Handling Contingent Attorney Fee Expenses

What Tax Preparers Need to Know

Frank Messina, DBA, CPA

Attorneys commonly pay litigation expenses on behalf of their clients; however, unlike most businesses, plaintiff's attorneys cannot deduct litigation costs paid on behalf of their clients as ordinary and necessary business expenses at the time they occur. It is only in the case of a settlement or award that attorneys may recover these costs. The types of costs can include travel expenses, costs of medical records, reports, interpreters’ fees, witness fees, deposition costs, filing fees, investigation costs, photography, laboratory tests, law enforcement fees, services of process servers, shorthand reporters, investigators, doctors, and even expert witness fees. Attorneys who take cases on a contingency fee basis most often rely upon this practice.