Bankrupt Tax Resolution Services (ie..JK Harris, etc)

[KathMorgan]

We are seeing more and more "victims" of outfits like JK Harris and Tax Masters coming into the office. I've had 3 in the last two weeks. Can I deduct the amount they paid these bankrupt organizations as tax prep charges on the Sch A under the 2% rule? some of them have paid as much as $8000 and as far as I can tell JK Harris and TaxMasters did nothing but file a Power of Attorney and had them start to put together some info for a possible OIC. In one case they actually filed an amended return that i'm going to have to amend again.
So what do you think? Might take a little bit of the sting out in the current year. All of the clients are parts of various class action lawsuits, but the hope of recovering anything is minimal.

Kathy

[erchess]

No cite but I believe

that those fees could be deducted as you describe. Put it this way if last year you had helped a client with an OIC and charged whatever you charge for that, would you not deduct it when you did this year's taxes? I don't see how it being a different firm or they got ripped off would stop the deduction. Of course if they DO collect anything after claiming the deduction are they not looking at being taxed on the entire sum they collect?

[erchess]

Bump

I'm sending this back up in case anyone has a different opinion or perhaps can add a cite.

[DaveO]

I agree with erchess. When I have done an OIC or other representation work I always deduct the additional fee the following year.