Q: My company is being investigated for making illegal kickbacks. (I wasn't involved in the allegations.) If we are found guilty, are the payments at least tax deductible? No name, via e-mail
A: Sorry. Tax law says you can't deduct any direct or indirect payments that constitute illegal bribes, kickbacks or other payments that are illegal under U.S. or state law and subject you to a criminal penalty or the loss of a professional license. For this purpose, the IRS defines "kickbacks" as payments in consideration of the referral of a client, customer or patient. Note: On the flip side, illegal payments are fully taxable to the recipient.