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Are Tax Attorney Fees Deductible Monthly?

Introduction

As the year 2023 begins, many individuals and businesses are looking for ways to reduce their tax liabilities. One question that often arises is whether tax attorney fees are deductible on a monthly basis. In this article, we will explore the rules regarding tax deductions for attorney fees and whether they can be claimed monthly.

What are Tax Attorney Fees?

Tax attorney fees are fees paid for legal services related to tax matters. These can include preparing tax returns, representing clients in tax disputes with the IRS, and providing advice on tax planning strategies. The fees charged by tax attorneys can vary widely depending on the complexity of the matter and the attorney's experience and reputation.

General Rule for Deducting Attorney Fees

The general rule for deducting attorney fees is that they are deductible if they are paid to produce or collect taxable income or to help in tax-related matters. However, there are some limitations on this rule. For example, attorney fees paid in connection with personal matters, such as divorce or child custody, are generally not deductible.

Deducting Tax Attorney Fees on a Monthly Basis

The IRS allows taxpayers to deduct attorney fees on their tax returns, but there are some restrictions. In general, attorney fees must be paid in the year in which they are claimed as a deduction. However, there are some exceptions to this rule. If the attorney fees are related to a legal matter that spans multiple years, such as an ongoing tax dispute, they may be deducted in the year they are paid. Additionally, if the attorney fees are paid on a monthly basis, they may be deducted in the year they are paid as long as the fees are for services actually performed during that year.

Limitations on Deducting Tax Attorney Fees

Even if tax attorney fees are deductible, there are still some limitations on the amount that can be claimed as a deduction. For example, attorney fees that are related to tax preparation or advice on tax planning strategies are subject to a 2% adjusted gross income (AGI) floor. This means that the fees must exceed 2% of the taxpayer's AGI before they can be claimed as a deduction. Additionally, attorney fees that are related to the production or collection of taxable income are subject to a 2% floor, but only if the fees are paid to an attorney who is not the taxpayer's employee. If the attorney is an employee, the fees are deductible as a business expense and are not subject to the 2% floor.

Conclusion

In conclusion, tax attorney fees may be deductible on a monthly basis as long as they are for services actually performed during that year. However, there are limitations on the amount that can be claimed as a deduction, and the fees must be related to tax matters in order to be deductible. As always, it is important to consult with a tax professional to ensure that all deductions are being claimed correctly on your tax return.

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