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Expert Witness Tax Overview: Guidelines and Regulations

Understand the tax implications of expert witness income. Learn the difference between taxable and non-taxable testimony. Discover how to determine if expert witness income is considered unrelated business income tax. Follow the process for taxing expert witness billings.

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Expert Witness Tax Overview: Guidelines and Regulations

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  1. Expert Witness Tax • November 14, 2018

  2. Expert Witness Tax Overview • Fact or Expert? • Expert: Generally, a patient that our physician did not treat. A physician qualified by reason of his/her skill, knowledge, education, experience, or training to testify on a particular medical area. The physician will offer an opinion about the medical issue related to the case. Testimony is optional. TAXABLE • Fact: Our provider is generally the treating physician. The physician has personal knowledge of the events pertaining to the case and can testify as to the things they have personally observed or witnessed. This testimony may be mandatory. NON TAXABLE • Was the expert witness used for educational purposes (did residents or students assist in preparation)? NON TAXABLE • If the client is a federal, state, or local government agency, UNC-CH can treat the income as NON TAXABLE. • For example, UNC-CH can take the position that income for expert witness testimony provided to the North Carolina State Attorney General, or the U.S. Department of Justice, is not taxable to UNC-CH.

  3. Expert Witness Income • Expert Witness income is considered unrelated business income tax (UBIT) to the IRS if the income is in relation to a provider testifying as an expert. • Unrelated business income is assessed on the Net Income • Expert Witness is considered other contract income, therefore, it will be taxed at the new 5.5% tax rate. = = =

  4. Example * Taxes paid to the University, who will in turn pay the IRS.

  5. Process for Taxing Expert Witness • UNCFP Finance will send all departments a report detailing all Expert Witness billings for the fiscal year ended • We will ask departments to verify the data and provide any missing information • Departments can verify if the Expert Witness qualifies for tax exempt status • Based on the information above, UNCFP will calculate the amount of unrelated business income tax owed to the University (IRS) • Note: All tax exempt monies will be excluded from the calculation

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