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We had an AGI of $110,000 last year from my husbands work. We will have about the same this year from him. I received a $34K lump sum from Medicare Disability (3 year wait recently, 2009, and have started getting payments of 1000. per month that started in Spetember. The lawyer fees have not been deducted from the $34,00, they will be about $5,500.00. How will our joint return be affected this year and do I have to pay tax on the lawyer fees too, as they have not been deducted yet? Thank you
Country/State/Province of question: USA/Washington State Already Tried: Nothing, my husband procrastintes and then regrets at tax time, I need to take care of this now
Mike,Please further explain what the $34K settlement was for.Regards,Mark D
I received the 34K for a retroactive payment from Medicare Title Insurance for my muscular dystrophy. It took Disability 3 years to decide if I was qualified to receive disability after I worked professionally for 39 years, so that it where it came from
Mike,Social Security disability payments are sometimes not taxed, however, if you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000. If you case, you should expect to pay taxes on up tp 85% of your benefits since your AGI is high enough. The legal fees may be deducted on Schedule A as they were incurred to produce taxable income, although you should only deduct the same percentage of legal fees as you have a percentage of taxable income. For example, if, when you file your taxes, you determine 85% of your payments were taxable, you may deduct 85% of your legal fees. Please let me know if you have further questions.Regards,Mark D
Approximately what will the AGI be with the figures I gave you? What bracket does that put us in? Should I file separately from now on? I feel pretty stupid about all of this.
Mike,Generally you would not be better off filing separate, although a good software or tax professional can show you the difference when you file your taxes. Your AGI will probably be in the area of $135K, however, I cannot tell you your tax bracket as I do not know your itemized deductions or any other adjustments. Please let me know if you have further questions.Regards,Mark D
Enrolled Agent
MBA, EA, Specializing in Business and Individual Tax Returns and Issues