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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1493
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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Question 1 I am currently employed by a large corp and going

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Question 1: I am currently employed by a large corp and going through the Employee Dispute Resolution program to get resolution to a employee relocation policy change. In summary the corp was bought out by another corp; now the newly formed corp has changed the written relocation policy around covering the loss on investment for employees who loose money on their homes in high cost areas due to relocation. (Basically in the past when you move to high cost areas the corp guranteed to cover your loss if the housing market dropped; now the new company says we don't like that policy and good luck....). So I've hired an attorney to represent me through the employee dispute resolution (Emploment contract mandates we have to go through the DRP program instead of normal court/lawsuits, etc). Currently through the mediation phase and going to binding arbitration. The question is - can my legeal fees incurred be tax deductible?

Question 2: Can expenses paid to resume writer/career coach/recruiter be tax deductible?

Arthur Rubin :

Yes, they should both be deductible.

Arthur Rubin :

The second one is clearly deductible as a "Job Expense", on Schedule A line 21 (for 2010).

Arthur Rubin :

The first one is trickier. As the reimbursement would be considered "wages" if you get it, legal expenses should be deductible on line 21 or 23. As there is no difference in taxes between those placements, we can consider it "deductible", and worry about the details later.

Customer:

Quick research off the net "Legal fees are generally tax deductible on your tax return if the dispute arose in the course of your business or employment or involves income producing property. The employment/income producing property legal fees are miscellaneous itemized tax deductions on your tax return and are subject to the 2% AGI floor. Legal fees for personal matters are generally not tax deductible on your tax return". ----- I guess the big question is does this fall under an employment claim or personal matter. I am still employed; but this change in corp relo policy definetly leaves me finacially damaged (would have never took the job offer w/out the loss on investmetn policy) and if prevents me from moving within the corp due to it being financially impossicle to reloacte, etc. Legal fees for 2010 are ~ $20,000 so this would be a substantial deduction.....don't want to raise a red flag and get audited.

Customer:

forgive the spelling

Arthur Rubin :

An alternative phrase is "for the production of taxable income", rather than "if the dispute arose in the course of your business or employment or involves income producing property". As the relocation loss coverage would be taxable income, it clearly applies. The instructions for line 21 specify that "Fees to employment agencies and other costs to look for a new job in your present occupation" are deductible.

Customer:

OK - from your experience do these type of deducations increase your chance of getting audited?

Customer:

Thanks for the quick response!

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