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I was awarded back wages for unpaid overtime in a class

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I was awarded back...

I was awarded back wages for unpaid overtime in a class action lawsuit. Award was reported on 1099-MISC which included legal fees. I believe I can adjust my income on 1040 on above the line. If this is correct do I enter it on line 36 ? Do I need to make any note on the form or just enter the amount ?

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2017

Submitted: 4 months ago.Category: Tax
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4/13/2018
Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago
Robin D.
Robin D., Senior Tax Advisor 4
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Satisfied Customers: 18,411
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Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

Legal fees are reported on Schedule A. That is the procedure to deduct the fees. The IRS will be looking for the full amount form the 1099MISC to be reported as income then the expense is reported on the Schedule A. There is no line on teh 1040 form itself to subtract the cost so it is shown on the Schedule A.

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Customer reply replied 4 months ago
Thank you, ***** ***** know most legal fees are deducted on Sch. A but I thought that legal fees to recover employment wages were above the line adjustments
Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

You are most welcome.
Unfortunately no they are not. It would be better for the taxpayer if they were.

A positive 5 star rating is appreciated so I am credited for assisting.

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Customer reply replied 4 months ago
See Tax advise below....I promise this will be the last question. Thanks...6. Legal Fees in Employment Cases Are Fully Deductible. Most employment settlements are either wages (on a Form W-2) or non-wage income (on a Form 1099). If your lawyer takes 40%, you still must include 100% in your income. However, you can deduct the legal fees “above-the-line,” before reaching adjusted gross income. That means you have no tax—no regular tax and no AMT—on the legal fees.
Robert W. Wood , Contributor
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I’m a tax lawyer based in San Francisco (www.WoodLLP.com), but I handle tax matters everywhere. I enjoy untangling a tax mess from the past, disputing taxes with the government or planning taxes for the future. One of my specialties is advising about lawsuit payments. Whether you’re receiving or paying a legal settlement, you can probably improve your tax position. I write frequently about taxes, from expatriation to sales tax, from selling your company to restitution. I’ve written over 30 tax books, but my best seller is still Taxation of Damage Awards and Settlement Payments. Contact me at***@******.***.
The author is a Forbes contributor. The opinions expressed are those of the writer.
Tax Professional: Robin D., Senior Tax Advisor 4 replied 4 months ago

Opinions expressed by Forbes Contributors are their own.

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