Question

Where do I deduct legal fees for employment discrimination cases? The IRS says 1040 line 24h, but I can't find it in TurboTax.

Forum|Forum|3 years ago
February 16, 2023
3 replies
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TurboTax Deluxe Online

Legal and court fees related unlawful discrimination up until tax year 2021 were a right in adjustment of schedule 1, by entering the information on the 1040 worksheet and coded "UDC". Starting tax year 2021 this was actually included as a line item on Schedule 1 line 24 box h and last year it worked properly. This year (I have a download home and business TT program) this line item still exists on Schedule 1, but TT will not allow you to enter this information on the 1040 worksheet unless you select override and in doing so although the amount transfers to the correct line in Sch1 and also flows to the correct area on my state taxes (CA540 adjustment) because override was chosen the amount is not included in turbo tax calculations so it as if you didn't even add it. If you do as you have mentioned in your posting as a work around it does work and the legal fees are deducted from gross income, but because the amount is entered in the wrong location on the tax forms and this will result in the IRS/State sending you a tax notice because it was done incorrectly. I am uncertain why Turbotax is not working correctly this year, as I mentioned legal fees and court costs related to unlawful discrimination are considered an "above the line" deduction to gross income and should be reported as an adjustment on schedule 1 line 24h and as an adjustment to income on state taxes; therefore, this appears to be a glitch in the turbotax program this year.

E

ErnieS0

Do not override to enter attorney fees paid to settle unlawful discrimination. Enter the amount on the 1040/1040SR worksheet.

Select Forms in upper right confer
In the left column (Forms in My Return) tap 1040/1040SR Wks
Find the Other Adustments to Income Smart Worksheet between lines 23 and 24 of Schedule 1 Part II.
Enter your amount on line K: Attorney fees and court costs for actions involving unlawful discrimination.
Tap Step-by-Step in the right corner where forms used to be to get back to the interview mode.

You may be able to deduct, as an adjustment to income on your Schedule 1 (Form 1040), attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U.S. Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act.

However, the amount you can deduct on your Schedule 1 (Form 1040), is limited to the amount of the judgment or settlement you are including in income for the tax year.

@LaJolla

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C

CAG29

Thank you -I spent 4 hours trying to figure out how to get information on to 24h and searched so many descriptions and questions.

Is it possible to add this to the step by step interview questions when walking through all the topics?

So grateful to know how to add these critical expenses

R

rubyskies

I am looking for this deduction for my 2024 taxes. I was able to find a "Legal fees" deduction, but was informed that it didn't qualify (though it didn't ask me for any specifics for what kind of legal fees) for a federal or state deduction.

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JohnW152

To enter legal fees in an employment discrimination case in TurboTax Online:

Select Tax Home in the left pane
On the Hi, let's keep working on your taxes! screen, select the dropdown to the right of Wages & Income
Select Start, Continue, or Pick up where you left off
Scroll down and select the dropdown to the right of Less Common Income
Select Start or Revisit to the right of Miscellaneous Income, 1099-A, 1099-C
Scroll down and select Start or Revisit to the right of Other reportable income
On the Any Other Taxable Income? page, select Yes
On the Other Taxable Income page, enter the description Qualifying Legal Fees and enter your fees as a negative amount (i.e., -5000). Then, select Continue

To see your form entry in TurboTax Online:

Select Tax Tools in the left pane
Select Tools
Select View Tax Summary
Select Preview my 1040 in the left pane

You'll see your negative entry on line 8 of Form 1040, generated from line 24h of Schedule 1.

If the TurboTax Online navigation described above doesn't look like what you're seeing, see the TurboTax Help article Why does the TurboTax navigation menu look different for me?.

@rubyskies

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rubyskies

Thank you for your response. I was able to locate where to enter based on your description. However, when I went to verify that it put it in the correct place, it put it under Schedule 1, 8z "Other income. List type and amount:".
I was able to locate "Attorney fees and court costs for actions involving unlawful discrimination" under Other Adjustments to Income Smart Worksheet (Schedule 1, 23K). This seems like the appropriate place for it, but how do I get it there?

U

utah withholding id

To enter legal fees in an employment discrimination case in TurboTax Online:

Select Tax Home in the left pane
On the Hi, let's keep working on your taxes! screen, select the dropdown to the right of Wages & Income
Select Start, Continue, or Pick up where you left off
Scroll down and select the dropdown to the right of Less Common Income
Select Start or Revisit to the right of Miscellaneous Income, 1099-A, 1099-C
Scroll down and select Start or Revisit to the right of Other reportable income
On the Any Other Taxable Income? page, select Yes
On the Other Taxable Income page, enter the description Qualifying Legal Fees and enter your fees as a negative amount (i.e., -5000). Then, select Continue