Are Lawyer Fees Deductible?

Can you deduct legal fees you have incurred when filing taxes? The answer is complicated, the guidance is provided by the Internal Revenue Service Publication 529. In short, it depends on what the legal fees were in regard to. The general rule, as stated by the IRS, is that: “You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax.”

Therefore, if the legal fees related to obtaining a tax refund or filing the taxes in general, they appear to be deductible. If the legal fees are based on the attempt to collect taxable income, those fees would also be covered. Deducting legal expenses is also governed by the 2% rule, as discussed below.

Legal fees

What type of Legal Fees Are Deductible?

As stated above, legal fees incurred due to filing/receiving taxes or obtaining taxable income are deductible. Below are more examples of where legal fees are potentially deductible.
Family Law – you are allowed to deduct attorney fees that relate to collecting taxable income, as discussed above. Therefore, legal bills incurred attempting to obtain alimony (which does constitute taxable income) would also be included.
Criminal Law – legal fees incurred defending yourself in a criminal case that is related to or arising out of your job are deductible. This deduction is probably heavily scrutinized. According to DUI Attorney Michael Rehm, legal fees defending a DUI charge would not be deductible, unless there was some evidence that the arrest arises out of a work related event, and even then it would be stretch. The rule applies more to incidence of white-collar crime such as insider trading where the activity is related to the profession.
Business Attorney– this is obvious considering the role business attorneys play in helping business ensure survival, thus collecting taxable income.

2% Percent Rule

The 2% rule means that you are only allowed to deduct the total of certain expense that exceed 2% of your Adjusted Gross Income. Certain expense are a part of the 2% rule. When deducting your expenses, you add up all of the expenses that fall under the 2% rule category, and if they exceed 2% of your adjusted gross income, then you deduct the amount that is in excess.
Legal fees are fees covered by the 2% rule, so when adding up all of the expenses, legal fees fall under this category.

Tax Deduction -DUI Attorney

Non-deductible legal expenses

Family law legal fees that are spent to collect alimony are deductible, but family law legal fees defending an alimony lawsuit are not. Family law fees spent to collect child support are also not deductible, since child support is not taxable income. When determining whether legal fees are deductible, the best steps to take is to determine whether the fees were incurred in relation to taxes in and of themselves, or your job, or obtaining taxable income. Always consult with a professional, whether it is a tax attorney or CPA to determine which legal fees are deductible. Don’t forget to write down the advice and save the receipt for a future deduction.

Continue reading


What Can I Expense on My Taxes as a Fitness Instructor in USA?

There is a famous saying “health is wealth”, which has a great meaning in one’s life. The most valuable and treasured possession is Health for every individual. Most people fail to appreciate the importance of health. Whatever you do, you need to maintain health that is good as because if your health deteriorates you will not be able to deliver satisfactory results.

Whenever you hear the word health, consideration comes only for your body but because proper mental fitness is also needed to maintain a decent health. If your mind is not healthy, then your body will not be healthy too.

Since you are a self-employed, and your job as a fitness instructor, you are yourself a business. It is so because you need to think like a business person himself. That means you needs to maximize your business expenses to lower your taxes. There are certain categories where you can spend as an instructor to claim certain tax deduction on returns of your personal tax:

Equipments and working tools

The equipments that you purchase exclusively for customer use that qualifies justifiable expenses, as well as the repair. Namely treadmills, weights, music system, electronic organiser’s, etc. first aid kit, backpack, a belt bag, diary, stationery, briefcase or a working bag.

Work Uniform

The expense of buying specific working uniform that your employees should have a proper logo on it. The laundry or dry cleaning cost of uniforms. The cost of buying sunscreen for training outside the training centre.

Videos on exercise and audio music

You can also claim for investments that you make on music or videos or the projectors you spent for group sessions. But here it is important to mention that you need to keep all the receipts.

Travels and meals

Food cost while working overtime. The cost of travel by taxis or public transport or even parking. You can also claim for the expense of your car.

meals

Insurance

As a fitness instructor, you can always insure the cost of your work equipment as the safety of your customer is important and for so won’t be neglected.

Training

Short training courses and education expenses can be claimed along with the educational books expense if you are a university student.

gym

Other Expenses

  • Annual fees for the membership to the association you are a member.
  • Cost of attending any competition as a coach, work- related magazines and journals.
  • Buying DVD’s & CD’s, fitness books, nutrition books, internet connections, phone bills, and the cost of maintaining a home office or the training centre.

You can also make claims, for your donations to charities, the fee of the bank for account investments. Fee of the agent who manages your tax returns and even the cost of travelling you make to meet that agent.

Wherever you spend, keep the receipt safely because you will need it as proofs for claims that you are going to make. The better proofs you have, better the chances are to get deductions.

Resources and more information:

Continue reading


Taxation History of the United States

The taxation history of the United States begins in 1760, with colonial protest against the taxation policy of the British, which lead to the American Revolution. Taxes were collected on imports, whiskey and on glass windows for a while by the independent nation. States and localities collected property tax on commercial building and land.

State and inheritance taxes began at the starting of 20th century. The sales tax was started by state government during the 1930s. Income taxes were imposed by the United States for a brief period during the 1890s and he Civil war. It was imposed on a permanent basis from 1913.

new york

Colonial taxation

During the colonial era, taxes were low a colonial, local and imperial level. The issue whether parliament could impose taxes on the Americans led to the revolution.

  • Stamp Act (November 1, 1765): It was the fourth stamp act that was supposed to be passed by British parliament. According to the act, all legal documents, newspapers, wills, commercial contracts, permits and [playing cards in American colonies was required to carry tax stamp.
  • Townshend Revenue Act (1767): Two tax laws were passed by the Parliament which were proposed by Charles Townshend
  • Sugar Act (1764): Taxes were imposed on the non-British exports like sugar, coffee and cloth.
  • Tea Act (1773): It was a drawback of duty and tariff on tea.
  • Boston Tea Party: The American colonists protested against Great Britain for Tea Act by dumping chests of tea into the Boston Harbor.

Tariffs

Tariff played various roles in the economic history of the United States and trade policy. They were the biggest source of federal revenue between 1790 and the eve of World War I. After that, it was surpassed by income taxes. Tariff also played a role in protection of the local industry. It generated some political stress during the 19th century.

night

Excise Tax

Federal excise taxes are applied only to certain items like tires, motor fuel, telephone usage, alcoholic beverages and tobacco products. Often, excise taxes are allocated to special funds which are related to the activity or object taxed. To fund his policy of assuming war debt of American Revolution, tax on distilled spirits was proposed by Alexander Hamilton when George Washington was the president. The legislation was approved by the House after a vigorous debate. Seven cent per gallon was imposed on whiskey.

Income Tax

Income taxes began during the 19th century in the United States when income taxes were imposed for funding the war efforts. The constitutionality of the income taxes was in doubt until the Ratification of 16th Amendment in 1913. Article 1, Section 8, Clause 1 of the Constitution allows imposing of tax, duty, impost and excise. Article 1 Section 8 requires duties, excises and imposts to be uniform throughout United States.

In 1916, Congress re-adopted income tax with 1% tax on personal income over $3000 and 6% on net income over $500,000. By 1918, the income tax was increased to as much as 77% for financing World War 1. The top marginal tax rate kept reducing till it reached 24% in 1929. During the Great Depression, the tax rate keeps increasing steadily.

Continue reading