Are legal fees taxable?

gkmhan

Registered Users (C)
#1
My company says that the legal fees they paid for me are taxable.. And the tax is deducted from my paycheck..

It never happened to me before.. Is this a new law? Is this common?

If its true, it sucks because I have to pay a third of all legal fees, and that may be substantial..

Please shed some light on this..

Thanks..
 

Jim Mills

Registered Users (C)
#4
I hate to disagree with Jaxen since he is usually right and I am not positive, but

I don\'t believe that H-1 legal fees are considered "income" to the employee. The employer is the petitioner on an H-1, the employee is legally unable to file themselves, so I don\'t see how this could be considered "income" to the employee. In fact, the employer is technically the client on an H-1 filing.

If it is, I\'ve never heard of it. It just doesn\'t make sense to me but you will need to speak to an accountant to be certain.

Jim

James D. Mills
Attorney at Law
http://www.geocities.com/jamesdmillsesq/
 

gkmhan

Registered Users (C)
#5
what are the options

I have a question to jaxen..

If thats the rule, then how come most companies don\'t report that on W-2? (at least ones in which my friends work, they work in big corporations, I mean to say not startups)

What are the options if my company says "We don\'t know about other companies, but we will report it". Is the amount tax deductible?
 

gkmhan

Registered Users (C)
#7
No Title

More specifically, can you let me know any document that states that legal income should be reported on W-2?

I asked my company and they say it comes under "Fringe benefits" provided by company to individual, though they didn\'t say where they read it.
 

jaxen

Volunteer Moderator
#9
Legal fees are not deductible...

I agree that H1 fees cannot be considered as income. I was referring to the practice of employers reporting the "legal fees" (the portion given by the employee) as income.
I think all such legal fees (for H1 especially) have to be paid by the employer. Not only they have violated this code (is there a law?) but after making the employee pay, they do not reimburse it properly (they are doing this so that on paper it would appear as if the employee did not pay the legal fees) but make the employee pay tax on it.

I understand from where Jim is coming from, but in Form 1040 you cannot claim legal fees - as tax free. More so, if it is included in W-2. I have tried this a few years ago and I gave up.

If you find the tax side-step please let us know.
 

gkmhan

Registered Users (C)
#10
No Title

No, I think there is a misunderstanding..

I did not pay anything for the legal fees.. The company paid everything.

But, they are reporting it on my W-2 because they say they read somewhere that it is considered as a "Fringe Benefit" to the employee..
 
#11
No Title

If the employer is reporting this as your "fringe benefit" they are making a mistake. The legal fees for this petition has to be borne by your employer as the petitioner in this H-1B application is the employer and you are the beneficiary. But again there is no law (I haven\'t come across anything) which bars this. So if he is doing so, you might end up paying taxes for that.
 

whiz-kid

Registered Users (C)
#12
This is getting interesting by the hour :)

If the employer pays $5,000.00 as fringe benefits they could be deducting it twice once as "legal expenses" and second time as "salaries wages/incentives/bonus/fringe benefits" (call it whatever you like) hence gross income could be reduced by say $10,000.00 per employee.

On the employee side the annual pay could be shown artificially inflated by $5,000.00 per employee.
 

Jim Mills

Registered Users (C)
#13
Really more an accounting question than an immigration question

I only handle two sections of the Code of Federal Regulations. That\'s enough for me.

Jim
 

kkimm1

Registered Users (C)
#14
I think legal fees should be categorized as un-reimbursed business expense...

if the filing fee is paid by employee...

I would think of all this business-related visa fees as business expense - which you can deduct on 1040 as un-reimbursed business expense similar to professional society dues, etc.
 
#15
That's a lot of money being spent on lawyers . My boss paid the LC filing fee of $1000 and he also paid $600 for the ad in the newspaper. I paid all my immigration fees myself and I filled all the papers myself too. The only reason I ended up spending a total of $2855 is because I filed under 245i. The extra 1000 was for the supplement A form.
But If you took some experienced Employment Lawyers views, then according to them, employer is responsible for paying the all expenses and legal fees associated with the Labor Certification Application and the I-140 Immigrant Petition as they belong to the Employer. The employer might pass the fees associated with I-140s (not Labor Certifications) onto the foreign national if there is a mutual agreement. The foreign national is responsible for his/her own I-485 or Consular visa related costs unless the employer is willing to cover the cost.
 
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