Attorney referral fee

Forum|Forum|3 years ago
February 7, 2023
3 replies
26 views

Hi all,

Appreciate all the help and responses to my inquiries. It is most helpful. Here is my latest:

A retired attorney gets a significant referral fee in 2022. Did no work on the file, but was entitled to and received the referral fee. Paying attorney issues a 1099-NEC (subject to se tax, of course).

I am wondering if the treatment (NEC) may be an error and if there is a basis for having sending attorney amend the 1099 to treat it as "other income". Again, attorney did not work on the file.

Thank you, in advance, for your responses.

ProSeries Professional

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IRonMaN

Level 15

He evidently had some connections somewhere (which means he worked) to get the referral fee so why wouldn't it be on a 1099NEC?

Slava Ukraini!

BobKamman

Level 15

Who can spot the ethical issue here?

Referral fees permitted for lawyers

Attorneys can share referral fees with other attorneys, as long as they comply with the governing ethics rules. Under Rule 1.1 of the Model Rules, for example, “lawyers” can only refer to competent lawyers.

Rule 1.5 (e) specifically governs referral fees between attorneys, and spells out certain requirements, including these three:

The division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
The client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and
The total fee is reasonable.

https://www.attorneyatwork.com/is-it-ok-to-pay-referral-fees/