Have a Tax Question? Ask a Tax Expert
Hi and welcome to Just Answer!The main question is - if this out of court settlement was related to your job?Another question - did you receive any taxable income based on the settlement?
The reason I am asking these questions is that legal expenses might be deductible.In particular - the IRS allows to deduct legal expenses (including attorney fees) if they are related to your job. Specifically - related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business.In additional - you can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.So to determine if your legal expenses may be deducted and HOW to deduct them - it is very important to know if the settlement was related to your job or to any taxable income.
It was an out of court settlement that the company to on but I was somewhat strong armed into agreeing to give up my compensation and 12.5% of the company to help pay for the settlement and my attorneys fees which were in excess of 1,2 million
legal fees ai did pay on my own have been deducted.
I am still not clear if the settlement is related to your job? If the settlement is related to either doing or keeping your job - legal expenses (including attorney fees) are deducted as miscellaneous itemized deduction on schedule A.
When you gave up your compensation - the question - if that compensation was previously included into your taxable income? - if yes - the repayment may be deducted. If no - and you simply do not receive the compensation - that amount is not deductible.