Some credit card fees are now deductible
Wednesday, April 08, 2009
Don't get too excited. Note that word "some" in the headline.
But every little tax break helps at least a few folks. And I suspect that the IRS hopes this move will get more people to electronically file and pay their taxes.
To that end, the agency has decided that credit or debit card convenience fees that we have to pony up just to pay our IRS bills electronically are deductible.
If we itemize.
And if the allowable fees help push our Schedule A miscellaneous deductions over the 2 percent threshold.
But, hey, as I said, every little bit helps.
Logical move: Plus, I've got to give the IRS some credit for reversing itself here.
We've always been able to claim tax preparation charges, be they from an accountant or simply the cost of that box of tax software, as a miscellaneous itemized expense. This is just a logical extension of the process.
Card companies, not IRS collect: Plus it might be a bit of a PR bonus for the IRS, which some filers blame for the charge.
In reality, though, federal law bars the IRS from paying any fees associated with tax-related credit or debit transactions. So it's card processors who collect the money for handling the payment.
Hey, welcome to America and capitalism. Somebody always pays somebody else for a service.
In most cases, the credit or debit card tax-payment fees average around 2.5 percent of the due IRS bill.
I must admit that the payment processing cost, even when it's not really that much, is one reason that I chose the Electronic Federal Tax Payment System, aka EFTPS, over charging my tax bill. That and the fact that the hubby and I are one of only 23 people in America who don't have a rewards program connected to our plastic.
But even if the tax payment fee is not much, on April 15 I simply don't want to pay anyone, either the IRS or a credit card company, any more money. I am usually tapped out, financially and mentally.
Why the change? The IRS didn't elaborate on why it changed its mind or why now. It simply said that:
"In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction."
But some reading between the lines indicates the motivation.
The IRS says that most individuals still pay their federal tax bills by check. Last year, just over 4 million taxpayers paid their taxes electronically.
As the agency works to make the system as electronic as possible, getting more e-payers is a big step.
Again, not for all: Not to run this into the ground, but again, this change is limited, both in scope and actual tax break dollar effect.
This new allowable e-payment fees deduction will not benefit every taxpayer who pays his or her taxes with plastic and incurs a charge.
Because it's a miscellaneous expense, that total Schedule A line item must exceeded 2 percent of the your adjusted gross income before it can be deducted. And then, per the word "exceed," it's only the amount over 2 percent that you get to count.
But if you're willing to try to get over that deduction threshold hurdle, then check out these ways to maximize your miscellaneous deductions.
is this only for IRS tax bill? or also state property tax also? thank you.
Posted by: chrystie | Friday, January 28, 2011 at 04:11 PM