Finance

Have finance questions? Ask a financial expert online.

Ask an Expert,
Get an Answer ASAP!

This answer was rated:

I am about to enter a settlement for a sizable amount. For…

I am about to enter...
I am about to enter a settlement for a sizable amount. For this example lets use $200k, 30% will go to my lawyer and 40% to tax leaving about $60k over. The payment will be made to the lawyers trust then disused from there, i am not trying to get out of taxes but i would like to reduce them as much as possible, in general what are the options and individuals I should consult?
Show More
Show Less
Ask Your Own Finance Question
Answered in 8 minutes by:
11/17/2017
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,606
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified

Hello. My name is ***** ***** I will be able to assist you.

The fees you pay for legal expenses or court costs are deductible, as long as the legal matter is business and not personal.

In your scenario above, the 30% paid to the attorney would be deductible as long as the matter is for business purposes.

___

Fines and punitive damages are not deductible.

___

Deduct the settlement costs using Schedule C or Schedule E, as appropriate for your business structure. For instance, on Schedule C -- for sole proprietors -- you write off attorney fees on Line 17.

Settlement costs that are legally deductible. Subtract them, along with your other expenses, from your business structure. For instance, on Schedule C -- for sole proprietors -- you write off attorney fees on Line 17.

Ask Your Own Finance Question

Below is a link for further verification.

http://smallbusiness.chron.com/deduct-settlements-related-business-75269.html

https://www.pwc.com/gx/en/industries/pharmaceuticals-life-sciences/publications/tax-news-irs-factors-deductibility-of-settlement-payments.html

"Payments made pursuant to a settlement agreement or court judgment ordinarily will be characterized, from the payor's perspective, as a deductible expense, a capital expenditure, or a nondeductible, noncapital payment"

Ask Your Own Finance Question

The origin and character of the claim with respect to which an expense was incurred determines its tax treatment.

Generally, if a claim arises from acts performed by a taxpayer in the ordinary course of its business operations, settlement payments and payments made pursuant to court judgments related to the claim are deductible under section 162. For example, payments made to compensate a plaintiff for actual damages or harm caused by the defendant's action generally are deductible.

Ask Your Own Finance Question

I would be happy to answer any follow up questions you may have.

At the conclusion of our conversation please take a moment to accept the answer by rating the answer with three stars or more. A positive rating of five stars is always appreciated. Thank you!
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,606
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
Verified
Chad EA, CDFA®, CFP® and 87 other Finance Specialists are ready to help you
Ask your own question now
Customer reply replied 8 months ago
This is for a wage/hour claim settlement from my to my employer.
Phone call session started
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a financial professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Chad EA, CDFA®, CFP® Your Own Question
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Finance
Satisfied Customers: 2,606
2,606 Satisfied Customers
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA

Chad EA, CDFA®, CFP® is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Rakhi Vasavada

Rakhi Vasavada

Financial and Legal Consultant

2,609 satisfied customers

Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years

Megan C

Megan C

Certified Public Accountant (CPA)

2,222 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

Manal Elkhoshkhany

Manal Elkhoshkhany

Tutor

1,933 satisfied customers

More than 5000 online tutoring sessions.

JKCPA

JKCPA

CPA

844 satisfied customers

Bachelors degree and CPA with Accounting experience.

Eric

Eric

Financial Manager

559 satisfied customers

Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.

