Where to report attorney's fees that are included in other income listed on Box 3 of 1099-misc?

[aedwan]

Taxpayer received a 1099-misc from a lawsuit with gross proceeds reported as other income on box 3. The amount includes attorney's fees. How to report the legal fees on Form 1040 as the "above the line deduction?"

[Just-Lisa-Now-]

TCJA took away the ability to deduct lawyer fees for most types of settlements, you'll have to do some research for the type of claim and see if its even still possible.

This might help to start

https://www.lawyers.com/legal-info/taxation/tax-audits/are-attorneys-fees-tax-deductible.html

[aedwan]

Thanks Just-Lisa-Now-

Great link. It seems that business related attorney's fees are still deductible. Taxpayer is a Lyft rideshare driver and received a "Lyft Arbitration Settlement" reported on a 1099-misc Box 3 as other income, including his fees. lawyer sent an itemized statement, advising client to deduct fees on his tax return

The problem is that income on Box 3 is not subject to self employment tax so linking it to schedule C won't work. Can taxpayer deduct fees on Schedule C Line  17 "Legal and professional services," which also seems awkward because amount is not subject to self employment tax or is there anywhere to deduct on 1040? 

[Suchagoodlife]

I have always admired the work of lawyers. How could they remember every nuance in every law? I wanted to shake hands with every lawyer I met in my life, especially after that moment when they helped me a lot.

[Terry53029]

@aedwan I would put the 1099misc box 3 income on 1040 schedule 1 other income line 24, and back out attorney's  fees  on next line 

[BobKamman]

I wonder what inspired newcomer Suchagoodlife to resurrect this post with an inane comment more than half a year later. But I missed the question last March, and I try to follow what is happening with Uber and Lyft. It wasn’t easy to track down, but this must relate to a lawsuit where, the plaintiffs say:

“Petitioners are 3,420 Lyft drivers who are attempting to arbitrate their individual claims against Lyft for misclassifying them as independent contractors rather than employees.”

The case was filed in 2018 and settled out of court in 2019, but apparently some funds weren’t distributed until 2020. We are left to wonder about the result. Did Lyft agree they were employees? (Remember, in California there was legislation and a ballot issue about this.) In that case it shouldn’t go on Schedule C, should it? And Box 3 would seem to be the right place for a settlement with an employee. And legal fees for employment-related claims may or may not be deductible (there could be claims of discrimination involved here).

Lyft had decided the best defense was a good offense, so it went after one of the lawyers in the case because of his prior employment with the U.S. Chamber of Commerce. It’s a convoluted story. You can find it here.

https://www.reuters.com/article/legal-us-otc-lyft/3420-lyft-drivers-claim-the-company-wont-pay-arbit...

[qbteachmt]

"I wonder what inspired newcomer Suchagoodlife to resurrect this post with an inane comment more than half a year later."

That type of reply typically is a Robot-generated comment, as a prelude to spam. I'm surprised it is only that comment. The robot looks for keywords, then composes a response using standard sentence structure that is generically complimentary, and usually includes a reference link that is the point of the work.