction under the optional method is limited to $1,500 per year based on $5 per square foot for up to 300 square feet. Under this method, you claim your allowable mortgage interest, real estate taxes, and casualty losses on the home as itemized deductions on Schedule A (Form 1040). You are not required to allocate these deductions between personal and business use, as is required under the regular method. If you use the optional method, you cannot depreciate the portion of your home used in a trade or business.Business expenses unrelated to the home, such as advertising, supplies, and wages paid to employees, are still fully deductible. All of the requirements discussed earlier under Business use of your home still apply.For more information on the deduction for business use of your home, including the optional safe harbor method, see Pub. 587.If you were entitled to deduct depreciation on the part of your home used for business, you cannot exclude the part of the gain from the sale of your home that equals any depreciation you deducted (or could have deducted) for periods after May 6, 1997.Business use of your car.If you use your car exclusively in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. Generally, commuting expenses between your home and your business location, within the area of your tax home, are not deductible.You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Or, instead of figuring the business part of these actual expenses, you may be able to use the standard mileage rate to figure your deduction. For 2018, the standard mileage rate is 54.5 cents per mile. Beginning in 2019, the standard mileage rate increases to 58 cents per mile.If you are self-employed, you can also deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, whether or not you claim the standard mileage rate.For more information on car expenses and the rules for using the standard mileage rate, see Pub. 463.How Much Can I Deduct?Generally, you can deduct the full amount of a business expense if it meets the criteria of ordinary and necessary and it is not a capital expense.Recovery of amount deducted (tax benefit rule).If you recover part of an expense in the same tax year in which you would have claimed a deduction, reduce your current year expense by the amount of the recovery. If you have a recovery in a later year, include the recovered amount in income in that year. However, if part of the deduction for the expense did not reduce your tax, you do not have to include that part of the recovered amount in income.For more information on recoveries and the tax benefit rule, see Pub. 525.Payments in kind.If you provide services to pay a business expense, the amount you can deduct is limited to your out-of-pocket costs. You cannot deduct the cost of your own labor.Similarly, if you pay a business expense in goods or other property, you can deduct only what the property costs you. If these costs are included in the cost of goods sold, do not deduct them again as a business expense.Limits on losses.If your deductions for an investment or business activity are more than the income it brings in, you have a loss. There may be limits on how much of the loss you can deduct.Not-for-profit limits.If you carry on your business activity without the intention of making a profit, you cannot use a loss from it to offset other income. For more information, see Not-for-Profit Activities , later.At-risk limits.Generally, a deductible loss from a trade or business or other income-producing activity is limited to the investment you have "at risk" in the activity. You are at risk in any activity for the following.The money and adjusted basis of property you contribute to the activity.Amounts you borrow for use in the activity if:You are personally liable for repayment, orYou pledge property (other than property used in the activity) as security for the loan.For more information, see Pub. 925.Passive activities.Generally, you are in a passive activity if you have a trade or business activity in which you do not materially participate, or a rental activity. In general, deductions for losses from passive activities only offset income from passive activities. You cannot use any excess deductions to offset other income. In addition, passive activity credits can only offset the tax on net passive income. Any excess loss or credits are carried over to later years. Suspended passive losses are fully deductible in the year you completely dispose of the activity. For more information, see Pub. 925.Net operating loss (NOL).If your deductions are more than your income for the year, you may have an NOL. You can use an NOL to lower your taxes in other years. See Pub. 536 for more information.See Pub. 542 for information about NOLs of corporations.When Can I Deduct an Expense?When you can deduct an expense depends on your accounting method. An accounting method is a set of rules used to determine when and how income and expenses are reported. The two basic methods are the cash method and the accrual method. Whichever method you choose must clearly reflect income.For more information on accounting methods, see Pub. 538.Cash method.Under the cash method of accounting, you generally deduct business expenses in the tax year you pay them.Accrual method.Under an accrual method of accounting, you generally deduct business expenses when both of the following apply.The all-events test has been met. The test is met when:All events have occurred that fix the fact of liability, andThe liability can be determined with reasonable accuracy.Economic performance has occurred.Economic performance.You generally cannot deduct or capitalize a business expense until economic performance occurs. If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided, or the property is used. If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services.Example.Your tax year is the calendar year. In December 2018, the Field Plumbing Company did some repair work at your place of business and sent you a bill for $600. You paid it by check in January 2019. If you