Examination fees charged to client

[DTS]

Dumb question. I want to make sure the portion of fees I bill clients for regarding an audit on their businesses are deductible. I'm assuming it's fine as legal and professional, but I can't find anything that addresses this.

Thank you.

[Jesse]

Thinking out loud

I don't think it's a dumb question. If the audit was in regards to the business income/expenses I would say yes, it is an ordinary and necessary if you happen to be the lucky business picked for the audit.

If part was personal, for example concerning charitable contributions, you could allocate that portion to personal Schedule A.

[BOB W]

Dennis> I think all fees paid to a tax preparer regarding income tax issues, including audits, are deductible. Business audits are deducted on business tax returns; personal tax return audits are deducted on schedule A Misc.

In other words, I agree with Jesse.

[DTS]

Jesse and Bob

Thank you. Just as I thought, but I wanted some confirmation.

[ChEAr$]

If the audit is for 1040 with schedule c and/or e, my bill will reflect a suitable allocation for c, e, and non business.

Now then, if we could just persuade lawyers to break down their fees for personal versus tax planning, e.g. relative to alimony, things would be a whole lot better. (Or "more better" to some.)

[DTS]

If the audit is for 1040 with schedule c and/or e, my bill will reflect a suitable allocation for c, e, and non business.

Yes, this recent one was C and mortgage interest on E (ridiculous fishing expedition!), no other forms.