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Legal and Professional Fees

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Legal and Professional Fees

What You May Deduct
You may deduct fees paid to attorneys or other professionals who are independent contractors, for "ordinary and necessary" expenses of your business. This includes appraisers, systems analysts, consultants, and accountants/CPA's.

What You May NOT Deduct as Legal and Professional Fees
You may not deduct fees paid to professional lobbyists to represent your company's interests in a local, state, or federal legislature.

Where to Show these Expenses

  • For sole proprietors and single-member LLCs, show these expenses in the "Expenses" section of Schedule C
  • For partnerships and multiple-member LLCs, show these expenses in the "Deductions" section of Form 1065
  • For corporations, show these expenses in the "Deductions" section of Form 1120.

Special Notes

  • Legal fees to incorporate your business are part of the cost of incorporating; they are amortized along with the incorporation fees.
  • Legal or accounting fees used in the purchase of a business or an asset may be required to be capitalized, and added to the basis for that asset.
  • You may need to file a 1099-MISC if you pay any of these individuals more than $600 in a calendar year, unless they are incorporated.

Disclaimer
This article presents general information; I am not a tax attorney or tax preparation specialist. Refer to IRS publications and refer questions to your tax consultant.

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