When it comes to paying Uncle Sam, there are very strict rules about what can and cannot be written off on income tax returns. However, there are several costs that many individuals and business owners may not realize qualify for deductions during filing season. As a result, they may end up paying more than they should in taxes each year.
The Internal Revenue Service allows individuals to deduct expenses that were paid for the purposes of "producing or collecting taxable income, managing, conserving or maintaining property held for producing such income and determining, contesting, paying or claiming a refund of any tax." In addition, the amount of the expenses must exceed 2 percent of the filer's adjusted gross income in order to qualify.
There are several types of expenses and fees that may fall under this umbrella.
For example, investment and trustee fees are a common write-off if they meet specific rules. Expenses for professional investment advice and accounting or legal fees that relate to investments may qualify under this deduction. Clerical assistance and fees paid to an investment management company may also be written off on tax forms, but filers should ensure they keep good records to detail these costs. The IRS can be very particular when it comes to writing off these types of expenses, so ask investment managers to clearly detail what each fee corresponds to, Fox Business suggests.
In addition, individuals may deduct trustee fees, but only if they were billed and paid separately from an individual's own wallet. Those costs paid from within a retirement account do not qualify for the tax benefit, the news source explains.
Fees related to tax planning, guidance or preparation can also be deducted. This means that consumers who purchased software to help them file taxes may deduct it on their income taxes. In addition, those expenses paid to participate in certain tax repayment programs, such as an offer in compromise, installment program or resolving a tax dispute can also be written off.
Before deducting any of these types of fees and expenses, individuals should always consult their tax preparer
to make sure the write-offs are valid. The IRS has very particular rules about these types of benefits, and having a firm understanding of the rules can help filers avoid potential tax issues.
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.