Monday, April 13
Posted 11 a.m. EDT
Credit card filing fees now deductible
If you pay your taxes with a credit card, you might also create a new deduction
for yourself next filing season.
The IRS has changed its mind about that 2.49-percent fee that the credit card
companies charge to process tax payments. That amount is now deductible.
Unfortunately, as I mentioned, it won't help you this tax season.
Even more unfortunate, when the tax break is available next filing season,
many folks won't be able to actually claim the deduction.
First, you must itemize to claim the expense. The so-called convenience fee
counts as a miscellaneous deduction on Schedule A.
And that brings us to our second deduction caveat. Before you can write off
miscellaneous expenses, the total must be more than 2 percent of your adjusted
Many filers never meet that filing threshold. There are some ways to help pump
up that potential deduction, detailed in "Taking advantage of miscellaneous
deductions." But for most, it's going to take a hefty tax bill and assoicated
processing fee to make a deduction diference.
So realistically, the claim is somewhat limited.
And more notable, the IRS itself says that each year, most people tend to use
the standard deduction. That means this new tax break won't matter one bit to
the majority of filers.
Still, if you do happen to find this new write-off of use, then great! When
it comes to taxes, every little bit could help.
Coordinating filing deductions: I've also got to give the IRS credit
for finally getting its deduction ducks in this area all in a row.
Taxpayers have always been able to claim tax preparation charges, ranging from
accountant or other tax pro fees to the cost of tax prep software to tax guidance
books (like mine!), as a miscellaneous itemized expense.
Allowing the credit card payment fee is just a logical extension of that deduction
Why the change? In announcing the new deduction, the IRS didn't elaborate
on why it changed its mind.
I suspect, however, that as the agency works to get more of us to electronically
file, it realized that for some, the processing charge was an obstacle.
I know that in past filing seasons, even if the credit card payment fee wasn't
that much in actual dollars, I just didn't want to pay any more than I had to
-- to anybody! -- on April 15. So in those years that I owed the IRS, I sent
both my forms and payment through the U.S. Postal Service.
I found the $4 or so it costs to send my taxes certified mail a lot more acceptable
than a $15 or more e-filing fee and another 2.5-percent-of-my-tax-bill credit
This year, though, with many folks being able to e-file without cost via Free
File, as well as the major tax software manufacturers waiving the charge for
many of their otherwise paying clients, that e-filing charge is not an issue.
And now, although the credit card fee is still around, at least there's the
possibility it can be deducted next year.
Maybe that will help the IRS reach its goal of every single filer eventually
taking care of their taxes electronically.