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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 10486
Experience:  Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
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I am using Turbotax to fill out this years return. I went on

Resolved Question:

I am using Turbotax to fill out this years return. I went on disability in April 2011 and have been receiving disability income from my company's disability plan. In September 2012 I received an award from social security for disability benefits. Part of this was a lump sum payment, part went to the disability attorney I had hired ($6000) and part was an award for $2000 per month ongoing. I was forced by my disability company to repay them $17,000 for over payment in September 2012.

In 2012 I am filing married jointly, My wife also had income of approximately $26,000. I received a 1099 from the disabilty company and another from social security. First question: can I deduct the $6000 attorney's fee? Do I do this on schedule A and if so, where? Second question, can I deduct the entire $17,000 I had to repay the disability company and do I also do this on schedule A? If so, where?

The turbotax software has already taken care of the fact that a part of the award was for tax year 2011 so I don't need to worry about how to handle that.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Could you please tell me what is in the boxes on your 1099-SSA?

Thanks
Customer: replied 1 year ago.

Box 3: Benefits paid in 2012 - $28,403.00


Box 4: Benefits repaid to SSA in 2012 - NONE


Box 5: Net Benefits for 2012 - $28,403.00


Description of amount in Box 3:


Paid by check or direct deposit -$22,403.00


Attorney fees: $6,000.00


Total additions: $28,403.00


Benefits for 2012: $28,403.00


 


*Includes $3,870.00 paid in 2012 for 2011.


 


If it helps, the amount in Box 1 on my wife's W2 was $31,061.19. The amount in Box 1 from my disability insurance company was $24,041.89. The exact amount of over-payment I had to return to my disability company in 2012 was $18,307.00.


 

Expert:  Megan C replied 1 year ago.
Thank you for your question, and thanks for using JustAnswer.com. The amount from your 1099-SSA that you will enter as the potentially taxable amount would be the $22,403. This is because the legal fees had been deducted from the amount you were paid.

As for the overpayment for your long term disability company, if the long term disability payments were taxable income to you, then deduct the amount repaid on line 28 of schedule A, calling it 'repayment of taxable disability benefits.'

Please let me know if you need anything additional. Thnks again for using JustAnswer.com and have a great day.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not financial or legal advice, and must not be used as such. For financial and legal advice, please contact a local professional.*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.


Customer: replied 1 year ago.

What about deducting the attorney fees? If I don't include them in wages from SSI Disability as you recommend can I still deduct them in schedule A? Or do I just report the $22,403.00 as Box 3 wages and forget the attorney fees?

Expert:  Megan C replied 1 year ago.
You will report $28,403 (sorry I got ahead of myself before) as income from social security, and if any portion of this is taxable income then you will deduct a portion of the attorney fees, but not all of them.

For example, if $14,200 of the amount was taxable, then you could deduct 1/2 of the legal fees as a miscellaneous itemized deduction on your tax return. This is line 23 of your tax return.

If none of your benefits are taxable, then none of your legal fees are deductible.

Please let me know if you need anything additional. Thanks again for using JustAnswer.com and have a great day.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not financial or legal advice, and must not be used as such. For financial and legal advice, please contact a local professional.*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Customer: replied 1 year ago.

Last question. How do I figure out how what portion of the social security benefit is taxable income? I believe there is a complicated formula for this but could you clarify? Finally, before you said to enter $22,403.00 and now you are saying you got ahead of yourself and I should enter the full $28,403.00 Is your final answer $28,403.00? This is important because it's my tax return and I don't want an audit. Thanks. (you have been very helpful so far).

Expert:  Megan C replied 1 year ago.
thank you for your follow up. You will use the $28,403 as your social security benefit. If you use TurboTax, put the entire amount in it - and they will do the calculation of taxable benefit for you. You can CLICK HERE for a calculator that will tell you any taxable amount that you may have.

Please let me know if you need anything additional. Thanks for using JustAnswer.com and have a great day.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not financial or legal advice, and must not be used as such. For financial and legal advice, please contact a local professional.*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 10486
Experience: Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
Megan C and other Tax Specialists are ready to help you
Expert:  Megan C replied 1 year ago.
Thank you for the positive rating. Please remember me the next time you have a question. Simply enter "MyVirtualCPA" in the subject of your question, and it will be routed directly to me. Thank you again for using JustAnswer
Customer: replied 1 year ago.

I realize we have completed the transaction but on Schedule A Line 28, Turbotax divides "Other miscellaneous deductions" into those subject to 2% Limitation and those not subject to the 2% Limitation. Does the repayment of the taxable disability payments fall under subject or not subject to the 2% limitation?


 


If you can answer this question I would appreciate it. If I need to ask it and pay again just let me know.

Expert:  Megan C replied 1 year ago.
Thank you for your follow up. Your repayment of disability payments will NOT be subject to the 2% floor. It's on line 28 other deductions. It's not a miscellaneous deduction. The entire amount is deductible.

Please let me know if you need anything additional. You can rate this response and I will receive credit again for this response.

Thanks again for using JustAnswer.com and have a great night.

** Please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not financial or legal advice, and must not be used as such. For financial and legal advice, please contact a local professional.*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Customer: replied 1 year ago.

Are the portion of the attorney fees I can deduct subject to the 2% limitation? Again I will gladly pay if you require.

Expert:  Megan C replied 1 year ago.
Yes, any legal fees that are deductible are subject to the 2% floor and are a miscellaneous itemized deduction.

Please let me know if you need anything additional. Thanks for using JustAnswer.com and have a great night. You can give me credit for answering this by once again rating the response. Thanks.

** Please take a moment to rate my response as "Excellent" so that I may receive credit for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site. This answer is not financial or legal advice, and must not be used as such. For financial and legal advice, please contact a local professional.*
You should be aware that your question, as with most tax questions, can never really be answered completely...addressing all the permutations; that is because of the many assumptions that have to be made I have done my best to determine what I think you are asking and answering it in the most direct and understandable manner possible. If, however, after reviewing the questions, you have any uncertainties or further questions, please do not hesitate to ask.

Expert:  Megan C replied 1 year ago.
Thanks for allowing me the opportunity to help you. Please let me know if I can be of any further assistance to you in this matter. Also if you ever need anything else in the future please Simply enter "MyVirtualCPA" in the subject of your question Thanks again for being a JustAnswer customer

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