When it comes to both personal and business tax preparation, you may be considering turning the chore over to an accountant in order to save time and minimize payments. If the cost of tax preparation is a concern, you may be wondering if you can deduct the costs of preparing the returns from the taxes. To help you make the right choices about how you complete your returns, our small business accounting firm is taking a closer look at the issue.
If you’re an employee, and you receive a W-2 in order to prepare your taxes, the short answer is that you are no longer able to deduct your tax preparation fees. With the Tax Cuts and Jobs Act that passed in 2017, most of the itemized tax breaks were eliminated, including deducting medical costs, unreimbursed expenses for work, moving expenses, and theft losses in addition to the costs accrued with preparing your tax returns.
The upside to losing many of these itemized deductions is that the legislation did increase the standard deduction, so most people came out ahead. Especially since in order to deduct these fees in the first place they had to exceed two percent of your adjusted gross income. So, if your adjusted gross income was $50,000, your tax preparation fees would have to be $1,000 or more for you to be able to deduct them, and that’s generally significantly higher than it costs to have an accountant do your taxes.
On the other hand, individuals who are self-employed are able to deduct the cost of the tax preparation fees, including tax software or working with a professional. In order to meet this, you have to fit the folowing criteria:
It’s important to note that you may not be able to deduct the entire cost of the tax preparation fees. You can only claim the amount of the fee that was accrued by preparing the business portion of your taxes. The rest, including the standard deduction, personal deductions, and credits fall into personal expense.
Even if your business tax preparation costs may not be fully deductible, it’s still important to work with a professional CPA to prepare your tax returns. Often, an experienced small business accountant can find additional deductions, credits, and benefits that will minimize your tax bill and help you save a significant amount of money as well as ensure they are accurate and filed in a timely manner.
Work with a diligent, experienced CPA to make sure the fees you pay are worth it. We provide monthly bookkeeping services as well as tax preparation for our small business clients. We take extra precaution to protect our clients’ information, providing an additional layer of security in the fight against identity theft. Fill out our contact form or call our Raleigh accounting firm today at 919-420-0092.