List Of Are Tax Attorney Fees Deductible 10 Years References

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Are Tax Attorney Fees Deductible 10 Years Later?

Introduction

Hiring a tax attorney can be a costly affair, and taxpayers may wonder if they can deduct those fees on their tax returns. While the answer is not always straightforward, it is possible to deduct tax attorney fees under certain circumstances. In this article, we will explore whether tax attorney fees are deductible 10 years later.

What are Tax Attorney Fees?

Tax attorney fees refer to the amount paid to a lawyer for legal advice and representation related to tax matters. These fees can be incurred for various reasons, such as tax planning, filing tax returns, representing clients in IRS audits or appeals, or resolving tax disputes.

When are Tax Attorney Fees Deductible?

Tax attorney fees are generally deductible as a miscellaneous itemized deduction on Schedule A of Form 1040. However, these deductions are subject to a 2% floor, which means only the amount that exceeds 2% of the taxpayer's adjusted gross income (AGI) can be claimed.

Exceptions to the 2% Floor Rule

There are some exceptions to the 2% floor rule that allow taxpayers to deduct tax attorney fees without meeting the threshold. For example, tax attorney fees paid for the production or collection of taxable income, such as fees for preparing estate tax returns or defending a will contest, are deductible above the line as an adjustment to gross income.

10-Year Limitation on Deducting Attorney Fees

Under the Internal Revenue Code, taxpayers are generally allowed to deduct attorney fees in the year they are paid. However, there is a 10-year limitation that applies to certain types of legal expenses, including tax attorney fees.

What Does the 10-Year Limitation Mean?

The 10-year limitation means that taxpayers cannot deduct legal fees paid for a tax matter that occurred more than 10 years ago. This limitation applies even if the legal fees were paid in the current year.

Exceptions to the 10-Year Limitation

There are some exceptions to the 10-year limitation, such as legal fees paid for a tax matter that is ongoing, or for a tax matter that resulted in the production or collection of taxable income. Additionally, the 10-year limitation does not apply to legal fees paid for tax shelter cases or whistleblower cases.

Conclusion

In conclusion, tax attorney fees are generally deductible under certain circumstances, subject to the 2% floor rule. However, there is a 10-year limitation on deducting legal fees for tax matters, which means taxpayers cannot deduct fees paid for a tax matter that occurred more than 10 years ago. As always, taxpayers should consult with a qualified tax professional to determine the deductibility of their tax attorney fees.

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