R. Klein, EA

R. Klein, EA

Accountant

480 satisfied customers

TurboTax Expert. QuickBooks Certified Pro Advisor

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

332 satisfied customers

NASD Licensed Rep, 1997-2001, Business Attorney

< Previous | Next >

Related Finance Questions
My father passed in May and he had several tax deferred
My father passed in May and he had several tax deferred annuities. All of these annuities had a death benefit for which the beneficiary is a trust. Most of these were never annuitized. However there i… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
I have a slightly complicated question which involves
I have a slightly complicated question which involves medical injury settlement which is waiting for me in the lawyers trust account so that I can put it into a special needs trust and hopefully also a cat rescue nonprofit organization I informed so that I can continue to pay my wife expensive bills and continue my cat rescue activities without endangering my disability benefits or other public assistance because the money is not enough to change my financial status it's only enough to pay my medical bills and expenses of living moving and cat care … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
How can my dad invest or loan $10,000, at a tax deduction?
Dear sir or madam, At my request my father would like to know how he can invest or loan $10,000 to me for my business - as a tax write-off. I guess you will need to know my financial situation, my wif… read more
Rakhi Vasavada
Rakhi Vasavada
Financial and Legal Consultant
Bachelor's Degree
2,609 satisfied customers
Situation is as follows:2 brothers own an S Corp - No-
Situation is as follows: 2 brothers own an S Corp - No- correction on paper only 1 brother owns it, but there was a verbal years ago that the employee and non-owner one day would be entitled to 40% ow… read more
TaxRobin
TaxRobin
Vocational, Technical or Trade School
1 satisfied customers
Regarding taxes on inherited land in B.C. I own a parcel of
Regarding taxes on inherited land in B.C. I own a parcel of land jointly with my brother. In my will I am passing along my half-interest to my children. What kind of taxes will they be expected to pay… read more
Rakhi Vasavada
Rakhi Vasavada
Financial and Legal Consultant
Bachelor's Degree
2,609 satisfied customers
Accounting question: I have an SCorp. that showed a $20k profit
Accounting question: I have an SCorp. that showed a $20k profit for the year. however, I don't know where that money is. It's not in my checking account, I keep very little inventory so it's not there… read more
R. Klein, EA
R. Klein, EA
Accountant
Master's Degree
480 satisfied customers
I hope this is the right catagory...I am expected to get
I hope this is the right catagory... I am expected to get a large amount of money from my brother soon as a result of a "finders fee" for setting him up with some real estate people and making a very … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Steven, Corporation "B" has a list of equipment on the depreciation
Steven, Corporation "B" has a list of equipment on the depreciation schedule that is at zero book value. Corporation "B" scraps these assets. Enterprising entrepreneur, "The Opportunist" acquires the … read more
keeperumiami
keeperumiami
Sr Financial & Tax Consultant
Bachelor\u0027s Degree
1 satisfied customers
Id like guidance to know if I should exercise a lump sum payout
I'd like guidance to know if I should exercise a lump sum payout of a pension plan. I'm about to turn 50. At age 65, the pension payment would be 467/month for life. It's a single life annuity, so the… read more
R. Klein, EA
R. Klein, EA
Accountant
Master's Degree
480 satisfied customers
I have a tax lien and am in a repayment plan with the IRS for
I have a tax lien and am in a repayment plan with the IRS for taxes owed in 2003 and 2004. If I receive an inheritance, can the IRS take the inheritance? If so, is there any way to invest the inherita… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
as part pf an estate plan we were about to transfer some rental
as part pf an estate plan we were about to transfer some rental real estate into a trust, but heard that creating and transferring it to a LLC might provide some advantges. Specifically, we heard that… read more
Rakhi Vasavada
Rakhi Vasavada
Financial and Legal Consultant
Bachelor's Degree
2,609 satisfied customers
How do I fine an privite investor My company is doing well,
How do I fine an privite investor? My company is doing well, but I'm looking for an investor to do heavy marketing for my company. I'm looking to give back the return value plus 30 - 40% within 6 mont… read more
Shawn P. Adamo
Shawn P. Adamo
CEO
Bachelor's Degree
18 satisfied customers
I currently have a 1st and 2nd mortgage on my home, I am not
I currently have a 1st and 2nd mortgage on my home, I am not making any of the payments for about 7 months. The reason; my wife got layed-off and I we have a son going to college (UC Davis) My 1st $21… read more
Dave Z
Dave Z
Self-Employed
Bachelor
418 satisfied customers
My husband, a police sergeant who also does consulting for
My husband, a police sergeant who also does consulting for the military & other organizations, wants to retire from law enforcement (after 24 years) & do consulting full-time. I am (slowly) building a… read more
TaxTom
TaxTom
Accountant
Bachelor's Degree
14 satisfied customers
Background Im a retired federal employee (65 in July) getting
Background I'm a retired federal employee (65 in July) getting a monthly CSRS annuity of about $60k per year. I'm living well within my means, have triple A credit and, little credit card debt. I have… read more
Peter
Peter
Master\u0027s Degree
57 satisfied customers
Hi, I have been hanging on to credit cards pending a sizeable
Hi, I have been hanging on to credit cards pending a sizeable settlement basically to survive. Now, the settlement has been pushed into the future to an unknown date. Recently, Chase Bank increased th… read more
Dennis M. Smith
Dennis M. Smith
Retired
Bachelor Degree
1,293 satisfied customers
Its embarrassing, but my husband and I are in a lot
It''s embarrassing, but my husband and I are in a lot of debt and need advice. Our situation-married w/4 kids ages 2-10. Income-husband $104K/yr, I work 1 day/week and made $15K this year. Own our hom… read more
Dave Z
Dave Z
Self-Employed
Bachelor
418 satisfied customers
Lets say that as my husband and I are completing our
Let's say that as my husband and I are completing our will and setting up trusts etc..., we discover that we still want to find a way to put back money that our kids won't know about because we want t… read more
The Geezer
The Geezer
Master's Degree
120 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x