Question

How to enter 1/3rd lawyer fee as expense from a 1099 misc which was issued for entire settlement amount and same entered as income?

Forum|Forum|4 years ago
April 12, 2022
1 reply
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KrisD15

That depends on what the lawsuit was for and if it was business related.

If it was business related, enter the fee as an expense on your Schedule C.

Please click here for more information.

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M

mm_hoque99Author

Thank you for your reply.

It was a settlement from a bank out of a lawsuit for their misdeed.

I was sent 1099 misc for the entire settlement amount which went to add to my income, but I only got 2/3rd of the settlement amount because the lawyer kept 1/3 for the contingency fee agreement. Now, if I'm not able to deduct the lawyer portion of the settlement fee, it appears that the same 1/3 portion will be taxed twice, once through me and the other through lawyer because the 1/3 contingency fee will go against lawyers income. It doesn't seem logical.

There should be a way I can adjust my income by reducing 1/3 of the settlement money.

Thank you.

DaveF1006

Some legal fees can be deducted as itemized deductions if you are able to itemize. There are certain legal fees that can be deducted in this manner such as.

Fees for personal injury actions where you recover taxable damages
Court costs and attorney fees related to either doing or keeping your job, including back pay, injury to reputation, and unlawful discrimination claims
Costs of collecting taxable alimony or arranging details of alimony payments

If your legal fees fall within these parameters, report these by going to federal>deductions and credits>other deductions and credits>legal fees.

@mm_hoque99

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