IRS: You can deduct fee for paying taxes by credit card
Ruling creates a break for paying tax by plastic -- but only for some
By Kay Bell
The Internal Revenue Service has decided that taxpayers who use their credit or debit cards to pay federal tax bills need a break.
|Taxes, credit, debt and you|
These CreditCards.com articles about taxes, credit and debt will help you navigate tax payment options, tax liability, tax-time identity theft and manage your credit and debt at tax time.
But don't do your tax happy dance just yet. This change will not help every filer.
The fee must be counted as a miscellaneous deduction. That means you must itemize and include the charge in the "job expenses and certain miscellaneous deductions" section of your Schedule A.
Even then, you can only deduct the amount that exceeds 2 percent of your adjusted gross income. If that's $40,000, for example, then your miscellaneous items must come to more than $800.
And then only the amount over that percentage counts, meaning $810 in miscellaneous expenses will get you a $10 deduction to add to the other times on your Schedule A.
Still, the move makes sense.
Among the miscellaneous expenses that can be counted on Schedule A is the cost of tax preparation. This includes such things as your accountant's fee, tax prep software and the price of tax guide books. Allowing you to include the cost of actually paying your taxes by plastic is a logical extension of the process.
And the IRS no doubt hopes it will boost e-payment numbers.
In announcing the new deduction, the IRS said that although around 4 million filers electronically paid their taxes -- and the surcharge -- last year, most filers who owe still send in their tax payments by check.
See related: How taxes can help -- or hurt -- you at tax time
Published: April 8, 2009
- CFPB moves toward restriction on mandatory arbitration – The Consumer Financial Protection Bureau is considering a rule that would ensure consumers' right to band together and sue credit card issuers ...
- Banks making refunds for add-on products – Fifth Third bank agreed to refund some $3 million to about 24,500 customers for debt protection coverage that regulators say was marketed falsely ...
- Why bankruptcy of the rich and famous is nothing like yours – How the rich and famous stay wealthy post-bankruptcy while regular folks who file don't ...