Audit fees to attorney

[Redneck]

Help me out with this is attorney fees for an audit of schedule c including re building books a deductible on the sch c or sch a misc exp. Thanks Red

[DaveinTexas]

You must allocate the Fees accordingly

Help me out with this is attorney fees for an audit of schedule c including re building books a deductible on the sch c or sch a misc exp. Thanks Red

From The Tax Book, page 4-26:

Allocation of tax preparation fees. The portion of the fees paid
for preparation of Schedules C, E, or F and related tax forms or
worksheets are deductible on those schedules rather than on
line 22, Schedule A.

If the attorney fees were audit rep fees and rebuilding the Sole Prop's books, I would deduct these fees on the Schedule C. If, however, the Audit covered Sch A or Sch E income/expenses then you need to allocate the cost of the audit amongst those Schedules. Ask the Attorney for the breakdown in fees if this was the case. If entire audit focused on Sch C, then deduct fees as Legal/Professional Fees on Schedule C for the tax year the expenses were paid.

[FEDUKE404]

Simplest answer

Assuming the original post ("fees for an audit of schedule c") is correct, the answer is really quite simple: All such attorney fees slide directly to Schedule C, line 17.

OTOH, as duly noted by DaveinTexas, if there is more involved with the audit than the single Schedule C and directly associated forms (such as Form 4562 et al), then an allocation of some type must be made for allocating the attorney expenses to certain other activities shown on the original tax return.

Once you step into the overall "tax preparation" issues, the 2% haircut for personal portions of the services rendered must be considered.

In most instances, a detailed invoice from the attorney should provide all of the information needed to avoid any potential confusion.

FE

[Black Bart]

I vote for this:

Assuming the original post ("fees for an audit of schedule c") is correct, the answer is really quite simple: All such attorney fees slide directly to Schedule C, line 17.

because the chances of getting this:

...a detailed invoice from the attorney...

are slim to none. Most likely you'll get a bill stating "Services - $xxxx".

[Redneck]

Thanks

As always thanks. Red