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Can you, I hired a company to help me get disability and…

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I hired a company...

I hired a company to help me get disability and they charged me $6,000, am I able to claim that on taxes as an expense?

Accountant's Assistant: Is there anything else the Accountant should be aware of?

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Submitted: 3 months ago.Category: Tax
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3/26/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,614
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi. …. My name’s Lane,

I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, to clients on three continents, since 1986.

I’m reading your question now.

Bear with me a moment while I type up my response.

….

Then if you have further questions we can go from there.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

Yes, If you win your disability claim and some of your lump sum turns out to be taxable, you can deduct the fee paid to your attorney from your disability benefit income, but only on a pro-rated basis.

...

Normally, on a personal return (1040) legal fees are generally not deductible ... BUT there are two exceptions;

(1) legal fees incurred to determine or collect any tax liability, and

(2) legal fees expended to secure taxable income.

...

SO, legal fees can be deducted to the extent Social Security income is taxable.

...

As an example, if 50% of Social Security income is taxable, then 50% of legal fees are deductible.

To deduct legal expenses, you must have enough itemized deductions (ie. Medical, mortgage interest, property taxes, charitable giving, ect) to exceed your Standard Deduction. If you itemize, your deduction is limited to the extent that it exceeds 2% of your Adjusted Gross Income.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars on your screen, and then clicking “submit")

That’s the only way JustAnswer.com will credit me for the work.

...

I hope you’ll rate me based on accuracy and thoroughness, rather than any good news / bad news content

But again, let me know if you need more here,

Lane

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Customer reply replied 3 months ago
When I received my 1099 it showed my gross disability, then showed the $6000 fee and then the net amount. So do I use the net amount as my income?
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

Hi ... I tried to accept your call request, but there was an error of some sort on my end.

...

So sorry, but it gets a little trickier than that.

...

What you'll have to do is run the taxes (or work through the worksheet in Publication 915) to see how much OF that disability income is taxable.

...

The if, say, 40% of it is taxable, you'd be able to deduct 40% of the $6,000.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 3 months ago

Does that help?

...

If you'd like to give me some numbers, (amount of the income, plus any other income for the household plus how you file - married single, etc), I can run the numbers to see how much of the social security is taxable.

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