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TheMysticWave
TheMysticWave, Payroll/Timekeeping Clerk
Category: Tax
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Experience:  Legal Office Administrator in charge of payroll/timekeeping.
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can I deduct legal expenses stemming from criminal charges

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Submitted: 11 years ago.
Category: Tax
Expert:  Jon Andrews replied 11 years ago.

Generally not.


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Customer: replied 11 years ago.
Reply to Jon Andrews's Post: How can I find out under which circumstances I can deduct these legal fees? If I am acquitted from the charges are the fees deductible?
Expert:  Jon Andrews replied 11 years ago.

The outcome is not the determining factor. To be deductible, the criminal charges must be related to your business or income producing activity and the business or income producing activity itself must be legal.


For example, defending against charges for shoplifting would not be deductible because that is not connected with a business or income producing activity. Defending against charges for drug sales would not be deductible because that income producing activity is not legal.


If you can give me an overview of your situation, I can tell you whether you have a deduction possibility or not.


If you take the time to read the posts following mine (from Mystic Wave), please take the time to evaluate the source (look at the number of stars and the accept rate). She is very knowledgeable in legal matters but has a limited understanding of the tax code. If necessary or desirable, I will provide you iwth the specifics from the tax code to back up what I have told you. Even though what she has posted may be "what you want to hear" it cannot be substantiated from the tax coade except under limited circumstances as outlined above.


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Expert:  TheMysticWave replied 11 years ago.

Greetings:


Did you sign a contingency fee agreement with your attorney? If so (to my knowledge and belief), such fees may be included in the taxpayer's gross income and deducted as a miscellaneous itemized deduction  (Rev. Rul. 80-364) - providing that this is allowed in your state.. See, e.g., Young v. Commissioner, 240 F.3d 369 (4th Cir. 2001).


Please confirm this with your attorney.


Contingent Attorneys’ Fees: The Income Tax Dilemma


If you have any questions, please let me know.


Bright Blessings.


Peace, Love & Happiness,


The Mystic Wave

 
   
Expert:  TheMysticWave replied 11 years ago.

Greetings:


It was pointed out to me by another specialist here that my response above was quite wrong - however, to my knowledge and belief as a legal secretary/paralegal, if you paid the attorney to stay out of jail, you can deduct the fees as stated in my response above...I do suggest that you consult with a practicing tax attorney to confirm same.


If I'm wrong then I stand corrected. However, I've been in the legal profession in California for almost 30 years (with knowledge in criminal law) - and this is what I have been told. I am certainly open to proof that states otherwise.


Thank you.


Bright Blessings.


Peace, Love & Happiness,


The Mystic Wave

Expert:  Jon Andrews replied 11 years ago.

If you take the time to read the posts following mine (from Mystic Wave), please take the time to evaluate the source (look at the number of stars and the accept rate). She is very knowledgeable in legal matters but has a limited understanding of the tax code. If necessary or desirable, I will provide you iwth the specifics from the tax code to back up what I have told you. Even though what she has posted may be "what you want to hear" it cannot be substantiated from the tax code except under limited circumstances as outlined by me above.


[email protected]
Expert:  TheMysticWave replied 11 years ago.

Greetings:


Yes, I happen to know the law and know it fairly well (experience is in California and Nevada) - in a criminal case - of which criminal law is very broad and for which I have 29 years experience in this field of law, you may be the defendant  - but there are all kinds of twists and turns in criminal legal cases - Perhaps you may have signed a contingency fee agreement. Perhaps you suffered personal injuries in this case and countered sued. Perhaps you sued for wrongful prosecution -perhaps you were the plaintiff........ to my knowledge and belief, one can claim certain deductions in legal matters - but I may be wrong in someone else's opinion that is not familiar with law. I do know for a fact, however, that I have assisted legal clients in gathering information related to their cases in preparation for filing their taxes of which to my knowledge they were legally able to deduct certain legal fees. Knowingly, things change constantly...... laws change.  I simply provided this information based on my experience/knowledge....as I believe all responses are such. Thus, it is suggested that you consult with your attorney.


Bright Blessings.


Peace, Love & Happiness,


The Mystic Wave

 

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