Q. Where on my tax return do I deduct attorney fees for lump sum award for back years disability from SSA?
A. There is no allowable deduction for that.
Q. So, the IRS can collect taxes TWICE on the same attorney fees?
A. Yes. But they don't "see it" that way. It was income to you, so it's taxable to you. You then paid your lawyer (no different than paying your doctor or plumber) for personal services. So the lawyer then has his own income to pay taxes on.
But, for you there is a special tax calculation, on lump sum distributions, for back years. For most people, this greatly reduces the tax on the large amount received in a single year.
