Fines, Restitution, and Forfeiture: Tax Implications of Criminal Penalties
May 14, 2025 | New York Law Journal
In addition to potential incarceration, defendants convicted in federal criminal cases face various financial penalties, including fines, restitution, and asset forfeiture, each of which can have tax consequences for years to come. The Tax Cuts and Jobs Act of 2017 and regulations adopted by the Treasury Department in 2021 have clarified when a taxpayer may deduct court-ordered restitution and amounts they are ordered to forfeit. Earlier this year, in United States v. Hubbard, the United States Court of Appeals for the Sixth Circuit rejected the IRS’s attempt to require a convicted defendant to recognize taxable income based on his forfeiture of a retirement account. Hubbard turned on the terms of the forfeiture order, which transferred ownership of the account to the government before it was liquidated. In his latest article for the NYLJ, “Fines, Restitution, and Forfeiture: Tax Implications of Criminal Penalties,” Morvillo Abramowitz Grand Iason & Anello partner Jeremy H. Temkin reviews the tax treatment of fines, restitution, and forfeiture, analyzes recent statutory and regulatory developments, and explores how the language used in criminal judgments can impact a defendant’s tax liability.
Fines, Restitution, and Forfeiture: Tax Implications of Criminal Penalties
