The Internal Revenue Service has recently announced that credit and debit convenience fees charged for paying federal individual income taxes electronically are now deductible as a Miscellaneous Itemized Deduction, subject to the 2% floor. A taxpayer must itemize to take advantage of this deduction, as well as have enough miscellaneous expenses to exceed the 2% AGI threshold.
Card processors normally charge taxpayers convenience fees when they use their credit or debit card to pay taxes. These fees average around 2.5% of the total tax payment. While most individuals still pay their taxes by check, electronic payment methods are becoming more popular every year.
These convenience fees are deductible in the tax year in which they are paid, not the year associated with the tax liability. If you have not deducted these fees in the past, contact your tax preparer to determine if it would be advisable to amend your return.
There are other fee-free ways to pay your taxes electronically. Through the IRS website, you can have funds electronically withdrawn from your account, or you can utilize the Electronic Federal Tax Payments System.
If you would like any further information on this topic or other year-end tax planning items, please contact Henssler Financial at 770-429-9166 or [email protected].