Posted by : Daniel Stoica in (Articles, Income Tax Preparation, Tax Deductions, Tax Filing, Tax Preparation, Tax Return) On: May 27th, 2011
Tagged Under : audit, calculations, convenience fee, credit card, Daniel Stoica, debit card, deduction, electronic filing, fees, gross taxable income, income tax, interest rates, IRS, miscellaneous expense, Schedule A, supporting documents, tax bracket, tax liability, tax preparation, tax preparation fees, tax returns, tax software, taxpayers
Every year an estimated 60% of taxpayers use a tax preparer to complete their federal and state income tax returns. You can deduct tax preparation fees for the year in which you pay them. On your 2011 return, you will be able to deduct the fees you paid in 2011 for the preparation of your 2010 return. These include the cost of tax software and publications. It also includes any fee you paid if you electronic filed of your return.
According to the IRS, expenses for a tax professional or expenses paid for the preparation of your return are deductible. This is true for federal, state or city taxes and if the tax is income, estate, gift, property or any other tax.
The fee you pay a tax preparer to file your returns is deductible as a Miscellaneous Expense on Schedule A. You can also deduct the cost of any fees you have to pay for filing electronically, as well as “convenience fees” that are charged when you pay by credit or debit card for any taxes you owe. There is a valid reason why you may not want to pay by this method. Credit card companies and banks tend to charge high interest rate fees and you could spend years paying these taxes off.
Tax deductions reduce your gross taxable income. Deductions are valuable because they can bring income down to a lower tax bracket and reduce your tax liability. If you pay fees for a tax preparer, you can deduct those fees. The deduction may be small, but that small deduction can bring you down one or two tax brackets and save you money.
Write down all of the fees you paid for tax preparation by a professional, any software, if you used that, and e-File fees. Add up all of the fees to get your total, and then round down to a whole dollar amount.
Put the dollar amount on Line 22 of Schedule A, if you are preparing your own taxes. If you are using tax software, then find the category under Deductions and enter the dollar amount in the section labeled “Tax Preparation Fees.” If you are using a tax professional, take your calculations and supporting documents to him or her to finish filing your return.
It is very important that you have all receipts and forms available, no matter what method you use to file your taxes. It is recommended that you seek the advice of a tax professional for more complicated tax filings so there is no mistake with the calculations. Electronically filing on the IRS website is your best alternative to software if you can’t afford to hire an accountant.