The Internal Revenue Service said that it would make some credit and debit card convenience fees tax-deductible, but only under certain circumstances.
The fees need to have been charged by the card provider when the taxpayer is paying federal individual income taxes electronically, and theyre only deductible if the taxpayer itemizes.
Federal law bars the IRS from paying any fees associated with these credit or debit transactions, the IRS noted. Card processors normally charge taxpayers convenience fees when they use their credit or debit card to pay taxes. The fees vary but average about 2.5 percent of the tax payment.
In reassessing a previous position, however, the IRS has 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. However, only those miscellaneous expenses that exceed 2 percent of the taxpayers adjusted gross income can be deducted.
Not everyone who pays the fees will be able to deduct them either. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. Plus, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.
Most individuals still pay their federal tax obligations by check, but last year more than 4 million taxpayers electronically paid their taxes.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access