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bearyg1833
Level 2

Legal fees

I know legal fees are generally no longer deductible. However, I have legal fees that relate to regaining my job. From the IRS pub 529, "You can deduct legal expenses that are related to doing or keeping your job". I also know that suing for discrimination is deductible. My questions is "how?". Where in TurboTax do you record this? Other sources indicate that for 2018: "Taxpayers filing Form 1040 for 2018 wishing to take an “above the line” deduction for their attorney’s fees related to discrimination suits or whistleblower awards must attach Schedule 1. The deduction will be considered a “write-in” adjustment. The type and amount of the deduction must be reported on the dotted line of Schedule 1, Line 36, since no other line has been allocated to it (please consult with your tax specialist about how to properly identify the deduction as specific acronyms exist for different deductions). All deductions from Schedule 1 will then flow to Line 6 of the taxpayers’ Form 1040." 

 

How do I do this for 2019 taxes using Turbotax? There doesn't appear to be any Line 36 that is available. Thank you for your help. 

1 Best answer

Accepted Solutions
macuser_22
Level 15

Legal fees


@bearyg1833 wrote:

I figured out a way to do it, but I'm not sure it is correct. What I did was go to Forms and open 1040/1040 SR Wks. I scrolled down to the Schedule 1 section and went to Part III "Adjustments to Income". Under line 21 in the section "Other Adjustments to Income Smart Worksheet", I went to Line H and wrote in "Legal Fees to sue the City of XYZ" and added the legal fee amount to the right. The information is then carried forward to Schedule 1 line 22 and is listed on the "......." line. The amount is then added to total for adjustments to income. 

 

Is this the correct way to do it? I've also read "(please consult with your tax specialist about how to properly identify the deduction as specific acronyms exist for different deductions)." Is there a special acronym that I'm supposed to use to identify this? Thank you for your help. It is much appreciated. 


You did a good job of figuring it out except the IRS says to enter "UDC" next to line 22, but the smart work sheet line H is the correct place to put it.

 

For reference see the 1040 instructions for Schedule 1, line 22 https://www.irs.gov/pub/irs-pdf/i1040gi.pdf  page 90

Attorney fees and court costs for
actions involving certain unlawful discrimination
claims, but only to the extent
of gross income from such actions
(see Pub. 525). Identify as “UDC.”

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

9 Replies
Opus 17
Level 15

Legal fees

W-2 employees can’t deduct legal expenses even those relating to keeping their job. Although that class of expense is generally deductible, it was a miscellaneous itemized deduction subject to the 2% rule and that entire category of deductions was eliminated.

 

You talk about a discrimination lawsuit but you don’t actually say this was a lawsuit for workplace discrimination. That is the only kind of legal expense that is still deductible and it is a special so called above the line deduction.  I can tell you how to make the adjustment if you are using the desktop version of TurboTax installed on your own computer, but I don’t know how to make the adjustment if you are filing online. There are some other folks who will know the answer to that.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
bearyg1833
Level 2

Legal fees

Thank you for the help. I am using the desktop version. I would appreciate understanding how to do this. 

macuser_22
Level 15

Legal fees


@Opus 17 wrote:

I can tell you how to make the adjustment if you are using the desktop version of TurboTax installed on your own computer, but I don’t know how to make the adjustment if you are filing online. There are some other folks who will know the answer to that.


That is a situation not supported by TurboTax so it can only be done by using the forms mode that is only available in the desktop versions.

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
bearyg1833
Level 2

Legal fees

I figured out a way to do it, but I'm not sure it is correct. What I did was go to Forms and open 1040/1040 SR Wks. I scrolled down to the Schedule 1 section and went to Part III "Adjustments to Income". Under line 21 in the section "Other Adjustments to Income Smart Worksheet", I went to Line H and wrote in "Legal Fees to sue the City of XYZ" and added the legal fee amount to the right. The information is then carried forward to Schedule 1 line 22 and is listed on the "......." line. The amount is then added to total for adjustments to income. 

 

Is this the correct way to do it? I've also read "(please consult with your tax specialist about how to properly identify the deduction as specific acronyms exist for different deductions)." Is there a special acronym that I'm supposed to use to identify this? Thank you for your help. It is much appreciated. 

macuser_22
Level 15

Legal fees


@bearyg1833 wrote:

I figured out a way to do it, but I'm not sure it is correct. What I did was go to Forms and open 1040/1040 SR Wks. I scrolled down to the Schedule 1 section and went to Part III "Adjustments to Income". Under line 21 in the section "Other Adjustments to Income Smart Worksheet", I went to Line H and wrote in "Legal Fees to sue the City of XYZ" and added the legal fee amount to the right. The information is then carried forward to Schedule 1 line 22 and is listed on the "......." line. The amount is then added to total for adjustments to income. 

 

Is this the correct way to do it? I've also read "(please consult with your tax specialist about how to properly identify the deduction as specific acronyms exist for different deductions)." Is there a special acronym that I'm supposed to use to identify this? Thank you for your help. It is much appreciated. 


You did a good job of figuring it out except the IRS says to enter "UDC" next to line 22, but the smart work sheet line H is the correct place to put it.

 

For reference see the 1040 instructions for Schedule 1, line 22 https://www.irs.gov/pub/irs-pdf/i1040gi.pdf  page 90

Attorney fees and court costs for
actions involving certain unlawful discrimination
claims, but only to the extent
of gross income from such actions
(see Pub. 525). Identify as “UDC.”

 

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**

View solution in original post

bearyg1833
Level 2

Legal fees

Thank you for your help. I really appreciate it. 

Stockmoose16
Returning Member

Legal fees

I am confused by the answers here. There is no PART 3 under schedule 1.  I put my ATL deduction under both Schedule 1, line 22 and 1040 8a.  The issue is there's no place to write "UDC."  Can anyone assist me for Turbotax 2019?

bearyg1833
Level 2

Legal fees

Are you looking at form "1040/1040 SR Wks"? 

macuser_22
Level 15

Legal fees


@Stockmoose16 wrote:

I am confused by the answers here. There is no PART 3 under schedule 1.  I put my ATL deduction under both Schedule 1, line 22 and 1040 8a.  The issue is there's no place to write "UDC."  Can anyone assist me for Turbotax 2019?


That is because it is not on Schedule 1 directly but the 1040/1040SR Worksheet.

 

Sched 1 UTD.jpg

**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
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