Are Paying Lawsuits Tax Deductible?
The IRS doesn't treat all lawsuits in the same way for purposes of assessing the federal income tax implications. If you are paying a lawsuit settlement or court judgment, your eligibility to claim a deduction for it depends on what the underlying claim of the lawsuit relates to. Only when the underlying claim qualifies for a tax deduction can you begin to evaluate your deductible expenses.
Personal Injury Lawsuits
If you are the defendant in a personal injury lawsuit and you either settle the case or the court orders you to pay the plaintiff, you cannot claim a deduction for any monetary award you must pay, including the court and legal expenses you incur. This is because the basis of the lawsuit is your negligence or some other act that causes injury to the other party. As a result, the IRS treats this type of payment as purely personal that has no effect on your tax return.
Business Disputes
If the basis of your lawsuit is a business contract dispute and you are unsuccessful, you may be able to claim a business expense deduction for the amount of the settlement award. In order to claim a business deduction, the underlying dispute must relate to an expense that would be deductible to the business in the absence of a dispute and the presence of a voluntary payment. For example, suppose you operate a restaurant and you refuse to pay one of your suppliers for a shipment of produce that you claim was spoiled at the time of delivery. Regardless of whether this is true or not, if the court decides in favor of the supplier and requires you to make full payment for the shipment, you can claim a deduction for that produce just as you would had it not been spoiled.
Punitive Damage Awards
Regardless of whether the IRS allows you to deduct a portion of your lawsuit payment, under no circumstances can you ever claim a deduction for the portion of the settlement award that represents punitive damages. The sole purpose of punitive damages is to punish the unsuccessful party in the same way as a penalty. As such, the Internal Revenue Code specifically disallows individuals and businesses from deducting penalty charges.
Legal Fees
For some lawsuits, the cost of hiring an attorney to defend you can be just as expensive as the actual settlement. The only time the IRS allows you to deduct the legal fees you incur is when the lawsuit is the result of a business dispute, your employment or involves disputes that relate to income property you own, such as a rental home. For example, if your lawsuit payment relates to legitimate dispute with a business creditor and you operate as a sole proprietor, you can include your legal fees as a business expense on Schedule C, regardless of the outcome.
Big Banks Get Tax Break On Foreclosure Abuse Deal
www.huffingtonpost.com/2013/01/17/foreclosure-settlement-tax-break...Jan 17, 2013 WASHINGTON (AP) Consumer advocates have complained that U.S. mortgage lenders are getting off easy in a deal to settle charges that they wrongfully ...
10 Often Forgotten or Overlooked Tax Deductions and Tax Tips
ezinearticles.com Finance TaxesJan 25, 2007 Tax tips and tax deductions can save you thousands in taxable income. The IRS is only interested in claiming that which they are entitled to, but
Which Settlement Fees Are Deductible on a Federal Tax
www.ehow.com Tax Information Tax DeductionsOct 29, 2012 Which Settlement Fees Are Deductible on a Federal Tax Return?. Homeowners enjoy tax advantages that are not available to renters. Of these, certain ...
Publication 530 (2012), Tax Information for Homeowners
www.irs.gov/publications/p530/ar02.htmlTo deduct expenses of owning a home, you must file Form 1040 and itemize your deductions on Schedule A (Form 1040). If you itemize, you cannot take the ...
Tax Law Home - Tax Debt Relief: Get Help with Unpaid Taxes, IRS ...
www.taxlawhome.comTax Attorney resource center. We can help you take the guess work out of the Tax Attorney process.
Are Lawsuit Settlements Deductible? - Buzzle
www.buzzle.com/articles/are-lawsuit-settlements-deductible.htmlAre lawsuit settlements deductible? Tax deduction for damages provide a modicum of relief to the defendant who may be burdened with a huge settlement in favor of the ...
Tax Settlement - Optima Tax Relief
optimataxrelief.com/services/tax-settlementWhat exactly is tax settlement? This article explains how tax settlement works, the costs & benefits, and who qualifies.
Small Business Tax & Tax Deductions - Nolo.com
www.nolo.com Legal Topics TaxesIf you have a business, you'll need to know something about taxes, the IRS, and tax deductions.
