Part-time consulting income taken by court - taxes?

[mikeycp]

I have a full-time job. In addition, I consult in the advertising industry on the side to bring in extra income (just trying to pay the bills). A couple of my clients were a little slow in paying and there was one large job outstanding. Long story short, at the time I filed, I was owed around $4,000. The lawyer told me the court would take that money and they did.

Now, my question is a little different. Normally, I would report that income on my taxes when I file for 2005. But since it went from me right to the court, do I have to pay income taxes on that? Something doesn't seem right to pay $1,000 in taxes (or whatever it may be) on $4,000 of income that was taken from me. When my clients give me their 1099's, they will show all of the income they gave to me. Is there a place on the income tax form to report this kind of loss?

[Minnymouth]

Okay, let me put it too you this way......
I was not allowed to "claim" a $90,000 loss of my home on my taxes.......... I don't think they are going to let you get by without "paying" the taxes on $4,000 of income.

Bad situation, and we both get screwed in the process of it all..............

Just my thoughts,

Minny

Yes, you will end up paying the taxes on the income....!

[quest42]

I guess you gotta think of it as $4,000 income that you earned to pay a debt... bummer! Let us know what your tax advisor says, or call the IRS help line?

Just my guess, but you'd have to pay income tax on any wages garnished by the IRS, too... yes?

[edwards2]

Totally agree Minny...my husband and used to pay exorbitant child support(before they considered the father a parent?) which we paid to his ungrateful and conniving ex...we were taxed on the money we gave her..justice...same
song, 56th verse.

[AAAArt]

You will have to pat taxes on it, but someone should have informed you that on self-employment income the trustee is "supposed to allow you to have enoough to pay taxes or send it to the IRS and state and this should include SS Self Employment tax. Sorry you didn't know before. Maybe you can contact your atty or the trustee and submit your tax liability to the govt, or maybe it's already been disbursed and it's too late.
Worst case scenario...pay as much as you can and ask for an installment agreement for the rest.
Do not consider not filing or omitting that amount. Remember what happened to AL Capone Art