What is the difference between "attorney's services" and "legal services" for 1099 box 10 guidelines?

Question

Under section 6045(f), report in box 10 payments that:

Are made to an attorney in the course of your trade or business in connection with legal services, but not for the attorney’s services, for example, as in a settlement agreement;

What is the difference between "attorney's services" and "legal services?"

So, if you were to pay for "legal services" to a law firm, you would have to send the law firm a 1099, but if you were to pay for "attorney's services", you would not have to send the law firm a 1099?

So, if you were to ask the lawyer in exchange for money to help you draft a settlement agreement between you and someone else, that would not be reportable on a 1099?

If you were to ask the lawyer to read a contract for you in exchange for money, would that require a 1099 sent to them?

Answer 1

This article does a nice job of summarizing it.

Fundamentally, what box 10 is for on 1099-MISC is when you're giving money to an attorney that isn't entirely for work the attorney did, but is intermingled with other funds (either with, or without, knowledge of what proportion is for the attorney - and even if 0% goes to the attorney ultimately):

• Settlements where you pay the claimant by sending money to their attorney, who then will take a cut of the settlement and send the rest to the client (you report the WHOLE amount, not just how much the attorney might get)

• Other transactions, such as real estate transactions, that are mediated by an attorney who is not your attorney and who then handles the transaction (including, but not limited to, their payment).

This is as opposed to times you pay an attorney directly for only their work, where it goes in other places (depending on the details).

The example in the article is a good one:

• You have a lawsuit where you pay $25,000 to your attorneys to represent you. There is a settlement where you end up paying $85,000, plus $15,000 for the attorney fees for the other side.

It's reported like this:

Tax Form Name	Box on Form	Amount	Comments
1099-NEC	Box 1	$25,000	Your fees to your attorney
1099-MISC	Box 3	$85,000	Damages you pay
1099-MISC	Box 10	$100,000	Total amount sent to the other side's attorney, which includes the attorney fees