Taxes: Income tax preparation, filing and deduction advice - MSN
money.msn.com/taxesTaxes are everywhere. Learn crafty tax preparation and filing tips from the MSN Money tax experts. Our deductions might help reduce your tax liability.
Are Paying Lawsuits Tax Deductible? eHow
www.ehow.com Tax Information Tax DeductionsAre Paying Lawsuits Tax Deductible?. The IRS doesn't treat all lawsuits in the same way for purposes of assessing the federal income tax implications. If you are ...
Tax Deduction Checklist: Rental Property - Australian Property ...
www.propertyinvestment.net.au/tax-deduction-checklist.htmIf you are serious about investing in property, then you should know which expenses for rental property are tax deductible.
US Tax Center File Your Tax Return Online, Tax Extension, Tax ...
www.irs.comPart of the health care overhaul began in 2010 when a new excise tax was levied on indoor, ultraviolet tanning. The IRS now collects 10% of consumer tanning purchases.
Are Attorney's Fees Tax Deductible? - Lawyers.com
taxation.lawyers.com/tax-audits/Are-Attorneys-Fees-Tax-Deductible.htmlIf you need legal help preparing your taxes or getting money owed to you, then attorney's fees you pay may be tax deductible.
Churches and Taxes - ProCon.org
churchesandtaxes.procon.orgUS churches* received an official federal income tax exemption in 1894, and they have been unofficially tax-exempt since the country's founding.
Five Tax Deductions you never thought about LegalZoom
www.legalzoom.com Article Center Taxes Personal TaxesRead about Five Tax Deductions you never thought about at LegalZoom.com
Direct Tax Relief Representing Taxpayers across the 50 States ...
directtaxrelief.comOur team of qualified Tax Attorneys and tax experts have the skills and experience necessary to resolve your IRS and State tax problems. Many taxpayers have
7 Tax Deductions Doctors Miss Out On The White Coat Investor ...
whitecoatinvestor.com/7-tax-deductions-doctors-miss-out-onTweet; Its tax season again. I have found tax literacy among doctors to be particularly low, so much so that many doctors get sucked into questionable investments ...
When buying real estate, what's tax deductible?
www.realestateabc.com/taxes/deductible1.htmBuying a Home -- Whats Deductible? Realtors are quick to point out that home ownership allows a lot of tax advantages not available to someone who merely pays ...
Executive Bonus Plans: Tax Deductible Life Insurance Premiums
www.youtube.com/watch?v=UbCFalh4zHoTax Deductible Life Insurance with 162 Non-Qualified Supplemental Retirement Plans A IRC Sec. 162 executive bonus plan is a method of compensating selected ...
HM Revenue & Customs: Paying HMRC
www.hmrc.gov.uk/payinghmrcPaying HMRC. Follow the links below to find information on how to make a payment, advice on payment methods and what to do if you can't pay.
Payroll Tax Settlement Learn How to Resolve Payroll Tax Liability
freshstarttax.com/payroll-tax-liabilityPayroll tax liabilities are a first priority for the IRS. Find out the steps you need to resolve your liability and settle with the IRS.
The 7 Tax Deductions You Shouldn't Overlook - ABC News
abcnews.go.com MoneyFeb 18, 2013 The good thing about taxes is they're only filed once a year. The bad thing is it's almost impossible to remember which tax deductions you qualify for each ...
Tax Topics - Topic 503 Deductible Taxes - Internal Revenue Service
www.irs.gov/taxtopics/tc503.htmlApr 15, 2013 Topic 503 - Deductible Taxes. There are four types of deductible non-business taxes: State, local and foreign income taxes; State, local and foreign real ...
Home Improvement Tax Deductions Home Guides SF Gate
homeguides.sfgate.com Construction & RemodelingHome Improvement Tax Deductions - read about Are Home Closing Costs Tax Deductible?, What Capital Improvements Are Tax Deductible?, Are Property Taxes
He was given a lump sum of cash that really helped him out of a difficult financial situation. Continue
BalasHapusThank you for sharing! This article is informative and very helpful. Good job!
BalasHapusTax Services