Of course, you will have to pay to use a professional tax preparation service, although for many it's worth the cost to know that their tax return is complete and accurate. And if you are contacted by the IRS to be audited, most professional tax preparers will help you with that often stressful process. And another big advantage of paying an expert is that you can deduct the cost of having your taxes prepared and filed professionally.
What Is Deductible?
Costs associated with any aspect of preparing or tracking your taxes are deductible, and it isn't just the fee that you pay your tax preparer, as some people wrongly think. You can legitimately claim the cost of any financial or legal advice on how to file your taxes, as well as the costs of tax preparation software and any books or manuals relating to preparing taxes.
When and How You Should Deduct Tax Preparation Fees
If you pay a professional tax preparation company to file your 2017 taxes, but you actually pay that person in 2018, the tax deduction will apply to the tax year 2018; it's the actual year in which you pay the fees, not the tax year.
Where Is It On the Form?
If you are filing as a sole proprietor, you can deduct the fees for having your taxes prepared professionally, in the section for legal and professional fees under Schedule C. Under that same section, Schedule E is used for any preparation fees pertaining to income from a rental property, or associated expenses. Schedule F relates to expenses and income pertaining to a farm, while line 22, Schedule A is the section for miscellaneous itemized deductions.
The Miscellaneous Itemized Deduction
If none of the above apply to you, you must either claim the standard deduction or you can itemize - but of course, you can't do both. If in doubt, a professional tax preparation company can advise you on the best approach. However, it may not pay you to itemize - for example, you would need to have $6,351 in itemized deductions if you are filing as a single taxpayer and claiming the 2017 standard deduction of $6,350.
What Is Itemizing?
Itemizing means adding up all your deductible expenses for that tax year, including not only the preparer's fee but such things as medical expenses, interest on your mortgage and contributions to charity. However, you have to take into account the threshold and the fact that you aren't allowed to claim 100 percent of all of these expenses.
As an example, dental and medical expenses will have to exceed 10 percent of adjusted gross income in order for you to be able to deduct them. If your medical expenses totaled $7,000 and you earned $60,000, you can deduct them. This can make it complicated and it pays to compare your options to determine which approach will get you the bigger refund; many tax filers feel that it is well worth the cost of paying a professional preparer to figure this out for them.
Written by Tax Professionals