When Are Tax Preparation and Tax Attorney Fees Deductible?

Although Section 212 of the federal tax code and the corresponding regulation at Section 1.212 do not specifically provide for the deduction of tax preparation fees or fees paid to an attorney giving tax advice, it does provide for the deduction of expenses incurred “in connection with the determination, collection, or refund of any tax.” This has been widely interpreted to mean fees for tax return preparation and legal advice on the tax treatment of items are deductible on Schedule A of an individual income tax return.

They may also qualify as business expenses if they arise from the business and are ordinary and necessary to the operation of the business (for more on this, see the FAQ here). If they qualify as business expenses, they should be claimed on Schedule C or on the appropriate business return because the tax treatment is more favorable as an above-the-line deduction.

In either case, as with any other expenses, they are deductible only in the year they are incurred. It is a common mistake to deduct the fees for preparing a return on that same return – e.g., the fees for preparing the 2013 return claimed on the 2013 return. However, the fees for a 2013 return would have likely been incurred between January and April of 2014, and the taxpayer would have to wait another year to deduct those fees on the 2014 return.

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