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Where to report attorney's fees that are included in other income listed on Box 3 of 1099-misc?

aedwan
Level 2

Taxpayer received a 1099-misc from a lawsuit with gross proceeds reported as other income on box 3. The amount includes attorney's fees. How to report the legal fees on Form 1040 as the "above the line deduction?"

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2 Replies 2
Just-Lisa-Now-
Level 15
Level 15

TCJA took away the ability to deduct lawyer fees for most types of settlements, you'll have to do some research for the type of claim and see if its even still possible.

This might help to start

https://www.lawyers.com/legal-info/taxation/tax-audits/are-attorneys-fees-tax-deductible.html


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
aedwan
Level 2

Thanks Just-Lisa-Now-

Great link. It seems that business related attorney's fees are still deductible. Taxpayer is a Lyft rideshare driver and received a "Lyft Arbitration Settlement" reported on a 1099-misc Box 3 as other income, including his fees. lawyer sent an itemized statement, advising client to deduct fees on his tax return

The problem is that income on Box 3 is not subject to self employment tax so linking it to schedule C won't work. Can taxpayer deduct fees on Schedule C Line  17 "Legal and professional services," which also seems awkward because amount is not subject to self employment tax or is there anywhere to deduct on 1040? 

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