This is completely incorrect information and should be removed from the site.
First the line numbers that the TT represented cites are from tax year 2018 and the lines numbers have change for tax year 2019.
Second the information is incorrect.
Qualified legal fees must be entered as a positive number on the Schedule 1, Line 22 and there are specific tax codes that must entered in association with this adjustment which are found on this line IRS publication 525
codes for Other Adjustments tax return (Form 1040):
- 403(B) - A minister or chaplain who participates in a 403(b) retirement plan, who is not self-employed, and whose employer includes their contributions in earned income, can deduct those contributions here (see Publication 517). Identified on the printed form as 403(B).
- JURY- Jury pay the taxpayer received (and is included on the return in Miscellaneous Income) which they gave to their employer if the employer continued to pay them while they served on a jury. Identified on the printed form as JURY PAY.
- PPR- Deductible expenses related to income reported on Form 1040 line 21 from the rental of personal property engaged in for profit (see Publication 525). Identified on the printed form as PPR.
- RFST- Reforestation amortization and expenses (see Publication 535). Identified on the printed form as RFST.
- SUB-PAY- Repayment of supplemental unemployment benefits under the Trade Act of 1974 (see pub 25). Identified on the printed form as SUB-PAY TRA.
- UDC- Attorney fees and court costs for actions settled or decided after October 22, 2004, involving certain unlawful discrimination claims-R.C. §62(a)(20) subsection (e)(18) (ii), but only to the extent of gross income from the action (see pub 25). Identified on the printed form as UDC.
- USOC - US Olympic Committee and Paralympic Medals and Prize Money (entered in the return as Miscellaneous Income), but only if AGI without this deduction is less than $1,000,000 ($500,000 if filing MFS). Identified on the printed form as USOC.
- WBF- Attorney fees and court costs paid in connection with an award from the IRS for information provided after December 19, 2006 that substantially contributed to the detection of tax law violations, up to the amount of the award that is included in gross income. Identified on the printed form as WBF.
The adjustment entered on schedule 1 should then pass through to line 8a (adjustments) on Form 1040 and this should be entered as a positive number. Then Line 8a is subtracted from Line 7b (gross income) to arrive at adjusted gross income (at Line 8b).
Because qualified legal fees are an above the line deduction and are subtracted dollar for dollar from gross income, the agent is correct in that the workaround should result in the same outcome since you are entering a negative amount under “income”. However, although the mathematical outcome may be the same, it is the incorrect way to enter this on your taxes and will cause the IRS to audit your taxes.
Other (uncommon) Taxable income pertains to specific categories of income (table court settlements, executor’ fees and punitive damage award) and in general, if some receives this type of income they are issued a W-2 (as income or sick-pay) or 1099-Misc (3-other income, 6-medical/health expenses, 7-nonemployee compensation etc) AND this income would NOT be entered as a positive number.
Turbo tax prevents you from manually entering any information on the forms page on schedule one, block 22 and if you hoover over line 22 you simply get a search box, and you cannot enter anything in it and once you try to or click on the box you are then taken to the 1040 worksheet. When I called TT I was told not to use the form page but rather go through the question section under personal income; however, he said the same thing that the TT agent wrote above which results in your having to LIE on your taxes and report your legal fees as negative income.
If turbo tax is not going to allow people to enter their taxes correctly as is directed by the internal revenue code, and TT only suggestion is their made-up “workaround” which does not even allow TT customers to enter the appropriate supporting information that is required by the IRS, or explain why this is being done, then turbotax needs to inform customer that their program is not robust enough to support certain customers and none of their programs support manual entries into schedule 1. – -I‘m using the second to highest consumer tax program (Home and small business-download) other side of the business tax program, and since this particular adjustment only pertain to personal “qualified legal fees” and not business legal fees which are reported on schedule C, if any of the TT tax product are going to support this function it should be the one that I am using.
Turbo tax should have a disclaimer that they do not support customers who need to enter certain adjustments on schedule 1 manually and refer customers to either use another tax program, or recommend that they go to a CPA or manually do their taxes themselves.
This is simply unsatisfactory; TT has progressively gone downhill in regards to the program and support. Last year the program kept crashing which was a glitch in not only the TT programs but also the professional version, there was also a computer glitch which caused TT not to properly file taxes last year which required some people to resubmit—including myself. The amount of time and effort required to use their program, as well as he escalating cost compared to other tax programs really shows that they do not care for their customers. Shame on you TT
