2018 Legal Fee deduction for whistleblower lawsuits or defending against criminal charges at work

[KVR2000]

Hello,

I had to spend $18,000 in 2018 filing a whistle blower complaint and defending myself against reprisals.  I know the itemized deductions for attorney fees went away for 2018-2025 (for most situations), but I saw several articles showing exceptions such as the ones I mentioned above.  Turbotax simply says you cannot do it and has no area for the exceptions.  So where is it deducted at?  

Thanks

https://www.nerdwallet.com/blog/taxes/can-you-deduct-legal-expenses-on-your-taxes/

[krmsv]

You are incorrect that itemized deductions went away.  However, standard deductions are much higher which means there are just a higher threshold for itemized deduction to be worthwhile.  You did not indicate if your filing single or married jointly.  If single, that $18,000 would be above the threshold, while married jointly it wouldn't be without other deductible expenses.  

[KVR2000]

Hi and thanks.  I was not implying that all itemization went away, only that many legal fee deductions are gone.  Im filing married and jointly, but everything I read said many attorney fees cannot be deducted.  Except in a few situations like mine mentioned above.  I wanted to verify my situation (whistleblower and fighting criminal charges at work) are a deduction and more importantly, how do I claim it since Turbo Tax ignores anything put in the attorney fee section (Schedule A, itemization)?

Regards

[NCperson · Accepted solution]

without getting into the debate whether it's legal or not, here is how to do it in TT.

First, there are no longer any legal fees that are permitted 'below the line', meaning they can not be placed on Schedule A.

However if you read the instructions to form 1040 very closely (see link below), they are to be placed on Line 36 of Schedule 1.  Look at the section in the link that states: (WBF is 'whistle blower fees;) 

• 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."

• 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, up to the amount of the award includible in your gross income. Identify as "WBF."

https://www.irs.gov/instructions/i1040gi#idm[phone number removed]928

pull up TT in Forms View, and then search for Schedule 1 and go to Line 36. 

It won't let you put the fee directly on this line, but if you click the search button on the left corner of the box another screen will open and on line H of the Income Smart Screen there is a free form box where you can type in  'WBF - Whistle Blower Legal Fees"  and then the dollar amount. 

TT should reduce your gross income by this amount (so called 'above the line')....then while it's really hard to see what is occurring, look at Line 7 of Form 1040, it should go down by the amount of the legal fees. 

I can't see how to do it using 'step x step' method.  

[krmsv]

Turbotax basically is doing the best it can for you to pay the least in taxes.  They have there program set as you plug your numbers, they show you the best possible way to do your taxes with what they know.  If you don't have enough deductions to add up to more than the standard deductions, it will figure that taking the standard deduction is best for you.  Since your married filing jointly, the standard deduction there is $24,000.  If you don't have more than $24,000 in deductible expenses, then you are best to file using the standard deduction.   

[NCperson]

Intuit changed my link when i posted.

use this link and go to page 96 at the bottom right where the instructions to Line 36 of schedule 1 are displayed. 

you will see the words related to attorney fees on the middle column of page 97 

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[KVR2000]

Thanks,

That helps and I also dont see a way to do it step-by-step.  Pretty easy to switch to form view and do it. I also found another method explained here that seems to do the same thing except is using a negative number:

To enter your qualifying legal fees,
In your open Federal return, choose the tab for Wages & Income
Scroll down to Less Common Income and Show more
Start/Revisit Miscellaneous Income and choose Other reportable income
Say Yes to continue to the screen "Other Taxable Income". Enter the description "Qualifying Legal Fees" and the amount as a
negative number.
A corresponding subtraction will be entered on Line 21 of your return.

The IRS legal wording here may also help someone decided if they can write the fees off or not.  It was useful to me because reprisal is part of the definition and that is where all my legal fees went.  Ill try your method NCperson and see if the numbers stay the same as with the other method above.

[NCperson]

that is interestsing that TT explains to use line 21, because the IRS specifically states it's to be placed on Line 36 (per my documented link)

the end result is the same though

[tomjones]

This entire area of deducting legal fees relating to discrimination cases, whistleblower cases, as well as legal fees resulting from SSDI and long term disability awards seems to have been entirely ignored by TT. There are numerous web sites that explain these legal fees are still considered 100% above the line expenses that do not get entered on Sch A.       But where and how do they get entered???

I share everyone's frustration with the inability of TT to offer a complete solution to preparing taxes, as they claim to.  I've also tried calling their "experts" and they don't have a clue!

I'm afraid that to be entirely confident that my taxes are completed correctly, I will require the services of a CPA well-familiar with the current tax laws.   So much for TurboTax!!!

[Critter-3]

You can report it as other income on Sch 1  line 8. Here's how to enter it in TurboTax.

• Click the Federal Taxes tab ( Personal in the Home & Business version)
• Click Wages & Income. (Personal income in the H & B version)
• On the screen "Your 2019 Income Summary," scroll all the way down to the last section, "Less Common Income."
• Click the Start or Update button for the last topic, "Miscellaneous Income, 1099-A, 1099-C."
• On the next screen, "Let's Work on Any Miscellaneous Income," scroll down and click the Start or Update button for the last topic, "Other reportable income."
• The next screen asks, "Did you receive any other taxable income." Click Yes.
• On the next screen, "Other Taxable Income," enter a description and the amount. Click Continue.
• On the next screen click Done.

The income will be reported on Sch 1 line 8 with the description that you entered.

[BorisKarloff1]

I see a response that has an instruction on how to enter an atty fee.  Then another response is where to input the gross.   But not sure if these responses are used?  isn't it required to have a tax attorney do the tax for you if you get a WB award; also all responses leave out SEC WB award.