It depends.
If a restitution order was part of a legal settlement of a dispute involving a business transaction, it may be deductible as a business expense. If you are filing a Schedule C, that is where you would deduct the payment.
Otherwise, under current law, the payment would not be deductible on your Federal return. Under previous law, depending on the circumstances, the payment could have been part of legal fees deductible under Miscellaneous Deductions. In some states, including California, these deductions are still allowed and you would enter them in TurboTax on the Federal return from which they would flow through to the state return.
If the payment you made in 2024 is deductible, you would claim the payment on you 2024 return. You would not amend your prior returns to account for the tax paid.
From IRS Publication 529:
Legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax are miscellaneous itemized deductions and are no longer deductible.
You can deduct legal expenses that are related to doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business. You can deduct expenses of resolving tax issues relating to profit or loss from business reported on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship), from rentals or royalties reported on Schedule E (Form 1040), Supplemental Income and Loss, or from farm income and expenses reported on Schedule F (Form 1040), Profit or Loss From Farming, on that schedule. Expenses for resolving nonbusiness tax issues are miscellaneous itemized deductions and are no longer deductible.
TT 9946 contains final IRS regulations providing guidance on section 162(f) of the Internal Revenue Code (Code), as amended in 2017, concerning the deduction of certain fines, penalties, and other amounts.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
