Paying tax is certainly one of those things no one enjoys doing. Whenever you find yourself in a tax dispute with the IRS or state agencies, it is always advisable to hire a tax resolution expert. This will help you expedite the manner as soon as possible. Nonetheless, the costs involved can seem a little pricey. Fortunately, tax deductions can help you cut costs significantly.
The IRS often allows attorney fees to be deducted provided the expenses involved relate to income generation or to tax matters directly. In the event you incur legal expenses as an employee, these expenses can be accounted for as itemized deductions on your individual tax return’s Schedule A. In case it is your business incurring the legal fees, you need to list this as a deductible expense on Schedule C of your tax return.
How To Pass the Deductibility Test
Generally, the IRS mandates all the deductible legal fees you pay need to be either connected to your business or trade. Therefore, you cannot deduct legal fees incurred on matters such as personal bankruptcy or divorce.
For your deduction to be approved, ensure your tax resolution expert doesn’t draw a fee-for-services contract with you as an individual but rather with your business. In case you pay any legal fees to buy property, ensure the charges are added to the property’s cost basis instead of deducting them.
If the tax dispute you have with the IRS is in connection with the establishment of your business, you can seek to have it deducted. Startup costs incurred in the form of legal fees ought to be treated as business expenses when filing your yearly business tax returns.
Tax Preparation Fees and Deductibility
Sometimes, a tax dispute can result from failure to pay your tax returns on time. If you hire an expert to prepare tax returns on your behalf, you will definitely incur tax preparation fees. However, the main question pertains to whether or not tax preparation fees are deductible. Self-employed individuals who are seeking professional help to have their dues calculated from their taxable income qualify for tax preparation deduction.
Do you wish to go the extra mile and achieve the best possible outcome in your tax resolution efforts? Contact Five Stone Tax Advisers for expert tax representation.