How to Deduct Your Tax Preparer Fees

How much of the bill your tax professional gives you after filing your taxes can you deduct as a business expense?

a) All of it

b) Part of it

c) None of it

The correct answer is b) Part of it.

You can deduct as a business expense the cost to file your business tax forms on Schedule C.

You can't deduct the cost to file your personal tax forms on Schedule A.

Therefore, ask your tax professional to break out your tax preparation fee into two parts: the fee to prepare your business tax forms and the fee to prepare your personal tax forms.

Report the cost of filling out your business tax forms on IRS Schedule C, line 17 (Legal & Professional Services). The business tax forms include: Schedule C, Form 4562 Depreciation and Amortization, Form 8829 Expenses for Business Use of Your Home, and Form 1040SE Self Employment Tax.

Your tax professional may have filed other business forms for you if you sold property (including your home), hired employees (payroll tax forms), amended your tax return (Form 1040X) or recaptured previously unclaimed depreciation (Form 3115). If so, include the cost to prepare these additional tax forms as a business expense.

Your personal tax forms would include Form 1040 U.S Individual Income Tax Return, Schedule A Itemized Deductions, and all other forms not directly related to your business. The fee to fill out these personal tax forms cannot be deducted on Schedule A.

When to Deduct Fees

If you paid your tax professional in 2021 to do your 2020 tax return, you must claim this expense on your 2021 tax return.

Tom Copeland - www.tomcopelandblog.com

Image credit: https://advancedtaxservices.us/

My book Family Child Care Tax Companion can help educate your tax preparer about your taxes and reduce the chances that mistakes are made.