It is common in the law profession, especially those attorneys accepting cases on a contingency fee basis, to incur costs on behalf of a client, with the expectation that such costs will be recovered against the eventual lawsuit or settlement proceeds. Examples of client-related costs include deposition fees, court reporting fees, transcripts, police reports, filing fees, travel, etc. These are costs that are case specific, as opposed to general operating costs.
The IRS has identified the tax treatment of these costs as a problem compliance issue, especially with smaller law firms, which tend to expense these as paid either …read more
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