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emc011075
emc011075, Tax adviser
Category: Finance
Satisfied Customers: 3004
Experience:  IRS licensed Enrolled Agent and tax instructor
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Seven (7) people, myself included, are suing a former

Customer Question

Seven (7) people, myself included, are suing a former employer for discrimination. I am helping the other 6 people in their lawsuits, with both advice and financing. On my federal tax return, I am showing this as a business, since there are substantial
ongoing expenses. I am being audited by IRS, and they have examined this business, and have found that everything is proper, and they have allowed my expenses for this that I listed on a Schedule C. The onl;y problem is that the IRS wants me to distinguish
between the expenses for these 6 lawsuits for other people, and for the expenses connected with my own similar lawsuit. So they will accept the Schedule C for the other people, but for my own lawsuit, they want me to list the expenses for that on a Schedule
A. There is a considerable difference in tax obligation doing it that way, mostly because I have to give up the standard deductions for myself and my wife (this is a joint return). I want to include the expenses for my own lawsuit in the same manner, on the
Schedule C. Am I correct in doing this, or is the IRS correct about the Schedule A?
Submitted: 1 year ago.
Category: Finance
Expert:  emc011075 replied 1 year ago.

Hi. My name is ***** ***** I will be happy to help you.

Don't shoot the messenger here but this time IRS is correct. If it involves your own lawsuit, it is not business, it is personal and therefore the deduction is limited. Expenses classified as personal cannot be deducted on Schedule C because it is profit/loss from a business. If you are suing the employer for your own benefit, it is not business related for profit activity and therefore it has to go on Schedule A.

Expert:  emc011075 replied 1 year ago.

I know that's not the answer you were hoping for.

Let me know if you have any questions.

Customer: replied 1 year ago.
For me, it is business related for profit. If I win this lawsuit, I will make a considerable profit, for which I will pay income tax. For me, it is the same idea as my involvement in the other lawsuits, which IRS recognizes is a business activity.
Expert:  emc011075 replied 1 year ago.

Not necessarily. If your personal interest is involved, for tax purposes it is considered personal. You cannot work on your won case and classify it as business. You will still have to claim the settlement as taxable income but it will not be subject to self employment tax.

Customer: replied 1 year ago.
Please schedule a time (EDT) that we can talk on the telephone. That way I am sure to be available.
Thanks, ***** *****
Customer: replied 1 year ago.
I am still waiting to be able to speak with you over the telephone. Can you please suggest a time to do this, so I am sure to be home?
Customer: replied 1 year ago.
I have written to you twice saying that I want to have a telephone conversation about this, for you $18 charge. You have not replied to either request. Please tell me if you can do this or not. If you can not, then I will request another expert to speak with.I would appreciate a reply! Thanks, ***** *****