Level 2

Question

how to deduct restitution from form 1098-f

Forum|Forum|2 years ago
September 7, 2023
4 replies
30 views

i have a client who files 1120S and 1040.

Client was made to pay fines , penalties, and restitution to us dept of justice

client received form 1098-f with various boxes filled in including box 3 for restitution

his lawyer is telling him that amount form box 3 is deductible

I have never dealt with this issue and do not know if corporate or personal deduction or which form to use.

1098-f was sent to clients social security number. the amount of restitution paid is in excess of $500,000.

help!!

ProSeries Professional

This topic has been closed for replies.

Just-Lisa-Now-

Intuit Community Champion

Box 3 is the restitution amount. What is he paying restitution FOR? Whats the situation?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

P

paronAuthor

Level 2

i/m going to check with lawyer and get back to you. he owned a pharmacy and sold opiods.

all sales were by perscription. I need to check because i am not sure what he pleaded guilty too.

i know that box 3 is restitution amount. Just dont know if deductible on 1120s or 1040 and where to deduct

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paronAuthor

Level 2

restitution was for overbilling medicare and insurance companies

IRonMaN

Level 15

"the amount of restitution paid is in excess of $500,000"

That got my attention. I am eagerly waiting to hear the answer to Lisa's "what for" question.

As a side note, having a lawyer tell you something is deductible has just slightly better odds than your barber telling you that.

Slava Ukraini!

PATAX

Level 12

@IRonMaN got my attention too, we're not talking chump change here.

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paronAuthor

Level 2

Thanks to all for replying

I am going to take the amount of restitution that was withdrawn from the Scorp as a deduction on the s corp return. The lawyer and documentation indicate that this payment was restitution for over billing Medicare , Medicaid, insurance companies, etc. Through the advice of the community I did some further research and found an article in the national law review that states that restitution is a deductible business expense. The form 1098-f indicates the amount of restitution.

I am going to only take the restitution which was withdrawn from the business. No the total of the restitution paid on the 2 1098-f forms.

I would appreciate any thoughts on how I’m handling this. Thanks again

Skylane

Intuit Community Champion

I'd Check w/ the lawyer by email. I'd like to get the attorneys' opinion in writing with cites if possible.... lol

The operative term, and the problem, is that the restitution is considered a penalty, and as such is not tax deductible. Punitive payments are not considered ordinary and necessary business expenses under IRC 162. They are also not considered deductible for business or capital losses, since the nature of the restitution is a penalty.

If at first you don’t succeed…..find a workaround

BobKamman

Level 15

https://www.natlawreview.com/article/finding-silver-lining-leveraging-government-investigations-and-restitution-orders

And lots of other websites with useful information if you Google "restitution deductible"

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