Easy details about Clifton Park Small Business Consultant

The deduction of tax preparation fees on Schedule E reduces the taxpayer’s income tax liability. For more details click Clifton Park Small Business Consultant.¬†However, because the rental and/or royalty income reported on Schedule E is not subject to self-employment tax, the tax preparation fees deducted on Schedule E will not save the taxpayer any self-employment tax. On Schedules C, E, and F of Form 1040, a taxpayer can’t deduct all of their tax preparation fees. The tax preparer should give the taxpayer a statement detailing how much of the tax preparation fee was related to the taxpayer’s business, farm, rental, and royalty income. Only Schedule A allows the taxpayer to deduct the remaining portion of the tax preparation fee. If the tax preparer does not provide a detailed statement showing how much of the tax preparation fee was for the taxpayer’s business, farm, rental, and/or royalty income, the taxpayer should request an itemized statement from the tax preparer. If the taxpayer does not receive an itemized statement from his or her tax preparer, he or she should make a reasonable allocation. In this case, the taxpayer should seriously consider switching tax preparers for the following year.As an example, consider the following: Let’s pretend that the taxpayer is self-employed and owns rental property. For 2005, the taxpayer’s Form 1040 and related schedules were prepared for a fee of $600. According to the tax preparer, $300 of the $600 total fee was related to the taxpayer’s business, $200 to the rental real estate, and the remaining $100 to other aspects of the taxpayer’s income tax return. The $600 was paid by the taxpayer in February 2006.The $600 tax preparation fee can be deducted as a miscellaneous deduction on the taxpayer’s 2006 income tax return in the following ways: $300 on Schedule C, $200 on Schedule E, and $100 on Schedule A.

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