Prior to starting Washburn's Consulting, I was in the banking industry for over a decade (yup, I'm old) as a Licensed Auditor and I want to share some bank fees are deductible on your small-business tax return (there are a few on the personal side, but this post is for small-business) that you may not be aware of. I understand the tax deadline has passed, but this might help those who have yet to file, have filed an extension or for 2020 taxes!
1. Credit card and Loan interest under the business name.
Business deductions per the IRS have to be necessary and reasonable and understand that these items are typically a business necessity. Although, you cannot deduct late payment fees, annual fees, cash advance fees, convenience fees, and any other similar fees.
2. Merchant card processing fees.
Most of us pay card processing fees so that our clients can pay us, it's the cost of doing business and for that cost, those fees can be deducted. If you pass those fees on to the customer, you cannot deduct them. (Remember, you can only pass on credit card transaction fees to your customer, not debit or ACH)
3. Safe Deposit Box fees (SDB).
If you use a safe deposit box for your business, you can deduct the annual fee that you pay to the bank, or if you use a private safe deposit box provider. The box has to be listed under the business name and only used for business purposes. You cannot have personal documents stored in the box, for the fee to qualify.
4. Monthly maintenance fees (MMF), overdraft fees (OD), returned item fees (bounced check) and ATM fees.
These items are a bit murky and it mostly depends on the frequency of the fees for them to be considered as reasonable and necessary.
There is a popular story about a business owner who attempted to deduct $30,000 in overdraft fees, which the IRS of course deemed unnecessary and not reasonable. Be sure to keep all of your records if you incur any of these fees and speak with your accountant or tax advisor to determine if they would be deductible for your business.
What's that? You say $30,000 in overdraft fees is insane and can't be real?? I wish and I've seen worse!
5. Business Certificate of Deposits
If you make an early withdrawal from a CD in the business name, that fee is deductible.
**The above information is for educational purposes and should not be considered legal or tax advice. Always speak with an accountant or tax advisor as some items are case-by-case and to ensure there are no changes to the tax law.