Attorneys Beware! IRS Tax Consequences For Law Firms Accepting “Gifts” From Court Reporting Firms


As a marketing ploy, some court reporting firms give staff of law firms $25, $50 and even $200 if you set a deposition with that firm. There are “gifts” of trips, Dom Perignon, and one firm I know of gives $50 to any paralegal, legal secretary, assistant who takes a deposition off of one court reporting firm’s calendar to put it on their own. Obviously, the dollars can add up quickly. The question becomes: Who is going to pay the taxes for this practice? The law firm? The individual accepting the money?

California’s two court reporting state associations, DRA and CCRA, have asked the prestigious law firm of Hanson Bridgett to provide a legal opinion. The law firm opines in their Memorandum:

“Given that the incentives provided by Reporting Firms in exchange for business are payments for services rather than gifts, the [Internal Revenue Code] requires the recipients of those payments to treat the value of the incentives as gross income. This means that recipients must report the value of the incentives they receive as income on their tax returns. Failure to do so could result in the assessment of additional taxes, interest and penalties by the Internal Revenue Service.”

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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