Discussion:SS benefits, attorney fees, refund in next year

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Discussion Forum Index --> Advanced Tax Questions --> SS benefits, attorney fees, refund in next year
Discussion Forum Index --> Tax Questions --> SS benefits, attorney fees, refund in next year

LJACPA (talk|edits) said:

27 February 2008

Client received SS disability benefits = attorney fees. Reporting Box 5 of 1099-SSA and I believe the attorney fees are Misc ID subject to 2%. However, because only part of the benefits are taxable - say 85% - would only 85% of legal fees go to Sch A, subject to 2%? In early 2008, attorney reduced his fees (honestly!) and I suppose SSA will reimburse/refund the difference in 2008. I assume this would be taxable? I don't know what what to do with this.

CalifCPA (talk\|edits) said:	27 February 2008
The refund from the attorney would be taxable to the extent of the tax benefit received. Just figure the 2007 taxable income with and without the refund. The difference in taxable incomes would be the tax benefit received. Consider reducing the 2007 attorney fee deduction by the amount of the refund.

LJACPA (talk\|edits) said:	27 February 2008
That lost me completely. I think I would rather just forget what's 'going' to happen in 2008 and figure out how to report in 2007, though I do appreciate your response. Anyway, legal fees on A at 2%? Total legal fees or only 85%? I cannot find this anywhere. Thank you.