If I received a legal settlement in a prior year, but forgot to deduct attorney fees, can I still deduct them this year?

ANSWER

The BIDaWIZ Team's Answer:

You can deduct attorney fees in the prior year only up to the amount of income associated with the legal settlement. For instance, if the total settlement was $10,000 and you paid $2,500 in attorney fees, then the full $2,500 may be deductible. You would not be able to deduct the attorney fees if they were already excluded from income by reporting a $7,500 settlement. Please note that you would claim the adjustment on Form 1040X and as an adjustment to income on line 1.