by wuschelbeutel » Sun Mar 30, 2014 8:49 pm
At the end of 2013, I used my credit card to build up a retainer for my tax attorney (the credit card bill was paid off in 2014). However, this retainer was partially charged by the lawyer in 2014 (he didn't charge from it in 2013). I think I can't deduct the entire retainer (since the entire sum wasn't used for services), but can I deduct the part of the retainer that was taken out by the lawyer in 2014 from my 2013 taxes?
If the answer is no, can I deduct it from my 2014 taxes (when I fill it out a year from now), even though the retainer was created in 2013?
To already preempt the "Why don't you ask your tax lawyer?": By answering he probably bill me for the amount I could potentially save from a deduction.
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Re: Deduction of tax preparation fees in the US (timing)
by Gill » Sun Mar 30, 2014 9:17 pm
wuschelbeutel wrote:To already preempt the "Why don't you ask your tax lawyer?": By answering he probably bill me for the amount I could potentially save from a deduction.
Your thinking doesn't make sense. You've retained a tax attorney and are asking this question here? He can answer you in two minutes. Even at a $1,000 an hour that's only $33.
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Re: Deduction of tax preparation fees in the US (timing)
by JW Nearly Retired » Sun Mar 30, 2014 9:19 pm
Will you itemize your tax deductions or just take the standard deduction for 2013? Looking at some of your past posts I might guess the latter which would make your retainer deductibility question moot.
If you will itemize in 2014 I think you would be safe to deduct it for 2014 taxes, but this deduction (Sched A line 22) will only be useful to the extent this category of deductions exceeds 2% of your AGI.
JW
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Re: Deduction of tax preparation fees in the US (timing)
by Iorek » Sun Mar 30, 2014 9:27 pm
I don't think I have ever had misc itemized deductions above the floor, but I would think you could deduct on your 2014 taxes the amount that "used up" during 2014. I am guessing you still have some right to a refund of the remaining funds if you were to end your client relationship-- if not then you might have an argument for deducting it in 2013, but I wouldn't do that w/o checking with your lawyer (esp. as you don't want to create situation where the two of you are treating the retainer in an inconsistent manner).
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Re: Deduction of tax preparation fees in the US (timing)
by livesoft » Sun Mar 30, 2014 9:27 pm
Is this for a business and you intend to deduct the expense on Schedule C?
If not for a business then you will need to do the Schedule A thing and hope that either (a) your tax prep fees were so outrageous that they exceeded 2% of your AGI by a large amount or (b) you already had enough miscellaneous itemized deductions to fill up the 2% floor, so that your tax prep fees have a chance of being deductible. One year I reached the (b), but I have never reached the (a) reason.
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Re: Deduction of tax preparation fees in the US (timing)
by wuschelbeutel » Sun Mar 30, 2014 10:08 pm
Thanks for your comments and confirming that I can deduct from my 2014 taxes.
Gill wrote:
wuschelbeutel wrote:To already preempt the "Why don't you ask your tax lawyer?": By answering he probably bill me for the amount I could potentially save from a deduction.
Your thinking doesn't make sense. You've retained a tax attorney and are asking this question here? He can answer you in two minutes. Even at a $1,000 an hour that's only $33.
The resolution is much more coarse than 2min. Lawyers usually use the 6-minute rule. This one seems to use the 12-minute rule though.
JW Nearly Retired wrote:Will you itemize your tax deductions or just take the standard deduction for 2013? Looking at some of your past posts I might guess the latter which would make your retainer deductibility question moot.
If you will itemize in 2014 I think you would be safe to deduct it for 2014 taxes, but this deduction (Sched A line 22) will only be useful to the extent this category of deductions exceeds 2% of your AGI.
JW
Yes, you're right. There is no way I can reach $6k of deductions for 2013 (to beat the standard deduction), unless I can claim the earned Income Tax Credit, but I haven't looked into that. I'm sure I'll beat 6k in tax lawyer fees for 2014 though and that's a very big chunk of my salary.
Iorek wrote:I don't think I have ever had misc itemized deductions above the floor, but I would think you could deduct on your 2014 taxes the amount that "used up" during 2014. I am guessing you still have some right to a refund of the remaining funds if you were to end your client relationship-- if not then you might have an argument for deducting it in 2013, but I wouldn't do that w/o checking with your lawyer (esp. as you don't want to create situation where the two of you are treating the retainer in an inconsistent manner).
I really hope I don't lose my retainer in an illegitimate way (the retainer always has to be above a certain threshold at this firm).
livesoft wrote:Is this for a business and you intend to deduct the expense on Schedule C?
If not for a business then you will need to do the Schedule A thing and hope that either (a) your tax prep fees were so outrageous that they exceeded 2% of your AGI by a large amount or (b) you already had enough miscellaneous itemized deductions to fill up the 2% floor, so that your tax prep fees have a chance of being deductible. One year I reached the (b), but I have never reached the (a) reason.
No, not a business. I barely make above minimum wage right now, so I'm not worried about (b) and the fact that I have a tax lawyer represent me and do my work should also ensure (a).
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Re: Deduction of tax preparation fees in the US (timing)
by cheese_breath » Sun Mar 30, 2014 11:36 pm
If it's not too personal, I'm wondering what you do that you barely make above minimum wage but need a tax attorney for.
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Re: Deduction of tax preparation fees in the US (timing)
by mnaspbh » Mon Mar 31, 2014 12:26 am
cheese_breath wrote:If it's not too personal, I'm wondering what you do that you barely make above minimum wage but need a tax attorney for.
Based on some of the OP's past posts, he's said he's German but working in the US, and has had some income from international sources. That could make for a very complex tax situation, regardless of income level.
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