Research 2 Income Tax
Research Problem 2
How Are These Fees Determined? Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment (IRS.gov).
Are These Fees Themselves Deductible? Explain. Credit and debit card convenience fees charged for paying federal individual income taxes are deductible as miscellaneous itemized deductions subject to the 2% floor for taxpayers who itemize (RIA 16181 Tax Liability).
Summarize Your Findings In A Memo For The Tax Research File
October 3, 2014
TAX FILE MEMORANDUM
From:
Subject: John and Martha Stewart Convenience Fees: Conclusions
See IR-2009-37, 04/07/2009. In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.
Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.
Works Cited
IRS. (2009). Credit and Debit Card Fees Related to Tax Payment are Deductible. 2 October 2014. http://www.irs.gov/uac/Credit-and-Debit-Card-Fees-Related-to-Tax-Payment-are-Deductible
Thomson Reuters Checkpoint. (2014). Editorial Materials, Tax Guide. 2 October 2014. https://checkpoint.riag.com/app/loginDef?lastCpReqId=1395664&lastRoute=FORCE_LOAD_BALANCE%7C1412347894527%7C1%7C387831306.42280.000%7CBFE24F409036E2D7AEA6D3E560CBC931%7Ctomcat%7Cfalse%7C6281
Hoffman, Maloney, Raabe, Young. (2015). Federal Taxation Comprehensive Volume (p. 2-32-2-33). 3 October
How Are These Fees Determined? Card processors normally charge taxpayers for convenience fees when they use their credit or debit card to pay taxes. Fees vary but average about 2.5 percent of the tax payment (IRS.gov).
Are These Fees Themselves Deductible? Explain. Credit and debit card convenience fees charged for paying federal individual income taxes are deductible as miscellaneous itemized deductions subject to the 2% floor for taxpayers who itemize (RIA 16181 Tax Liability).
Summarize Your Findings In A Memo For The Tax Research File
October 3, 2014
TAX FILE MEMORANDUM
From:
Subject: John and Martha Stewart Convenience Fees: Conclusions
See IR-2009-37, 04/07/2009. In reassessing a previous position, the IRS decided that the convenience fees associated with the payment of federal tax, including payment of estimated tax, can be included as a miscellaneous itemized deduction. However, only those miscellaneous expenses that exceeded 2 percent of the taxpayer’s adjusted gross income can be deducted.
Not everyone who pays the fees will be able to deduct them. Taxpayers first must be eligible to file a Form 1040 Schedule A to itemize their expenses. And, taxpayers must have enough miscellaneous expenses to exceed the 2 percent threshold. These expenses include items such as tax preparation costs, job search expenses and unreimbursed employee expenses.
Works Cited
IRS. (2009). Credit and Debit Card Fees Related to Tax Payment are Deductible. 2 October 2014. http://www.irs.gov/uac/Credit-and-Debit-Card-Fees-Related-to-Tax-Payment-are-Deductible
Thomson Reuters Checkpoint. (2014). Editorial Materials, Tax Guide. 2 October 2014. https://checkpoint.riag.com/app/loginDef?lastCpReqId=1395664&lastRoute=FORCE_LOAD_BALANCE%7C1412347894527%7C1%7C387831306.42280.000%7CBFE24F409036E2D7AEA6D3E560CBC931%7Ctomcat%7Cfalse%7C6281
Hoffman, Maloney, Raabe, Young. (2015). Federal Taxation Comprehensive Volume (p. 2-32-2-33). 3 October