Penalties and Fines

Accounting Services For Small Businesses – Penalties incurred for late performance or nonperformance of a contract, for example missing a deadline under a construction contract, are generally deductible.

Generally, no deduction is allowed for fines and penalties paid to a governmental or specified nongovernmental entity for the violation of any law, except in the following situations.

·         Amounts that constitute restitution.

·         Amounts paid to come into compliance with the law.

·         Amounts paid or incurred as the result of certain court orders in which no government or nongovernmental agency is a party.

·         Amounts paid or incurred for taxes due.

No deduction is allowed for the restitution amount or amount paid to come into compliance with the law unless the amounts are specifically identified in the settlement agreement or court order. Also, any amounts paid or incurred as reimbursement to a government for the costs of investigation or litigation are not deductible.

 

Need More Information?

ABA Tax Accounting

 Amare Berhie, Enrolled Agent

Licensed by the IRS

amare@abataxaccounting.com

651-300-4777

 

https://www.abataxaccounting.com/smallbiz.php