form 1099 MISC

[skycophigh]

I received a 1099 MISC for a group lawsuit against the US government for improperly paid credit hours and overtime. the attorney says their fees are an above the line deduction. where do I put this on turbotax deluxe edition?

[ColeenD3]

Be sure that the attorney has not already deducted his fee from your settlement. When this happened to me, that is how my attorney took his fees.

While he is techically correct, this deduction is no longer allowed since the tax reform in 2017.

Prior to the 2017 Act, an individual taxpayer who took itemized deductions instead of a standard deduction could deduct legal fees that were greater than 2% of his or her adjusted gross income as a miscellaneous expense.

[skycophigh]

since this is a federal lawsuit, For tax purposes, you should retain copies of your payment and promptly notify us of any changes to your mailing address. No taxes have been withheld from these monies although they constitute taxable income for the taxable year 2019. We will be sending you an IRS 1099-MISC Form in late January 2020, if your damage monies exceed $600 for the full gross amount of the damages portion (inclusive of the 25% contingency attorneys' fees paid), so that you can properly report and pay your income taxes. The attorneys’ fees that you paid are deductible in their full amount, regardless of whether or not you itemize other deductions. The deduction is “above the line,” meaning that it is not taxable income to you. This is a result of §703 of the Civil Rights Tax Relief Act, which was signed into law on October 22, 2004. If you have any questions concerning the tax implications of this payment, we encourage you to seek advice from your personal tax consultant. If you have tax questions, please contact your tax preparer or other tax professional. 

[skycophigh]

this was May 17th 2019

[Fc19]

What did you end up doing with your taxes after all?? I have the exact situation this year,  probably the same lawsuit you were in actual.  

[LinaJ2020]

The above the line legal fees deduction is very limited.  See information below.  TurboTax online does not support this entry.  You will need to use TurboTax desktop and manually enter the info.  Click here: Attorney fees

With the TCJA,  it eliminates miscellaneous itemized deductions including the legal fees. Prior to the 2017 Act, you could deduct legal fees that were greater than 2% of your adjusted gross income as a miscellaneous expense. However, not anymore after 2017.  However, there are still some legal fees that might qualify for an above-the-line deduction against your gross income like discrimination or Trade & Business related.  To see deductible legal fees, click here: https://www.irs.gov/pub/irs-pdf/i1040gi.pdf ( Page 90 line 22)

[skycophigh]

Hi Fc,   I was able to take the above line deduction for the attorney fees, (per a tax guy) by going to the deductions and credit tab. open it, at the bottom is less common income, open it. At the bottom of the box will be misc income start that and at the bottom  will be other reportable income, open it. I put in a negative number, for the attorney fees.     -1,205 for example, and in the description I put " qualifying legal fees". Turbotax transferred that amount to line Line 22 of Other Income statement and subtracted it from your amount of judgement. Went through no problem. Let me know if you need anything else  LB

[Fc19]

thanks a lot, stay safe.