Deductions are one of the most common allowances Americans use to lower their tax liability during filing season, and these write-offs exist in several categories. Many taxpayers are aware of the most common deductions, such as those relating to charitable contributions, medical expenses, childcare and student loan interest, but there is another more general write-off that often falls by the wayside: miscellaneous deductions.
Write-offs for miscellaneous expenses can apply to a variety of costs and fees, however they are generally divided into three categories: unreimbursed employee expenses, tax preparation fees and "other" expenses, according to Bankrate.com. Further, in order to qualify, expenses must exceed 2 percent of a taxpayer's adjusted gross income and only the amount over this requirement is deductible.
Unreimbursed employee expenses refer to those costs that were paid out of pocket and were required in order for a worker to be able to perform his or her job. In addition, they must also be "ordinary and necessary" to an employee's business or trade industry in order to be considered legitimate. This may include work uniforms, licenses, job-related training classes and certain fees. However, it's imperative to keep thorough records and descriptions that detail why certain items are necessary to employees' positions or how they help them do their jobs.
Individuals who paid to have their taxes completed by a professional or purchased software to complete the task themselves may see some tax relief in the way of miscellaneous deductions. In addition, the IRS allows taxpayers to deduct the costs of related tax-filing fees, such as the expense of copying returns and paying postage to send them out, Bankrate.com explains. Taxpayers must write these fees off for the year they were paid, rather than the year in which they are filing. For example, individuals filing their 2011 tax returns can deduct fees paid in 2011 to prepare their 2010 return.
Lastly, "other" expenses may fall within the miscellaneous deductions category. This allowance generally relates to fees and activities related to "income-producing" efforts. For example, clerical or trustee's fees, may be included in this section if they related to caring for investments and retirement accounts.
Because miscellaneous expenses can be broad and far-reaching, individuals writing off these costs for the first time may consider consulting a tax preparer
to ensure they are filing correctly and their deductions are allowable.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.
About Liberty Tax Service
Liberty Tax Service is the fastest -growing retail tax preparation company in the industry’s history. Founded in 1997 by CEO John T. Hewitt, a pioneer in the tax industry, Liberty Tax Service has prepared over 8,000,000 individual income tax returns. With 42 years of tax industry experience, Hewitt stands as the most experienced CEO in the tax preparation business, having also founded Jackson Hewitt Tax Service.
Liberty Tax Service is the only tax franchise on the Forbes “Top 20 Franchises to Start,”
and ranks #1 of the tax franchises on the Entrepreneur “Franchise 500.” Each office provides computerized income tax preparation, electronic filing, and online filing through eSmart Tax.