You can deduct as a miscellaneous expense on Schedule A (subject to the 2% of AGI exclusion) any expenses paid in connection with the "determination, collection or refund" of a federal, state or municipal income, estate, gift, property or other tax.
So the fee you pay to someone like me for preparing your tax return, as well as fees for tax planning advice involved with a federal, state or local audit of your return, are deductible.
In the days before the 2% of AGI exclusion for miscellaneous expenses, when the tax rate was as high as 50%, we used to tell our tax preparation clients that Uncle Sam would reimburse them for up to half of our fee.
You can also deduct the cost of:
- E-filing of your return
- Legal fees relating to tax advice
- Photocopies needed for return preparation or an audit
- Round-trip travel to your tax professional’s office
- Tax newsletters, publications and reports
- Tax preparation software programs
You can use a credit or debit card to pay the balance due on your Form 1040, but you will be charged a “convenience” fee by the processing company. While the original IRS position was that such a fee was not deductible, a recent IRS Chief Counsel Memorandum says that you can deduct “the convenience fee charged for paying individual income taxes with a credit or debit card.”
New Jersey tax pro Robert D. Flach has been preparing 1040s for individuals since 1972.
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