use the accrual method of accounting, deduct the $600 on your tax return for 2018 because all events have occurred to "fix" the fact of liability (in this case, the work was completed), the liability can be determined, and economic performance occurred in that year.If you use the cash method of accounting, deduct the expense on your 2019 tax return.Prepayment.You generally cannot deduct expenses in advance, even if you pay them in advance. This applies to prepaid interest, prepaid insurance premiums, and any other prepaid expense that creates an intangible asset. If you pay an amount that creates an intangible asset, then you must capitalize the amounts paid and begin to amortize the payment over the appropriate period.However, you do not have to capitalize amounts for creating an intangible asset if the right or benefit created does not extend beyond the earlier of 12 months after the date that you first receive the right or benefit or the end of the tax year following the year in which you made the advance payment. If you are a cash method taxpayer and your advance payment qualifies for this exception, then you can generally deduct the amount when paid. If you are an accrual method taxpayer, you cannot deduct the amount until the all-events test has been met and economic performance has occurred.Example 1.In 2018, you sign a 10-year lease and immediately pay your rent for the first 3 years. Even though you paid the rent for 2018, 2019, and 2020, you can only deduct the rent for 2018 on your 2018 tax return. You can deduct the rent for 2019 and 2020 on your tax returns for those years.Example 2.You are a cash method calendar year taxpayer. On December 1, 2018, you sign a 12-month lease, effective beginning January 1, 2019, and immediately pay your rent for the entire 12-month period that begins on January 1, 2019. The right or benefit attributable to the payment neither extends more than 12 months beyond January 1, 2019 (the first day that you are entitled to use the property) nor beyond the tax year ending December 31, 2019 (the year following the year in which you made the advance payment). Therefore, your prepayment does not have to be capitalized, and you can deduct the entire payment in the year you pay it.Contested liability.Under the cash method, you can deduct a contested liability only in the year you pay the liability. Under the accrual method, you can deduct contested liabilities such as taxes (except foreign or U.S. possession income, war profits, and excess profits taxes) either in the tax year you pay the liability (or transfer money or other property to satisfy the obligation) or in the tax year you settle the contest. However, to take the deduction in the year of payment or transfer, you must meet certain conditions. See Regulations section 1.461-2.Related person.Under an accrual method of accounting, you generally deduct expenses when you incur them, even if you have not yet paid them. However, if you and the person you owe are related and that person uses the cash method of accounting, you must pay the expense before you can deduct it. Your deduction is allowed when the amount is includible in income by the related cash method payee. For more information, see Related Persons in Pub. 538.Not-for-Profit ActivitiesIf you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit.The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether:You carry on the activity in a businesslike manner,The time and effort you put into the activity indicate you intend to make it profitable,You depend on the income for your livelihood,Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),You change your methods of operation in an attempt to improve profitability,You (or your advisors) have the knowledge needed to carry on the activity as a successful business,You were successful in making a profit in similar activities in the past,The activity makes a profit in some years, andYou can expect to make a future profit from the appreciation of the assets used in the activity.Presumption of profit.An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. The activity must be substantially the same for each year within this period. You have a profit when the gross income from an activity exceeds the deductions.If a taxpayer dies before the end of the 5-year (or 7-year) period, the "test" period ends on the date of the taxpayer's death.If your business or investment activity passes this 3- (or 2-) years-of-profit test, the IRS will presume it is carried on for profit. This means the limits discussed here will not apply. You can take all your business deductions from the activity, even for the years that you have a loss. You can rely on this presumption unless the IRS later shows it to be invalid.Using the presumption later.If you are starting an activity and do not have 3 (or 2) years showing a profit, you can elect to have the presumption made after you have the 5 (or 7) years of experience allowed by the test.You can elect to do this by filing Form 5213. Filing this form postpones any determination that your activity is not carried on for profit until 5 (or 7) years have passed since you started the activity.The benefit gained by making this election is that the IRS will not immediately question whether your activity is engaged in for profit. Accordingly, it will not restrict your deductions. Rather, you will gain time to earn a profit in the required number of years. If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. If you do not have 3 (or 2) years of profit, the limit can be applied retroactively to any year with a loss in the 5-year (or 7-year) period.Filing Form 5213 automatically extends the period of limitations on any year in the 5-year (or 7-year) period to 2 years after the due date of the tax return for the last year of the period. The period is extended only for deductions of the activity and any related deductions that might be affected.You must file Form 5213 within 3 years after the due date of your tax return (determined without extensions) for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving written notice from the IRS proposing to disallow deductions attributable to the activity.Gross IncomeGross income from a not-for-profit activity includes the total of all gains from the sale, exchange, or other disposition of property, and all other gross receipts derived from the activity. Gross income from the activity also includes capital gains and rents received for the use of property that is held in connection with the activity.You can determine gross income from any not-for-profit activity by subtracting the cost of goods sold from your gross receipts. However, if you determine gross income by subtracting cost of goods sold from gross receipts, you must do so consistently, and in a manner that follows generally accepted methods of accounting.Limit on DeductionsYou can no longer claim any miscellaneous itemized deductions. Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income limitation. You can still claim certain expenses as itemized deductions on Schedule A (Form 1040).Deductions you can take for personal as well as for business activities are allowed in full. For individuals, all nonbusiness deductions, such as those for home mortgage interest, taxes, and casualty losses, may also be deducted. Deduct them on the appropriate lines of Schedule A (Form 1040).For the limits that apply to home mortgage interest, see Pub. 936.Generally, you can deduct a casualty loss on property you own for personal use only to the extent each casualty loss is more than $100, and the total of all casualty losses exceeds 10% of your adjusted gross income (AGI). See Pub. 547 for more information on casualty losses.Disaster tax relief.For personal casualty losses resulting from federally declared disasters that occurred before 2018, you may be entitled to disaster tax relief. As a result, you may be required to figure your casualty loss differently. Beginning in 2018, casualty and theft loss are allowed only to the extent it is attributable to a federally declared disaster. For more information, see Pub. 976, Disaster Relief.Partnerships and S corporations.If a partnership or S corporation carries on a not-for-profit activity, these limits apply at the partnership or S corporation level. They are reflected in the individual shareholder's or partner's distributive shares.More than one activity.If you have several undertakings, each may be a separate activity or several undertakings may be combined. The following are the most significant facts and circumstances in making this determination.The degree of organizational and economic interrelationship of various undertakings.The business purpose that is (or might be) served by carrying on the various undertakings separately or together in a business or investment setting.The similarity of the undertakings.The IRS will generally accept your characterization if it is supported by facts and circumstances.If you are carrying on two or more different activities, keep the deductions and income from each one separate. Figure separately whether each is a not-for-profit activity. Then figure the limit on deductions and losses separately for each activity that is not for profit.2. Employees' PayWhat’s NewCompensation in excess of $1 million. P.L. 115-97, Tax Cuts and Jobs Act, made significant changes to section 162(m) which disallows the deduction of excessive employee compensation by any publicly held corporation. See Compensation in excess of $1 million , later.Employee achievement awards. P.L. 115-97 defines items that aren't tangible personal property for purposes of employee achievement awards. Tangible personal property doesn't include cash, gift cards, and other nontangible personal property. See Achievement awards , later.Certain expense deductions are now limited. P.L. 115-97 limits the deduction by employers of expenses for certain fringe benefits and entertainment expenses. For more information, see the Caution under Meals and lodging , later. Also see Food and beverage expense incurred together with entertainment expenses. and Transportation (commuting) benefits , later.At the time this publication was printed, the empowerment zone employment credit and the Indian employment credit expired at the end of 2017. To find out if legislation was enacted to extend these credits and make them available for 2018, go to IRS.gov/FormsUpdates.IntroductionYou can generally deduct the amount you pay your employees for the services they perform. The pay may be in cash, property, or services. It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. For information about deducting employment taxes, see chapter 5.You may be able to claim employment credits, such as the credits listed below, if you meet certain requirements. You must reduce your deduction for employee wages by the amount of employment credits that you claim. For more information about these credits, see the form on which the credit is claimed; you can find a list of these forms in Form (and Instructions) under Useful Items, later.Work opportunity credit.Credit for employer differential wage payments.Employer credit for paid family and medical leave.Topics - This chapter discusses:Tests for deducting payKinds of payUseful Items - You may want to see:Publication15 Employer's Tax Guide15-A Employer's Supplemental Tax Guide15-B Employer's Tax Guide to Fringe BenefitsForm (and Instructions)1099-MISC Miscellaneous Income5884 Work Opportunity Credit8932 Credit for Employer Differential Wage Payments8994 Employer Credit for Paid Family and Medical LeaveW-2 Wage and Tax StatementSee chapter 13 for information about getting publications and forms.Tests for Deducting PayTo be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. These and other requirements that apply to all business expenses are explained in chapter 1.In addition, the pay must meet both of the following tests.Test 1. It must be reasonable.Test 2. It must be for services performed.The form or method of figuring the pay doesn't affect its deductibility. For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible.