Are Tax Preparation Fees Deductible?

If tax season isn’t your favorite time of the year, you’re not alone! Many people dread the paperwork and number-crunching involved in filing yearly taxes.

There is, however, an easier way, and you don’t have to do it alone. 

A professional accountant can take much of the burden off your shoulders. Accountants have experience filing out even the most complex documents. They can help you ensure you’re minimizing your bill and maximizing your return. 

Many Americans feel more comfortable hiring an expert to file their taxes. If your finances are complicated, working with an accountant could be an especially smart move. 

Many taxpayers don’t realize that you may be eligible to deduct tax preparation fees on your return. Read on to see if you’re eligible and learn more about how you can minimize your fees.

What Are Tax Preparation Fees?

Tax preparation fees are paid to professional accountants who help fill out your forms and file your yearly taxes. 

An accountant has unique insight and experience filing these types of documents. As such, they can help you reduce your tax bill and maximize your refund. A tax preparation agent can give you peace of mind. They will correctly submit all documents to the IRS and protect you from future liability. 

There are many benefits to hiring a CPA to help with your tax preparation. The associated fees, however, are still something that you should account for in your finances. If eligible, you should treat these expenses as a deduction. They can be helpful, especially if you’re filing business/self-employed tax. 

Who Can Deduct Tax Preparation Fees?

When filing your taxes, you need to know the deductions for which you’re eligible to minimize your bill. If you’re wondering, “Can you deduct tax preparation fees?”, the answer is—it depends.  

Some workers cannot deduct these fees under federal law. For example, W2 employees cannot deduct tax-prep fees under the tax reform bill. 

However, self-employed filers and business owners CAN apply for this deduction—under certain circumstances. 

How to Deduct Tax Preparation Fees

If you own a business, you may be eligible to deduct tax preparation fees. In general, the IRS allows eligible taxpayers to deduct expenses associated with:

• The fee from the accountant/preparer
• Cost of tax-prep software programs 
• Fees for e-filing (including credit card fees), etc.

Note that only those who itemize their deductions are eligible to deduct tax preparation fees. You should include this deduction on your Schedule A. Typically, you can include these fees under your ‘miscellaneous expenses deduction.’ However, there is a catch: the 2% AGI Limit.

The AGI limit means that any miscellaneous expenses you can deduct must be more than 2% of your Adjusted Gross Income.

For example, if your AGI is $60,000, the 2% threshold would be $1,200. If your miscellaneous expenses total $500 (including $300 for tax prep), you would not meet the 2% threshold. This means you would not be able to take any deduction because your miscellaneous expenses were too low. 

If instead, you spent the same $300 for tax prep plus $1000 for an unreimbursed business expense, then your total miscellaneous expenses would be $1,300. In this case, you would be able to deduct $100 (the amount that exceeds the threshold).

So long as your miscellaneous expenses exceed 2% of your AGI, you can claim a deduction for the difference.  

Should You Pay for Tax Preparation?

Filing your taxes can be daunting—especially if you have complex finances or don’t have much experience.

Hiring an agent can make the whole process easier. You can rest assured that your taxes are filed properly. You’ll know that you’ve applied for the right deductions to minimize your bill. 

Accountants have years of experience helping individuals minimize their bills and secure larger refunds. Often, there are deductions of which the average taxpayer may not even be aware. These deductions can make a huge difference in your return. 

Hiring an accountant does come with a fee. However, it’s a small price to pay compared to how much a professional can help you get back in your refund. 

If you’re considering applying for a tax preparation fee deduction, your accountant can walk you through the process. They will make sure that you qualify and that you report it correctly. 

Whether or not you can deduct tax preparation fees, hiring an agent is a smart investment. For more information, call us for a free consultation. Find out how to minimize your bill and maximize your refund.