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No Tax Respite For Late Payment Fees

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in Small Business Tax

Q.  Can a late payment fee be considered interest and therefore deductible?

A.  No. Generally, the IRS treats late payment fees as personal expenses that are not deductible. What’s more, the deduction for personal interest expenses is long gone. But late payment fees incurred by a business may be deductible (e.g., fees on a business credit card).

Tip: While most personal interest expenses are nondeductible,other interest charges may qualify for deductions as mortgage interest, investment interest or student loan interest, if applicable rules are met.

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