Legal Fees related to unlawful discrimination claims

[ee-ea]

Allowable as an adjustment to income. 26USC62(20)

https://irc.bloombergtax.com/public/uscode/doc/irc/section_62?trackingcode=BTAX18523

[ErnieS0 · Accepted solution]

As Tax Champ @ee-ea says you can subtract legal fees paid for unlawful discrimination claims. You will need to move to TurboTax CD/Download.

How do I switch from TurboTax Online to TurboTax CD/Download?

Here's how to do it:

1. Select Forms in the top right
2. In the left column (Forms in My Return) tap Schedule 1
3. Highlight line 24h and tap the magnifying glass
4. Scroll up to the Other Adjustments to Income Smart Worksheet between lines 23 and 24
5. Enter your amount on line K

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. 

[jbg6126]

Very helpful. The TT step by step response would lead you believe legal fees are not deductible on the Federal return. If the goal of TT is to get you the max return this deduction should be built into the step by step software. It is very easy to not to include this deduction even though the tax code allows it under certain circumstances if you just rely on the software response as a guide.

[LaJolla]

There appears to be a glitch in the 2022 Home and business TT program. Last year I was able to enter my legal fees for unlawful discrimination exactly how you described; however, this year when I attempted to do so the program will not allow me to. I can right click on box 24h on the 1040 worksheet and select "override" and enter the amount I paid in legal fees, but then turbotax does not deduct this amount from my gross income. It simply shows as an entry but is not deducted.  I am uncertain what I need to do to get this fixed.

[BrittanyS]

Have you checked your software for updates?  You can check the desktop version for updates by following these steps:

1. On the Desktop Version, Click Online from the top panel
2. Click Check for Updates
3. Run updates, close software, and reopen
4. Log back in and follow the steps provided by ErnieS0 

I have included ErnieS0's steps below for your reference:

1. Select Forms in the top right
2. In the left column (Forms in My Return), tap Schedule 1
3. Highlight line 24h and tap the magnifying glass
4. Scroll up to the Other Adjustments to Income Smart Worksheet between lines 23 and 24
5. Enter your amount on the line K

@LaJolla 

[SAWNE]

I followed the instructions that were laid out for option "H" but highlighted "K" instead.  It scrolled up to the box "Other Adjustments to Income Smart Worksheet".  Most of the lines were highlighted except for "I" which is the one that I need to populate. Do you have any suggestions on how I can get this unlocked??

[AnnetteB6]

If you are trying to enter an amount in Form 1040 Schedule 1 line 24 'I', 'Attorney fees and court costs you paid in connection with an award from the IRS for information you provided that helped the IRS detect tax law violations', follow the steps below adapted from those provided by ErnieS0:

1. Select Forms in the top right
2. In the left column (Forms in My Return), tap Schedule 1
3. Highlight line 24i and tap the magnifying glass
4. Scroll up to the Other Adjustments to Income Smart Worksheet between lines 23 and 24
5. Enter your amount on the line L

The main change is that the information for Schedule 1 line 24I is entered in the smart worksheet on line L instead of line I.

@SAWNE 

[SAWNE]

Annette86-

I’m trying to enter on form 1040, line K -“Excess deductions of section 67(e) expenses from K-1 (form 1041and not line “I”.

[PatriciaV]

The amount on Form 1040 Line 24k comes from Schedule 1 Line 24k, which includes the information that the number comes from Schedule K-1 (Form 1041). Both lines are locked for manual entry. 

This means you need to go back to your Schedule K-1 entries and edit the information from the trust/estate that reported the excess deductions. You'll find that amount on Sch K-1 (1041) Line 11 Code A.

@SAWNE 

[eddyyee]

I've followed the steps 1 to 2. But can't highlight Line 24i and can't find the magnifying glass. Can you help? I can't seem to edit the boxes. Thanks!

[MonikaK1]

Assuming you are trying to populate Schedule 1, Line 24i:

If you already entered something in Line 24i and then took it out, it may not display the magnifying glass when you hover over it.

However, if you scroll up to the Other Adjustments to Income Smart Worksheet between lines 23 and 24, you should be able to enter your amount on line L and then it will auto-populate in Line 24i.